Displaying items by tag: value

(New York)

The market has been highly topsy turvy lately. With no real direction, stocks have been swinging back and forth based on economic and COVID news from day to day. With this kind of market looking likely for the near term, Goldman laid out some of its best picks for this kind of environment. Speaking about the market generally, the bank said “Consensus expects 9% upside to the typical stock over the next 12 months and volatility should remain elevated through the rest of the year, suggesting low risk-adjusted returns in the coming months.” Its stock picks included: Merck, Verizon, Philip Morris, General Motors, Comcast, Mondelez, and Coca-Cola.

FINSUM: A lot of old blue chips here whose earnings aren’t likely to be hurt too much by COVID.

(New York)

It has been a long, long, time since value stocks really had a shining moment. Growth has been outperforming value for over a decade now. However, strategists at JP Morgan say that value stocks may start to shine very soon. This underlying parts of this economy—weaker but still improving—are the exact conditions where value stocks traditionally shine. These pre-requisites for success seem likely to stay in place. There does not appear to be a second wave of infections brewing, there is ample government support for the economy, and economic data is trending more positively than negatively.

FINSUM: The typical rotation into value (such as in 2008-2009) takes over 100 days and has 18% upside. The logic here is sound, but we still wonder if value will outperform growth.

(New York)

The stock market may be complicated right now, but some things are abundantly clear. One of those is how the retail sector, and retail stocks in general, are going to react to the crisis. The answer is that big players are going to continue to grow, largely at the expense of smaller retailers. Bigger companies, with sophisticated websites and massive free shipping operations, have been thriving as small companies falter.

FINSUM: Think Amazon and Walmart, maybe Shopify (see other story about Shopify from today), as these companies will be the ones winning orders from customers over the short and long-term.

(Detroit)

There has been a lot of gloom for the auto industry lately. With showrooms and dealerships almost completely shut, car buying has dropped off a cliff, leaving auto companies sitting on big inventories with little demand. However, early signs from China and Europe are showing that the lockdown may have led to pent up demand for cars. In one sense, there is natural pent up demand from the closure of dealerships, but more interestingly, there seems to be more demand than usual. This is because people are growingly afraid of public transportation—in some cases governments are warning against using public transit . This means people are seeking the relative safety of traveling in their own vehicles.

FINSUM: This idea of surplus demand for private vehicles because of fear of the virus makes perfect sense. Auto stocks undervalued?

(New York)

So who is going to benefit most in the inevitable reopening of the economy? It is a tricky question to sort out. The most obvious companies are already seeing very stretched valuations, so those probably aren’t a good buy. Accordingly, here are some interesting names to look at in a category Goldman Sachs is calling “quality-at-a-reasonable-price”: Texas Instruments, Facebook, Mastercard, Alphabet, Home Depot, Ross Stores, Colgate-Palmolive.

FINSUM: Nice range of names. On the tech side, we love Facebook and Google. They are going to make more and more money as this lockdown accelerates the shift to ecommerce. On the retail side, discount stores like Ross seem like a good bet.