Goldman best stocks
Goldman Sachs believes investors should concentrate on firms that are in a position to protect profits by increasing pricing and passing greater expenses on to consumers as the second quarter of their results begins.
On the surface, this is shaping up to be a stellar earnings season, with profits for S&P 500 companies expected to jump 65 percent from the same quarter a year ago, when the pandemic was at its peak, according to Refinitiv. However, Goldman noted that the median stock is only expected to grow earnings by 24%, and many companies are expected to suffer from higher inflation.
“Global shipping woes, raw material inflation, and acute shortages in both labor and semiconductors have all combined to raise costs for companies across the economy,” said David Kostin, Goldman’s head of U.S. equity strategy, in a note.
With a 16 percent rally in 2021, the S&P 500 has broken multiple records, assuaging fears that the economic recovery is slowing and the Federal Reserve will begin tightening ultra-easy monetary policy. Many on Wall Street believe that the second half of the year will be much more volatile, and that investors should be more selective.
According to Goldman, in this inflationary environment, companies with the highest profit margins have begun to outperform.
“Investors have begun to reward companies with attractive margin profiles,” according to Kostin. “Our valuation model shows that profit margins are the second most important driver of company valuations today, trailing only market capitalization.
Goldman screened S&P 500 companies with above-average net margins, realized margin growth of 50 basis points or more in 2020, and expected margin growth of 50 basis points or more in each of the next two years to identify stocks with expanding profitability.
In 2021, the median stock in the basket has a net margin of 26 percent, compared to 13 percent for a typical S&P 500 stock. Meanwhile, the median stock in the screen is expected to increase margins by 306 basis points through 2022, versus 156 basis points for the median S&P 500 stock.
Texas Instruments, Broadcom, Analog Devices, and Microchip Technology are among the semiconductor companies on the list. Despite a global shortage, many chip companies are benefiting from increased demand from smartphone manufacturers, automakers, and gaming companies.
Goldman also mentioned mining companies Newmont Corp. and Freeport-McMoRan, as well as railroad company Union Pacific. duration of equity.”
Bank of America’s best stocks
According to Bank of America, many businesses that beat last year will do the same in the coming weeks.
As earnings season begins this week, the bank published a list of stocks it believes are good opportunities for stock pickers.
“Earnings season is a good time to be a stock picker,” according to Bank of America analysts. “During earnings season, particularly on the busiest reporting days, stock differentiation is heightened for short-term investors.”
Materials, industrials, and technology stocks are likely to outperform this quarter, while utilities, staples, and health care are less likely.
Almost all of them are scheduled to report at the end of July or the beginning of August.
This earnings season, take a look at Bank of America’s stock picks:
According to BofA, several of the picks, including M&T Bank, Allstate, and Twitter, are underweighted by active funds.
Twitter is the only technology stock on the list. The mining companies Freeport-McMoRan and Mosaic are among the materials and industrials. Mosaic is the stock with the lowest active fund weighting on the list.
The industrial sector is represented by agricultural machinery manufacturer Deere & Co and aerospace and defense company Northrop Grumman.
Jim Cramer’s best stocks
Jim Cramer,said on Monday that it was on the notion of holding Exxon Mobil stocks, citing a number of favorable triggers including the recent shake up by activist investors in the field of climate change.
“If this stock falls in price, I want to use that as an excuse to buy,” Cramer said on “Squawk on the Street” after discussing a new report from BMO Capital Markets analysts.
The firm initiated coverage of the oil giant on Monday with a market perform rating, which is equivalent to a hold.
“We currently see Chevron or Conoco as less appealing in terms of valuation, ability to increase cash returns, and cash flow leverage to higher oil prices,” the analysts wrote. “However, we like Exxon’s leading upstream pipeline, which benefits it in the long run, and we could be more constructive on shares if there is a pullback.”
Exxon stock was trading around $61 per share on Monday. The stock has a price target of $69 set by BMO.
Despite the fact that BMO’s article is titled “Exxon Mobil: Don’t Call It a Comeback,” Cramer said it sounds “like a comeback story.”
“Everything is going swimmingly for them. “The dividend is safe,” Cramer stated. “They have Permian foundation. This Guyana asset is fantastic. The board is taking steps toward ESG, which I applaud. … Chemical [margins] are at a 10-year high.”
The “Mad Money” host has recently avoided oil and gas stocks, citing poor performance even before the Covid pandemic. According to Cramer, one of the reasons the stocks have struggled is investor concern about climate change, which has led to a segment of investors refusing to own the companies.
However, energy has been the best-performing sector in the S&P 500 this year, rising about 39%, as Wall Street shifted its focus to economically sensitive industries that stand to benefit from the US economic expansion. Exxon stock, in particular, has risen 48 percent year to date.
Exxon and its peers had been hard hit by the coronavirus pandemic, which had reduced travel and, as a result, demand for oil. Now, a significant recovery is underway, with crude prices rising to the benefit of producers.
In recent months, Cramer has spoken positively about some fossil fuel stocks. He stated in early June that Pioneer Natural Resources and Chevron had “heeded the call” to reduce their environmental impact.
“They recognized that their old ways are no longer acceptable, and they are becoming better corporate citizens,” Cramer asserted. At the time, he hinted that his feelings toward Exxon were improving as a result of activist firm Engine No. 1 gaining multiple board seats at the company.
Exxon needed to adjust its operations and reduce its carbon emissions, according to Engine No. 1, to ensure the company’s long-term financial viability.
“With the new board, this is a great story,” Cramer said of Exxon.
