The S&P 500 is inches away from a record, boosted lately by stocks leveraged to a reopening economy like Boeing and banks. In the opinion of Wall Street experts, a new set of equities will rise to prominence and lead the way from here.
Many FAANG stocks — the term used to describe a collection of large, high-tech companies that includes Facebook, Amazon, Apple, Netflix, and Google parent Alphabet — have suffered recent losses. Apple and Netflix shares will each be down by 5% in 2021.
Amazon shares have fallen 1% in the last month, but analysts believe the stock will rise 33% in the next year. JPMorgan describes the stock as a “preferred idea,” noting Amazon’s recent purchase of MGM Studios as a boost to the firm.
“Overall, the MGM agreement should allow Prime Video to take a larger share of watching in a more competitive and consolidated streaming landscape…as well as generate prospects for AMZN’s rapid growth and high-margin advertising business,” JPMorgan’s Doug Anmuth said in a May 26 note.
Facebook is also on the list of experts’ top picks for the biggest upside. Bank of America confirmed its “buy” recommendation on Facebook in April, after the company’s first-quarter financial results exceeded Wall Street estimates.
“We anticipate Facebook to gain share in advertising markets and expand close to 20% over the next three years, driven by user growth, new product offerings, and new ad formats,” wrote Bank of America’s Justin Post in an April 29 note.
Another Wall Street favorite to make the list is Etsy. The stock has more than quadrupled in the last year, boosted by the Covid pandemic’s e-commerce surge. While Etsy shares have fallen 10% in the past three months as the economy reopens, Atlantic Equities thinks the online marketplace is well-positioned to remain a market leader.
“Through its strong brand and community-building, Etsy stands apart from other digital pure-plays. Its selection of one-of-a-kind, handmade, personalized items is another barrier to entry, and the community of sellers and purchasers Etsy has already developed would be tough to replicate,” Atlantic Equities’ Daniela Nedialkova said in a note Monday.
Last Wednesday, the firm grabbed news when it announced the purchase of the second-hand clothes app Depop.
Micron Technology, a semiconductor business, has the most upside on the list. Micron’s stock price, according to analysts, might rise 44 percent in the next year.
“We anticipate [Micron] to gain from the rebound in the memory cycle, which we feel has left a super-cycle and is now in a more regular cycle,” Needham’s Rajvindra Gill said in a note dated May 26.
Nike, Diamondback, and Alaska Air are just a few of the preferred brands with room to grow.
Ark Innovation, Ark’s flagship fund, is down nearly 10% this year to around $112 per share, despite a sharp rotation into value stocks in 2021. The ETF is down about 29% from its February high as investors avoid names associated with innovation due to concerns about how the Federal Reserve will react to inflation.
Despite the weakness in her funds’ top holdings, Wood has been buying her strongest conviction names, some of which are trading at a significant discount to where they were earlier in the year.
“We have capitalized on this volatility by selling names that have outperformed others and moving into names… that we have a high degree of conviction in and those that are more opportunistic,” she explained.
In June, Wood added shares of Netflix, Etsy, Google parent Alphabet, Zoom Video, Crispr Therapeutics, and DocuSign to her various funds. Wood is even increasing her stake in Tesla, which has fallen roughly 33% from its 52-week high.
Wood also bought millions of shares in Coinbase Global, the world’s largest cryptocurrency exchange, as the price of bitcoin plummeted last month. Ark Innovation’s ninth-largest holding is now Coinbase.
Over the next five years, Wood anticipates a 25 percent annual rate of return on her top holdings.