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TipRanks
JP Morgan: 2 stocks to buy (and 1 to avoid)
Marko Kolanovic, the well known quantitative strategist at JPMorgan, sees the formation of a positive feedback loop that will drive markets higher next year. Kolanovic believes that a decrease in volatility and favorable monetary policies will combine to make equities the go-to investment for 2021, driving higher market gains. Officially, JPM forecasts a 25% gain on the S&P 500 over the next 12 months. With investors gravitating toward equities, low volatility and cheap cash, Kolanovic predicts that institutional investors will also step up. In his recent note, the strategist says that $ 550 billion in combined hedge fund activity is likely for equity markets over the medium term. Taken together with the other factors, Kolanovic writes that “these inflows would dominate the stock offering to drive the equity markets higher.” In getting down to the essential details, Kolanovic points out three key segments investors should watch out for in the markets: financial stocks, energy stocks and value stocks. He sees that the first two will benefit from falling unemployment as the economy recovers, while the third will benefit at the expense of growth stocks. Growth stocks and government bonds will lose ground overall during what JPM sees as a bull year for the stock market. In addition to Kolanovic’s look at the macro situation, JPMorgan analysts have also dived into specific actions. Of particular interest, we’ve pulled data from TipRanks on two stocks that the firm predicts will show powerful double-digit growth next year. And just for contrast, we’ve included one that JPMorgan claims to avoid. Dollar Tree (DLTR) First comes Dollar Tree, a major name in the discount retail segment. Dollar Tree operates more than 15,000 department stores in the US and Canada, and offers a wide range of products, many of which are priced at $ 1 or less. Store departments include food and snacks, dairy and frozen products, household items, household cleaning supplies, toys; In short, all the items that customers can find in department stores and retailers, but at a discount price. of an impact on Dollar Tree than on other retailers, at least in part due to the company’s business model. Offering a “one-stop shop” for most homes and the lowest possible price during a severe economic recession has helped the company maintain sales and store traffic. This was made clear in the company’s 2020 quarterly earnings, which followed its historical pattern rather than general economic conditions. Yes, first quarter EPS was down and down year over year, but the first quarter is generally the slowest in the company. Second and third quarter earnings showed sequential gains, beating forecasts as they increased year-over-year. Revenues for 2020 have been stable, between $ 6.29 billion in the first quarter and $ 6.18 billion in the third quarter. Strong performance and a strong retail niche underlie JPM’s analysis of this stock. Analyst Matthew Boss writes: “Several years, we see DLTR return to a double digit EPS ‘composite’ with upper and lower drivers in place on DT’s central banner (with incremental implementation of DTPlus) and stabilization in the Concept. of the family dollar “. To this end, Boss improved his stance on DLTR from Overweight Neutral (i.e. Buy) and set a price target of $ 130, indicating confidence in a potential upside of 20.5%. (To view Boss’s history, click here) The analyst consensus rating here is a Moderate Buy, based on 17 reviews including 10 purchases and 7 positions. Dollar Tree stock is selling for $ 108, and its average price target of $ 121.33 suggests a 12% increase from current levels. (See DLTR on TipRanks stock analysis) Mohawk Industries (MHK) As a source of employment and an indicator of underlying economic health, few industries receive as much attention as home construction. And that will lead us to Mohawk, a contractor in the home building industry, specializing in residential and commercial fl ooring. The company employs more than 37,000 employees worldwide and has operations in North and South America, South Asia and Australia. Mohawk’s performance, in financial results and stock appreciation, has followed the pandemic throughout the year. Revenues decreased in 1H20 and bottomed out in the second quarter, but rose again in the third quarter. The top line for the third quarter, at $ 2.57 billion, was the highest so far in 2020. Earnings followed the same pattern, rising from a low in the second quarter to reach EPS of $ 3.26 in the third quarter, the highest in over 2 years. JPM analyst Michael Rehaut is impressed with Mohawk’s recent performance, enough to improve his stance on the stock. You have changed your rating from Neutral to Overweight (that is, Buy) and have set a price target of $ 157, suggesting an 18% increase in one year. (To view Rehaut’s history, click here) “After nearly three years of relatively underperformance, we believe both the sell and buy sides are overly conservative on MHK’s earnings growth prospects for the next 1-2 years. At this point, we see that our 2021E EPS of $ 10.60 is well above the street’s $ 9.87, as well as even more bullish buying expectations that we believe are around $ 10.00, based on our conversations with investors, ”he noted. Rehaut. Overall, Wall Street remains cautious of Mohawk stocks, as evidenced by the consensus rating of Hold. This is based on 6 purchases, 4 holds, and 4 sales. The stock is priced at $ 132.60 and the median target price of $ 116.15 indicates a possible 12.50% drop for next year. (See MHK stock analysis on TipRanks) Northern Trust (NTRS) Last and least is Northern Trust, a financial services company serving ultra-high-net-worth individuals, along with institutional investors and corporations. Chicago-based Northern Trust has $ 1.3 trillion in assets under management and another $ 10.1 trillion in assets under custody. The company has a market capitalization of ~ $ 19 billion and claims $ 152 billion in bank assets. Yet with all of that, Northern Trust has struggled in recent months. The company did not meet estimates for third-quarter results, with EPS of $ 1.32 falling 9.5% sequentially, more than 21% year-over-year and missing the forecast by more than 5%. On the top line, revenue fell 2.2% from the second quarter to $ 1.3 billion in the third quarter. On a positive note, Northern Trust has maintained its dividend payment during this pandemic year. The company pays 70 cents per common share, and has done so consistently for the past five quarters. The next payment is due in early 2021. Annualizing at $ 2.80 per share, the dividend yields more than 3%, an attractive value these days with interest rates close to zero. Vivek Juneja, one of JPM’s 5-star analysts, sees the negatives outweigh the positives at Northern Trust. Consequently, the analyst downgraded his position in the stock to underweight (ie sell). Its price target of $ 90 suggests a drop of almost 6% from current levels. (To view Juneja’s track record, click here) Supporting her bearish stance, Juneja sees several key points, including: “1) [Northern Trust’s] The P / E premium for trusted peer banks is almost two standard deviations above their long-term average premium, despite a sharp decline in revenue growth versus their peers; 2) Northern is more vulnerable to money market fund outflows than its peers: its disclosed institutional asset management money market fund AUM is declining faster in Q4, 7% so far; 3) Northern has had very few waivers of institutional money market fees so far, but they are likely to increase … “Overall, the current market view on NTRS is mixed, indicating uncertainty as to its outlook. Maintain the analyst consensus rating with only 2 recent buy ratings. This is versus 3 holds and 3 sells. However, the $ 96.38 price target suggests a potential upside of almost 8% of the current stock price. For ideas for trading stocks with attractive valuations, visit TipRanks Best Stocks to Buy, a recently launched tool that brings together all of TipRanks’ stock perspectives Disclaimer: The opinions expressed in this article are solely those of prominent analysts. to be used for informational purposes only. It is very important that you do your own analysis before making any investment.
