The second half of the year has begun, and Wall Street experts say there are still a lot of companies that aren’t receiving the attention they deserve.
These companies will benefit from a number of positive catalysts in the coming months, according to analysts, and investors should not dismiss them.
This week, CNBC Pro combed through the top Wall Street research to identify some of the most underappreciated stocks for the rest of 2021.
Caterpillar, Apple, Performance Food, Sysco, US Foods, and Stryker are among them.
JPMorgan said in a note this week that Stryker is poised for a second-half surge.
“We continue to view Stryker as a standout within our large-cap coverage heading into 2H21 as one of the few companies that has managed to pair a premium growth profile with consistent top-tier execution over the last few years,” analyst Robbie Marcus and his team said.
The medical technology firm has a diverse range of businesses, including neurotechnology and orthopedic products, but there is one area that investors may be overlooking, according to Marcus.
Stryker’s Medical unit, known as MedSurg, was said to have “value-creating tuck-in M&A, sales specialization, and market leadership in narrow high-growth markets,” according to the firm.
Marcus wrote that a recent meeting with company management had made him more optimistic about the unit, which he described as the “underappreciated backbone of Stryker’s premium growth profile.”
Marcus added that the company is continuing to innovate and that Stryker appears to be one step ahead of the competition.
“With a better understanding of these key underlying markets and Stryker’s positioning in them, we are even more bullish on the company’s ability to sustain premium growth,” he added.
This year, the stock is up 8.3 percent.
Sysco, Performance Foods, and US Foods
The pandemic wreaked havoc on the businesses of the world’s three largest food suppliers this year.
According to Wells Fargo, things may be looking up for Sysco, US Foods, and Performance Food.
“We remain very optimistic about the food service space’s post-COVID earnings power overall and continue to see upside in all three stocks,” analyst Edward Kelly wrote.
If recent management commentary is to be believed, investors could be in for a big rest of the year, according to the firm.
“PFGC recently indicated that total company sales in the most recent week were $100 million higher than in 2019, USFD stated that both chain and independent volumes were higher in April than in 2019, and SYY is serving 10% more independent doors than before COVID,” he said.
Kelly also mentioned some silver linings as a result of the pandemic, such as cost inflation, cost cutting, and additional share gains.
“Overall, we continue to see the possibility of an underappreciated earnings recovery beginning in the second half of 2021,” Kelly said.
Performance Food shares are up 0.8 percent this year, while US Foods is up 13 percent during the same period. Sysco’s stock is up 3% this year.
Caterpillar stock is a good time to buy, according to Credit Suisse analyst Jamie Cook in a note this week.
The construction equipment company was added to the firm’s top picks list, and Cook believes the industrial “bellwether” will see several positive catalysts this year.
“We believe CAT’s 2020 earnings are at a cyclical low and see most markets improving in FY2021,” he wrote.
Caterpillar, according to Cook, is a key beneficiary of the “cyclical bounce” in oil and gas, as well as increased construction activity.
“CAT should benefit from the North America Construction and Resource equipment replacement cycle, which are both recovering at the same time and are both positive to mix,” he said.
According to Cook, don’t underestimate the power of a stronger commodities outlook.
“Commodity prices have been strengthening, including copper, iron ore, and nickel, and the depressed mining industry should begin to recover,” Cook said.
Caterpillar has a slew of other “underappreciated” assets, such as strong cash flow generation and earnings power, that should pique the interest of investors, he adds.
Caterpillar shares are up 19.6 percent this year.