Goldman Sachs suggests a strategy that utilizes the finest aspects of growth and value equities. The idea is to own growth businesses while getting good value.
Value stocks were predicted to maintain their advantage over growth stocks in the third quarter of this year, while growth stocks are expected to regain the lead in early 2022. Goldman admitted that it was a difficult decision to make, and both approaches at times may seem as though they were breaking out.
Goldman’s list of GARP stocks includes the social media behemoth Facebook. Some FAANG stocks — the acronym stands for Facebook, Amazon, Apple, Netflix, and Google parent Alphabet — have struggled recently. However, Facebook has outperformed the rest of the group over the last three months, gaining 25%.
Costco Wholesale has the highest growth in the consumer staples category on Goldman’s list, but it still ranks in the 66th percentile for value. The retailer has an 11 percent long-term growth rate and a forward price-to-earnings ratio of 36.
Deere & Company ranks in the 99th percentile for industrial growth. While the stock has been trading in the red over the last month, the manufacturing name is up roughly 29 percent in 2021 and has more than doubled in the previous year.
Other GARP names on Goldman’s list include TJX Companies, Raytheon Technologies, and Applied Materials.
The last couple of weeks have seen fresh meme stocks come back again, as traders on Reddit keep identifying new companies to target beyond their previous favorites AMC Entertainment and GameStop.
Bank of America has been identifying potential WallStreetBets targets in recent weeks by analyzing for clients how many mentions each stock receives on Reddit, as well as other factors such as short interest — that is, the number of shares sold short by investors.
The Wall Street firm provided clients with an updated list of the top small- to mid-cap stocks to watch as the meme stock craze returns. The stocks on this list have received the most Reddit mentions and have seen short interest rise above the S&P 500’s 5-percentage-point average in the last week.
AMC is still ranked first on the list of meme stocks. While shares are only up 3% since Monday, mentions on WallStreetBets have increased for the third week in a row, with over 7,500 comments since June 2.
“Last week, we warned that option markets were signaling the end of the AMC rally, based on significant increases in stock volume, implied volatility, and the put-to-call volume ratio (signs associated with retail-led speculative rallies nearing their end). “Those warning signals have either reversed or subdued over the last few days,” Jill Carey Hall, equity and quant strategist at Bank of America, told clients in a note.
She claims that online comments about GameStop, the second most-mentioned stock on Reddit, have been increasing. The stock received approximately 2,670 mentions two weeks ago and approximately 3,804 comments in the last week. GameStop’s stock is up more than 20% this week. On Wednesday, GameStop, the original meme stock, revealed an SEC investigation into the trading of its shares.
According to Bank of America, GameStop and AMC still have 23 percent and 21 percent of their float shares sold short, respectively, compared to an average of 5 percent short interest in a typical U.S. stock.
Clean Energy Fuels, Wendy’s, and World Wrestling Entertainment are new additions to the list. Shares of Clean Energy Fuels, which has been mentioned more than 1,580 times on Reddit in the last week, have increased by more than 60% since May.
Wendy’s and World Wrestling Entertainment appeared on the screen of Bank of America for the first time since August. Since last week, Wendy’s has been mentioned 293 times, and World Wrestling Entertainment has been mentioned 35 times on Reddit.
Workhorse Group was the fourth most-mentioned company on Reddit, with 402 mentions. Workhorse has the highest percentage of its float shares sold short, at 40%, of any stock on Bank of America’s list.
Other companies on Bank of America’s list include Virgin Galactic, Beyond Meat, Athene Holding, Antero Midstream, Academy Sports and Outdoors, and Silvergate Capital.
According to Bank of America, other stocks to watch include Natus Medical, Bed Bath & Beyond, Zillow Group, O-I Glass, Alcoa, Gladstone Commercial, and Dave & Buster’s Entertainment.
Overall, according to Bank of America’s survey of institutional clients, the meme stock mania does not pose a significant risk to the small-cap index.
According to Hall, “investors do not see long-term risk to small caps based on speculative retail activity.”
This week, American Airlines, Plug Power, BioCryst Pharmaceuticals, and Goodrich Petroleum were dropped from Bank of America’s list.