Best stocks to buy looking at the “new normal”
Experts predict that pandemic-related work model shifts will persist even after Covid subsides — and Goldman Sachs analysts believe that certain stocks will benefit from this evolution.
According to the report, roughly half of the US labor force will continue to work from home at least some of the time in the near term, and most likely in the long term.
“We are in an experimentation period, but companies appear intent on figuring out what aspects of the pandemic experience are worth keeping, and there is little doubt that at least some of them will permanently stick for many companies,” Sven Smit, co-chairman of the McKinsey Global Institute, told Goldman Sachs.
The firm asked its analysts to identify specific stocks that will benefit from the continued use of hybrid work models.
Take a look at some of Goldman Sachs’ recommendations.
Analyst Kash Rangan named Salesforce as one of the top software companies poised to benefit from the ongoing digital economy. Salesforce is “focused on enabling businesses to have a holistic picture of customer touchpoints, e-commerce, and sales analytics,” according to Rangan.
Rod Hall of Goldman Sachs identified Cisco Systems as a beneficiary of hybrid work in the hardware and communications technology sectors. According to Hall, Cisco and other office networking companies are “well positioned to continue to capture gains from expected elevated network demand.”
According to Caitlin Burrows, an analyst, exposure to urban centers and marquee developments are important differentiators in the real estate space. Burrows suggested real estate investment trust SL Green Realty Corp because of its exposure to New York, “where the incremental improvement in return-to-office rates is likely to be more significant than national averages that did not have as significant an initial falloff in utilization.”
As business travel recovers, Goldman Sachs analysts named Hyatt Hotels and United Airlines as top picks. Hyatt Hotels is the only stock on Wall Street with a buy rating from the firm. According to analyst Catherine O’Brien, United is currently the cheapest major airline stock in terms of value.
Target was also named to Goldman Sachs’ list of retail companies. Target, according to Kate McShane, has gained market share during the pandemic and owns its own third-party delivery provider, Shipt.
These are the best stocks to buy during earning reports
Each stock has 10 or more reports in Bespoke’s data.
Roku, a streaming video platform, is one of the most well-known stocks on the list.
This year, the stock has outperformed the market, rising nearly 31% year to date. This strength comes on the heels of a more than 140 percent increase in 2020. Roku is also well-liked on Wall Street, with 74 percent of analysts rating the stock as a buy or overweight, according to FactSet.
According to Bespoke, the company has historically outperformed earnings expectations 93 percent of the time.
RingCentral, a business communications company, is also on the list. The stock has struggled this year, dropping nearly 30%, but it still has a market cap of around $24 billion.
Shareholders are likely hoping that another strong earnings report will help kickstart a recovery. According to Bespoke, RingCentral has outperformed earnings expectations nearly 97 percent of the time and has risen 3.5 percent the following day on average.
Grand Canyon Education is another stock on the list that has been struggling ahead of the earnings report. The education company’s stock is down less than 1% year to date, but has dropped about 15% in the last three months.
The company has outperformed earnings expectations 94 percent of the time, with a 3.4 percent average next-day gain.
Should you buy Chinese stocks at the deep?
In an interview with “Closing Bell,” Niles said his interest in the stocks was piqued Tuesday by reports in Chinese Communist Party-affiliated media outlets, which he interpreted as “trying to calm markets.”
“I think it makes sense that if you wipe out $1.5 trillion in market cap in three days, which is what happened earlier this week, at some point that 10% of the population that owns stocks is going to get really upset, and I think that finally caught their attention,” Niles said.
This is why “I started buying a basket on Wednesday, added to it on Thursday, and added more today while shorting a lot of US stocks that I could balance against it, which have been up significantly,” Niles explained.
The Chinese government’s recent regulatory crackdown on ride-hailing giant Didi Global, private education companies, and other tech firms prompted investors to sell their stock. The KraneShares CSI China Internet ETF, symbol KWEB, has dropped nearly 28 percent in the last month.
The uncertainty created by Beijing’s actions has unsettled shareholders and prompted a round of questions about whether investors should own companies that are either in the crosshairs of the government or may find themselves there in the future.
“Any of them could be at risk. It’s finally time. You must leave. “You can’t own these stocks,” Jim Cramer said last week..
Niles emphasized that it all comes down to risk tolerance and the nature of his investment firm.
“Remember, we’re a hedge fund, so we’re always looking for the best risk-reward ratio and balancing those risks,” he explained. “We bought a basket of over 50 names and have just been adding to it because we didn’t want to take company-specific risk,” Niles explained.
Didi, which went public in the United States in late June and then faced regulatory backlash from the Chinese government over data and privacy practices, is one name he avoids.
Since then, the company and its stock have been on a roller coaster ride.
Didi denied a report in The Wall Street Journal on Thursday that the ride-hailing company could go private in order to satisfy the government. The initial Journal report sent the company’s shares up nearly 40% in early trading on Thursday; the stock eventually closed up 11.2 percent. The stock gained 4.5 percent on Friday to close at $10.31 per share, which is still less than the $14 IPO offering price.
“I could see why people would get involved in Didi,” Niles admitted before delving into the Journal report. “I didn’t want any of that. “I avoided it,” he explained.