Freedom picks five small caps, two strategies as market enters Goldilocks mode

A “Goldilocks” scenario is unfolding in the stock market – a balanced backdrop in which the economy grows but does not overheat, inflation continues to normalize, and the labor market is supported by a neutral-to-soft policy by the Fed. This combination of factors creates favorable conditions for growth by equities, says Vadim Merkulov, head of research at Freedom Finance Global. He offers investors two “simple but effective strategies.”

For much of this year, dividend stocks have remained outside investors’ focus. For example, the ProShares Russell 2000 Dividend Growers ETF (SMDV) – which invests exclusively in small companies that have increased dividends for at least 10 consecutive years – has fallen 3.2% since the beginning of 2025.

This performance reflects limited market interest in dividend strategies. The main reason is that after the October rate cut, the fed funds rate is in a range of 3.75-4.00%, while the dividend yield of the SMDV is about 2.6%.

As rates continue to fall – Freedom Finance Global expects one more cut in 2025 and two additional reductions in 2026, for a combined 0.75 percentage-point decrease by the end of next year – dividend strategies could return to the spotlight. 

Sila (REIT)

Freedom Broker target price: $34 per share (upside 46.7% to the November 7 close); dividend yield: 6.80%  

Sila Realty Trust focuses on healthcare real estate investments, which provide predictable rents and steady cash flow. These factors, along with a strong balance sheet, create a foundation for long-term growth. M&A and a disciplined capital-return policy can further support its high dividend yield.

Ituran

Target price: $44 per share (upside 14.5%); dividend yield: 5.23%  

Ituran, based in Israel, specializes in satellite-based vehicle monitoring and control. The company has two sources of revenue: telematics services (vehicle monitoring) and equipment sales. Both provide stable, low-volatility cash flows. Ituran’s shares look particularly attractive for dividend strategies under a normalized monetary policy.

Growth stocks – those whose returns significantly outperform the market – traditionally perform well in periods of Fed rate cuts. They are also beneficiaries of the expected acceleration in business activity. These factors, combined with sustained structural trends such as rising interest in AI and a recovery in consumer finance, could bring several smaller companies to the forefront. 

Perfect Corp.

Target price: $4 per share (upside of more than 100%)

Perfect Corp. stands to benefit from growing demand for personalized digital solutions and is building a solid foundation to expand its customer base. Since beginning commercial operations in 2022, the company’s revenue has shown steady growth, averaging 13% annually. Through 2025, consensus forecasts point to an acceleration to 14.5% year over year. The combination of strong revenue and positive expectations, coupled with a focus on advanced AI applications, creates substantial growth potential in the current Goldilocks mode.

Gaia

Target price: $7 per share (upside 65.8%) 

Gaia, a streaming service focused on self-development content, benefits from stable subscription demand and the shift from traditional TV to digital platforms. The foundation for the company’s long-term growth includes an extensive library of original content, an efficient production model, and a strong balance sheet. In 2026, Gaia plans to expand its video catalog, strengthen direct-promotion channels, and launch an AI assistant to retain audiences during a new phase of price increases and intensifying competition.

Dave

Target price: $280 per share (upside 18.9%) 

Dave, a fintech, focuses on clients underserved by traditional banks and uses a unique business model that assesses solvency through cash-flow analysis rather than credit scores, employing a proprietary AI system called CashAI. This reduces costs and broadens the customer base. According to FactSet, consensus forecasts indicate double-digit revenue growth over the next several quarters, supported by the rollout of the Dave Credit product and the expansion of debit-card offerings. This strategy should increase revenue per customer while minimizing cost growth.

This material does not constitute investment advice.

The AI translation of this story was reviewed by a human editor.