The coronavirus outbreak and its economic implications have forced investors to re-evaluate their portfolios, and estimate the earnings hit to each of their companies.
Still, there have been some winning stocks this year. They tend to be companies with low debt, long-term growth potential, and not-outrageous valuations. If the pandemic lasts and stocks extend their bear market, there is good reason for them to continue beating the market.
Barron’s screened for companies whose stocks in the S&P 500 that have outperformed the index by at least 13 percentage points this year—meaning they’re in the green year to date—and that Wall Street analysts expect to continue growing their earnings in 2020 and over the next five years.
And, as always, investors don’t want to pay a too-elevated multiple for the shares: The stocks must also trade for no more than 25 times forward earnings estimates. That kicks Amazon.com (AMZN), Microsoft (MSFT), MarketAxess Holdings (MKTX), and others off the list.
Here are the 12 stocks:
- Akamai Technologies AKAM
- Arista Networks ANET
- Cabot Oil & Gas COG
- Citrix Systems CTXS
- Dollar General DG
- Gilead Sciences GILD
- Nasdaq NDAQ
- Newmont NEM
- Old Dominion Freight Line ODFL
- Steris STE
- Vertex Pharmaceuticals VRTX
- Walmart WMT
Meanwhile, Wall Street's main indexes have rallied this month, with the S&P 500 ending Friday with its biggest two-week percentage gain since 1974 on a raft of global stimulus and hopes the virus was nearing a peak in the United States.
The Nasdaq also registered its best two weeks since 2001, powered by new record highs for Netflix Inc. and Amazon.com Inc. - deemed "stay-at-home" stocks as widespread lockdowns fueled demand for online streaming and home delivery of groceries, Reuters explained.
Still, the benchmark S&P 500 is about 15% below its all-time high and analysts have warned of a deep economic slump from the halt in business activity and millions of layoffs.
"There's an early street consensus this morning that risk has run too far, too quick," said Stephen Innes, chief global markets strategist at AxiCorp.
"With several 'stay-at-home' names trading at or near year-to-date highs, the risk for a round of profit-taking might be on the cards ahead of S&P 500 earnings reports this week."
Hopes have also risen for a gradual reopening of the economy after President Donald Trump cited signs of plateauing in the virus outbreak last week and outlined new guidelines for states to pull out of shutdowns.
But his plan was thin on details and left the decision largely up to state governors.
"The recovery will be much slower than the market is currently pricing in simply because social distancing measures can be relaxed but not removed until we have a vaccine or a very effective cure," said Andrea Cicione, head of strategy at TS Lombard in London.
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