Source: Barron's
This means investors should look for top quality companies that have become cheaper.
The market continues to fall, so it's time to buy stocks that are unfairly biased.
$S&P 500 Index (.SPX.US)$Down nearly 4% from the closing high set on March 28, the past few weeks have not been good. Major US stock indexes are likely to fall by 10% or more every year, and there are many signs that the market is currently moving towards this trend.
The Middle East conflict may continue to push up already high oil prices for some time, and may trigger a wider range of inflation, which in turn will cause the Federal Reserve to completely abandon interest rate cuts this year. The market is keenly aware that economic growth may slow down and corporate profit expectations may decline.
This means investors should look for top-quality companies that have become cheaper, and if they are as profitable as analysts expect, their stock prices may rise after the results are announced.
“Barron's” made a list of such stocks. We searched for listed companies whose profit expectations for 2024 were raised by analysts or whose profitability remained the same since the S&P 500 profit forecast fell at the end of February. To be included in the list, the share price of these stocks must have fallen from their highest point, which indicates that they may have been affected by the general market decline, and they have yet to release earnings reports for the first quarter.
There are eight stocks on this list:$General Motors (GM.US)$,$Whirlpool (WHR.US)$,$Mattel (MAT.US)$,$Seagate Technology (STX.US)$,$Ameriprise Financial (AMP.US)$,$Sherwin-Williams (SHW.US)$,$Matador Resources (MTDR.US)$, and$Steel Dynamics (STLD.US)$.
Since the end of February, analysts' earnings per share expectations for Mattel (Mattel, a world-renowned toy company) stock have remained stable, while earnings estimates for other companies on the list have risen by 1.3% to 8.4%, according to FactSet data. Meanwhile, analysts' 2024 revised earnings per share forecast for S&P 500 stocks has now been lowered by about 0.4%.
The stock price of Sherwin-Williams (Sherwin-Williams, a well-known paint manufacturer in the US) hovered around $308, down 11% from the highest closing price set at the end of 2021, and below the multi-year high of $347 hit at the end of March. Analysts raised Sherwin-Williams's earnings per share forecast by 0.4% this year.
This is mainly due to the contribution of the sales side. Analysts have raised Sherwin-Williams's revenue forecast by millions of dollars to US$23.79 billion, an increase of about 3% over the previous year. On the face of it, this isn't exciting, but it also reflects the robustness of its business.
Sherwin-Williams announced price increases during the January earnings call, and investment bank Evercore wrote in a recent report that the company should continue to demonstrate strong pricing capabilities. Although existing home sales in the US (critical to the paint industry as a whole) may not grow much in 2024 due to high mortgage interest rates, the company can continue to expand its market share.
As for costs, Sherwin-Williams said in January that the cost of its raw materials should drop, while the cost of transportation and other projects would rise slightly. The company has been buying back shares recently to reduce the amount of share capital, so earnings per share are expected to increase by more than 10% this year to reach $11.46. Investors will know if the company's profit forecast can be realized after the closing of the market on April 23.
Now is a tough time to find potential bets, and these eight stocks on Barron's list are likely to meet requirements or even exceed expectations.
edit/lambor