After the “washing” of the stock market brought about by the Fed’s aggressive interest rate hike, there are already many stocks that have fallen deep in the market, but Barron’s believes that some stocks with good fundamentals have emerged as buying points , could be the big winner this year.
The Fed’s anti-inflation campaign caused the Russell 1000 index to plummet 20% last year. Higher rates, while keeping inflation in check, could also trigger a recession, or at least cool economic activity and dent corporate profits. In addition, high interest rates often make future corporate earnings vulnerable, putting downward pressure on individual stock price-to-earnings ratios.
After a series of declines, Baron believes that some stocks that can be bought on the dip are slowly emerging, some of which are technology stocks with slumped price-to-earnings ratios-tech stocks valuations are usually based on long-term earnings growth, when long-term interest rates climb , and its valuation will be hit hard.
The price-to-earnings ratios of these stocks have fallen to lows, and if the strength of earnings growth continues, the shares may make a comeback.
There are also some stocks to buy on dips that have shown resilience in the face of adversity of late, though the threat to profit remains elusive.
Based on the above points, Evercore identified five stocks from the Russell 1000 Index, the list is as follows:
Fortinet (FTNT-US): This US information security company fell 32% last year, and its current short balance falls in the 81st percentile compared to the past two years. Analysts have revised up its 2023 EPS by 6.8% from Sept. 30 to date, while Russell 1000 EPS forecasts for 2023 have slipped 5% over that time period.
Walgreen Boots Alliance (WBA-US): Shares of the drugstore chain fell 28% last year, with short interest in the 96th percentile, EPS since Sept. 30 The repair rate is only 1.7%.
Avis Budget Group (CAR-US): Shares of the U.S. car rental company have fallen 21% in the last year, with short interest at the 85th percentile. Analysts have revised up their 2023 EPS by 13.7 %.
Nvidia (NVDA-US): Nvidia plunged 50% last year, and its current short position ranks in the 50th percentile, with an EPS correction of only 2.2%.
Comcast (CMCSA-US): Shares of the U.S. telecommunications carrier fell 31% last year, with short interest in the 91st percentile and EPS corrections of only 2.6%.