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Three lesser recognized businesses and a regional bank have been added to the list of top stock selections from JPMorgan’s analysts.
Four new companies were added to the list in June, each with its own particular business approach: pharmaceutical firm Atea, genetic testing firm Natera, communications provider Poly, and real estate investment trust Regency Centers.
Analysts have taken off home systems firm Resideo Technologies as well as home office firm Corporate Office Properties from the focus list in June.
JPMorgan’s bullish view on US Bancorp as a near-term play is driven by rising consumer spending and recovering travel demand.
“Among our banks, US Bancorp should benefit the most from the rebound in consumer spending because it has a much higher share of revenues tied to credit/debit fees than any other,” analyst Vivek Juneja said.
According to Juneja, the bank’s merchant acquiring segment does a lot of business in the airline and hospitality sectors, which are expected to boom with a post-pandemic travel boom.
Poly was also added as a near-term pick by JPMorgan. With a market cap of about $1.4 billion as of Wednesday afternoon, the company is one of the smallest on the June focus list.
According to analyst Paul Coster, the stock is “attractively valued,” and the company’s video and headset offerings present a growth opportunity.
Poly shares are down about 20% in the last three months, but up nearly 25% in 2021.
Despite eye-popping profits in 2020, clean-tech stocks have slipped lately due to lower investor demand. The sector, however, is still attracting investment money and could see growth because of increasing consumer interest, according to Jefferies.
“Governments are reiterating their commitments to net-zero carbon targets, with some even announcing plans, and we believe COP26 will act as an additional catalyst to the decarbonization trade,” the firm wrote in a client note.
The abbreviation COP26 refers to the United Nations Climate Change Conference, which will be held in Madrid in November.
According to Jefferies, the “energy transition” refers to companies that are involved in the transition away from fossil-fuel based production and consumption systems and toward renewable sources such as wind and solar.
According to the firm, “the energy transition will continue to gain importance as investors prioritize environmental, social, and governance (ESG) factors.”
According to a recent Morningstar report, ESG-related funds attracted record inflows during the first quarter, bringing total assets in sustainable-focused funds to nearly $2 trillion. The $1 trillion mark was reached for the first time in the second quarter of 2020, implying that assets nearly doubled in less than a year.
Energy transition funds’ assets increased by more than $11 billion between December 2020 and May 2021, according to Jefferies, making it the most popular category among thematic funds. Water scarcity and the Circular Economy were the second and third most popular themes, attracting approximately $9 billion and $6 billion, respectively.
In terms of exchange-traded funds, Jefferies reported a $2.8 billion increase in assets in energy transition themes during the same time period.
According to FactSet data, the iShares Global Clean Energy Fund has been one of the most popular renewable energy-focused funds this year, with approximately $2.7 billion in inflows. Another popular vehicle has been the First Trust Nasdaq Clean Edge Green Energy Index Fund, which has received approximately $950 million in inflows.
BYD, National Grid, RWE AG, and Iwatani Corp. are among the buy-rated names on Jefferies’ list of stocks exposed to the energy transition theme. NextEra Energy, General Electric, Enphase Energy, and First Solar are also on the list.
In addition to the energy transition, Jefferies identified automation and cybersecurity as two of its top investing themes for the rest of the year.
Citi downgrades Allstate. Citi says that as a result of increasing automobile and house prices, Allstate’s shares may struggle to continue its good start to the year.
“We anticipate that personal lines insurers will face a double whammy in terms of rising claims costs. First and foremost, we anticipate an active [catastrophe] year (with a predicted above-typical hurricane season, following quite elevated 1Q:21 losses). Second, rising inflation is expected to put upward pressure on personal lines claims costs for auto and home policies,” according to the note.
The global semiconductor shortage continues to constrain supply in the auto industry, while high lumber and labor prices make home construction and repair more expensive than before the pandemic. According to Citi, prices for personal insurance lines have also gradually increased over the last two years, implying that Allstate has less room to absorb these higher prices.
Citi increased its price target for the stock to $142 per share, up from $135. The new target is approximately 3.4 percent higher than where Allstate closed on Wednesday.
“Bottom line,” the note said, “we move to the sidelines based on the stock’s YTD run and our view that ALL has already picked much of its low-hanging fruit in terms of business optimization.”
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As the S&P 500 closes in on a new all-time high, Kari Firestone, CEO and chairman of Aureus Asset Management, explained what she has been purchasing lately.
With just 35 equities in its portfolio, Aureus Asset Management chairman Don Firestone has said that “real estate possessed by any one brand is quite precious.”
In the technology sector, Firestone stated that she purchased the stock of Peloton, a stationary bike company, when it was reduced from $160 per share. Aureus Asset Management increased its position after Peloton fell to the low $80s due to the recall of its treadmills.
“It received some negative publicity as a result of an accident and a recall, but we believe they will recover, as Tesla has in the past. “Johnson & Johnson, Lululemon, and many other companies go through scandals and lose some credibility, which they regain,” Firestone explained.
As an infrastructure play, Aureus Asset Management has been purchasing shares of Westinghouse Air Brake Technologies, a company that manufactures products for freight cars.
As business travel resumes following the pandemic, Firestone believes American Express will outperform.
“If interest rates rise, they benefit from having all of that cash flow through the system,” Firestone explained.
She also likes HealthEquity, a mid-cap stock that is a health savings company.
“We believe [HealthEquity] has significant upside as people return to work and realize they would like to have a health savings plan as part of their insurance program, which employers will provide,” Firestone added.
Aureus Asset Management has been purchasing shares of real estate investment trust SL Green Realty as a Manhattan real estate play.
“It’s a company that obviously suffered a lot as a result of Covid, but businesses are reopening and people are returning to work,” she explained. “We believe that people will begin to return to the city, which is obviously beneficial to them.”
Firestone also owns American Tower, a provider of wireless communications infrastructure, which has seen a surge in popularity as a result of the work-from-home trend.