Although the fear of a recession is still circulating and many investors therefore prefer to exercise caution on the stock markets, the positive development on the stock markets since the beginning of the year suggests otherwise. This is because a few individual tech stocks have propelled major indices higher, while others continue to lag behind. For these three stocks, however, analysts are optimistic that they should take off again this year.
• Important indices up since the beginning of the year despite negative factors
• A few tech stocks push stock markets into positive territory
• Analysts are betting on these three stocks to catch up
If you look at the development of the stock exchanges this year, you could get the impression that the macroeconomic environment has improved significantly since the stock markets collapsed in autumn 2022. In fact, most of the negative factors such as high inflation, rising interest rates, the Ukraine war and fears of a recession are still there.
Nevertheless, an increase can be seen in the most important US indices compared to the beginning of 2023. The S&P 500 has increased by 15.62 percent since the beginning of the year, the Dow Jones by 3.36 percent, and the NASDAQ Composite tech index has even managed to grow by 31.47 percent.
Tech stocks fuel stock market rally
According to S&P Dow Jones Indices analyst Howard Silverblatt, at least the whopping rise in the market-wide S&P 500 is largely due to the strong upward movement of just seven stocks, as Yahoo Finance writes. The US investment bank Goldman Sachs also assumes that almost 90 percent of the price increase this year can be traced back to the 15 largest companies contained in the index. Unsurprisingly, these heavyweights are primarily various tech giants who have benefited in particular from the hype surrounding artificial intelligence.
A look at the winners over the past six months in the index shows NVIDIA at the top, followed by Tesla, Meta Platforms, Carnival, and Palo Alto Networks. Unsurprisingly, the losing side is made up of several US regional banks such as First Republic Bank, SVB Financial Group and Citizens Financial Group. Perhaps more surprising are formerly high-flying titles like Moderna, Under Armor, and Etsy, which have lost double-digit feathers in the past six months. Overall, the S&P 500 has had 256 gainers versus 234 losers year-to-date.
However, there are some titles that, according to various analysts, could still ignite the turbo this year. Truist expert Keith Lerner and Bank of Montreal analyst Brian Belski expect the rally in the S&P 500 to spread to other stocks in the second half of the year, as investors are looking for cheap entry opportunities and are already looking to the reversal of the currently strict USmonetary policy would set next year, as Yahoo Finance writes. “The bogeyman of the narrow breadth of the market is slowly beginning to widen and we expect this trend to continue,” explains Belski.
Occidental Petroleum Stock – License to Print Money
One such stock that has lagged year to date but has good prospects for the rest of the year is Buffett investment Occidental Petroleum. Since the beginning of the year, the share has lost 3.87 percent. Star investor Buffett also seems to remain convinced that the paper has long-term potential: his investment holding company Berkshire Hathaway has repeatedly bought shares in the oil company in recent months. The expansion of the investment to 25.1 percent of the oil company then led to speculation that Buffett could plan to take over the company entirely. However, the stock market legend had rejected this rumor at the last Berkshire general meeting: “There is speculation that we will buy control, we will not buy control. We would not know what to do with it.”
This year, the company has struggled in the face of a deteriorating economic outlook, as oil demand is falling with a weakening economy. However, Occidental Petroleum is not alone in this problem; the entire energy sector is lagging behind the broader market in terms of performance. However, Lee Munson, CEO of Wealth Advisors, sees great opportunity in Buffett’s investment, particularly given its leading production in the Permian Basin, a large sedimentary basin in the US that has an extensive oil field. As Oxy writes on its own website, the company owns around 11.7 million hectares of land in the states of Texas and New Mexico. Munson calls the basin a “crown jewel” from which to extract oil cheaply, according to Yahoo Finance Live. After that, fracking would remain as a method to get even more out of the basin. In his estimation, this is like “printing money”.
Occidental Petroleum stock is also popular with other analysts. On average, 28 FactSet analysts rated the share as Overweight. The target price now is $68.708, well above the current price of $60.55.
Cisco Stock – Excellent fundamentals are convincing
According to New Constructs CEO David Trainer, the tech company Cisco also has room for improvement this year. Year-to-date, the Cisco stock is up 9.40 percent, but compared to the rally in other tech stocks, that’s a much smaller increase. The US network equipment supplier is currently suffering from falling orders, as revealed in the figures for the most recent quarter. The volume of orders for switches and routers for Internet and data traffic fell by 23 percent in the three months to the end of April. As Cisco CEO Chuck Robbins explained in the course of the analysts’ conference, this is mainly due to hesitant customers who were more reluctant due to the uncertain economic situation.
However, Trainer sees the rather weak performance of Cisco shares as a good entry point for investors, as the company has “excellent fundamentals,” as Yahoo Finance writes. “The stock is also attractively valued, implying earnings growth of 4 percent over the next 10 years. We expect the company to be closer to 9 or 10 percent earnings growth.”
Cisco stock also has an average overweight rating from the 25 FactSet analysts surveyed. The median target price of $55.524 is also above the stock’s last close of $52.12.
AT&T stock – On the way to becoming a deep value company
The US telecommunications group AT&T has had a disappointing performance so far this year: it has fallen 17.33 percent since the beginning of the year. As shown by the first quarter results, the company’s cash flow was particularly affected by inventory and capital expenditures. The free cash flow from January to March was only one billion US dollars, while analysts had previously assumed that the inflow would be around three times as much. AT&T’s goal for the year is to generate at least $16 billion in free cash flow. CEO John Stankey did not question this goal when presenting the balance sheet.
Despite everything, Morningstar’s US chief strategist David Sekera considers the telecom rival to be a top pick: “AT&T is at the interface of a deep value company. Basically, it is relatively well positioned. We rate the company with a narrow economic moat , meaning it has structural cost advantages over the long term.
AT&T’s opinions are divided among FactSet analysts. The average rating of the 27 experts surveyed is somewhere between “Overweight” and “Hold”. However, the median price target of $20.445 is well above the current close of $15.22.
Editorial office finanzen.net
This text is for informational purposes only and does not constitute an investment recommendation. finanzen.net GmbH excludes any claims for recourse.