In today’s market rally, the task of finding stocks that are reasonably priced and exhibit a strong earnings trend has become quite challenging. However, despite the limited options available, such stocks do exist.
As history has shown, the rebound in the market tends to inflate stock prices, pushing some of them to astronomical levels. Thankfully, strategists have provided us with a solution in the form of screens that identify potential moneymakers that are still within reach.
While much attention has been given to the remarkable gains of Big Tech names, fueled by AI advancements and progressive plans, it’s important to acknowledge that they are not the only ones experiencing surges.
Wall Street’s growing confidence in the Federal Reserve’s decision to halt interest rate hikes has resulted in a positive impact on various sectors, ranging from manufacturing to retail. One notable example is the Invesco S&P 500 Equal Weight Exchange-Traded Fund (RSP), which emphasizes every stock in the index equally and has witnessed a 10% increase this year.
For individual investors, seeking out profitable opportunities amidst this landscape can be a test of their patience. That’s why Evercore strategists have stepped in to lend a helping hand.
The Evercore team conducted thorough screenings based on three essential criteria:
- Companies with a market capitalization of at least $15 billion that have performed within the lower 50th percentile of their respective sectors since the market steadied after the Silicon Valley Bank collapse in late March.
- Analysed earning per-share growth expectations for the year 2023 that fall within the top 50th percentile of their respective sectors.
- Analysts’ 2023 EPS estimates that have seen notable upward revisions since late March.
After conducting these screenings, Evercore identified 23 stocks that meet their criteria. Specifically, they have highlighted T-Mobile (TMUS), Workday (WDAY), Cloudefare (NET), Duke Energy (DUK), Deere (DE), Humana (HUM), and Pinterest (PINS) as seven notable options.
Now, let’s closely examine the potential of the last three options.
Deere Steadies After a Strong Performance
Deere (DE) stock has experienced a modest 6% increase since March, slightly trailing behind the Industrial Select Sector SPDR Fund’s (XLI) 8% gain. Despite this recent breather, Deere outperformed the S&P 500 in 2022.
However, analysts remain optimistic about Deere’s future. According to FactSet, they expect the company’s earnings per share (EPS) to grow by approximately 29% this year, more than double the growth rate of the rest of the industrial sector. In fact, since the end of March, analysts have raised their 2023 EPS estimates by just over 1%. Investors eagerly await Deere’s upcoming earnings report on Aug. 18.
Health Insurers Face Challenges, But Humana Remains Strong
Humana (HUM) has experienced a decline of nearly 6% in its stock price, while the Health Care Select Sector SPDR Fund has seen a 6% increase. This decrease is partly due to UnitedHealth Group’s (UNH) warning of higher expenses resulting from delayed elective procedures that patients are now moving forward with after the pandemic.
Although the situation poses a challenge for health insurers, analysts have revised Humana’s EPS estimates upward, with a growth forecast of just over 2% for 2023 since the end of March. Notably, this year’s expected growth is approximately 11%, driven in part by the addition of millions of new sign-ups for Medicare Advantage. Investors can look forward to Humana’s earnings report on Aug. 2.
Pinterest Shows Stability Amid Market Volatility
Pinterest (PINS) stock has remained relatively stable while the Consumer Discretionary Select Sector SPDR Fund (XLY) has gained an impressive 14% since March. Although sales guidance was disappointing in April, analysts have still increased their EPS projections by 5%. They believe that management’s cautious outlook does not fully reflect the potential growth in the uncertain consumer environment. Additionally, Pinterest is actively expanding its advertising efforts, which aligns with expected growth. Analysts predict a 27% increase in EPS this year.
While the options may seem limited at the moment, even a handful of promising stocks can present attractive investment opportunities. Investors have something to consider buying in the current market climate.