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Just a couple of weeks ago investors were fearing the worst. Inflation was coming in hot, interest rates cuts were off the table, and analysts were shouting about stagflation. Now just a few days later, broad equity indexes are again approaching all-time highs.
All it took as a measly -6% selloff in the S&P 500 to start scaring investors out of positions in good stocks. When small pullbacks like the one at the end of April are met with vigorous buying like we saw these last couple weeks, you know the bull market is intact.
Stocks are almost always climbing the “wall of worry.”
The hiccups that cause mini selloffs are fantastic buying opportunities.
The US economy is extremely robust in the face of record high interest rates. US household wealth is at all-time highs encouraging consumer spending, the US government is spending on big infrastructure projects such as semiconductors and nuclear energy, and though there may be a slight delay, expansionary monetary policy is on its way.
Rising consumer and government spending grows earnings, and falling interest rates will increase liquidity. These are the driving factors in markets, and they are pointing to a continuing bull market now.
Furthermore, this bull market is still in the early innings. Amazing businesses are still trading for very reasonable and even discount valuations and are ripe for the discerning investor.
The Zacks Rank continuously amazes me with its ability to identify leading stocks, and here I will show you three of my favorites. Not only do these stocks have top Zacks Ranks, but they are also showing relative strength, cheap valuations, and have rock solid business fundamentals and growth.
Alphabet
Google parent company Alphabet (GOOGL - Free Report) experienced some hefty upgrades to its earnings estimates this last week, boosting it to a Zacks Rank #1 (Strong Buy) rating.
Analysts have unanimously revised earnings estimates higher, with FY24 climbing by nearly 12%. EPS are forecast to grow at 17.2% annually over the next 3-5 years, which is an incredible pace for a mammoth company like Alphabet.
Image Source: Zacks Investment Research
Price action in Alphabet stock has also made some encouraging advances in recent months. After showing some questionable action early in the year, GOOGL stock has significantly outperformed the Nasdaq index and its mega-cap technology counterparts over the last three months.
Additionally, it has been forming what looks like a compelling bull flag. If the stock can break out from the recent highs, it should make another bull run.
Image Source: TradingView
PDD Holdings
PDD Holdings (PDD - Free Report) also known as Pinduoduo, is a Chinese e-commerce platform that specializes in group buying deals. It utilizes a social commerce model, encouraging users to share deals with friends and family to unlock additional discounts. The company's business model focuses on leveraging social networks and innovative marketing strategies to drive sales and engagement.
Revenue at PDD Holdings has exploded in the last few years, growing annual sales from $2 billion in 2018 to $35 billion in the last year. This huge pace of growth is expected to continue with sales expected to climb 50% this year and 35% next year.
Image Source: Zacks Investment Research
Pinduoduo has also seen some hefty upgrades to its earnings estimates, giving it a Zacks Rank #1 (Strong Buy) rating. Current quarter earnings were revised higher by 27% over the last two months and FY24 have increased by 18% over the same period.
PDD Holdings is currently trading at a significant discount too. Its one year forward earnings multiple of 16.5x is well below the market average, and its two-year median of 25.6x.
But what makes this valuation appear especially cheap is PDD’s PEG Ratio which considers EPS growth. Over the next 3-5 years EPS are forecast to grow 49.3% annually, giving it a PEG ratio of just 0.3.
PulteGroup
PulteGroup (PHM - Free Report) , one of the leading homebuilding businesses in the US and recently jumped up to a Zacks Rank #1 (Strong Buy), reflecting strongly upward trending earnings revisions.
PulteGroup along with the other homebuilder stocks are extremely well positioned for the current economic environment.
While some investors worry about the strong price appreciation in the residential home market over the last few years, it is unlikely to slow down. The reality of the US home market is that there is a huge shortage of available housing. Not even 7% mortgage rates could slow down the market!
Because of the limited supply of housing, homebuilders are likely to score strong profits in the coming years.
But what makes PulteGroup especially appealing is its earnings growth expectation in relation to its valuation.
PHM is currently trading at a one year forward earnings multiple of 9.2x, which is just below its 10-year median of 9.6x and the industry average of 10.4x. But analysts are anticipating EPS to grow 17.7% annually over the next 3-5 years, giving PulteGroup a PEG ratio of 0.52.
That is an extremely appealing level based on the metric.
Image Source: Zacks Investment Research
Bottom Line
For investors looking to add exposure to stocks, these three stocks are worth diving into.
I also particularly like this mix of stocks because it gives you a rather broad and diversified mix of companies. You have big tech, which include cloud, content and search at Alphabet, housing with PulteGroup, and China with PDD Holdings.
Diversification like this gives investors the luxury of various exposures. So, if one sector or geography underperforms, there is a possibility another will outperform.
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Hold On, Stocks are Going Higher
Just a couple of weeks ago investors were fearing the worst. Inflation was coming in hot, interest rates cuts were off the table, and analysts were shouting about stagflation. Now just a few days later, broad equity indexes are again approaching all-time highs.
All it took as a measly -6% selloff in the S&P 500 to start scaring investors out of positions in good stocks. When small pullbacks like the one at the end of April are met with vigorous buying like we saw these last couple weeks, you know the bull market is intact.
Stocks are almost always climbing the “wall of worry.”
The hiccups that cause mini selloffs are fantastic buying opportunities.
The US economy is extremely robust in the face of record high interest rates. US household wealth is at all-time highs encouraging consumer spending, the US government is spending on big infrastructure projects such as semiconductors and nuclear energy, and though there may be a slight delay, expansionary monetary policy is on its way.
Rising consumer and government spending grows earnings, and falling interest rates will increase liquidity. These are the driving factors in markets, and they are pointing to a continuing bull market now.
Furthermore, this bull market is still in the early innings. Amazing businesses are still trading for very reasonable and even discount valuations and are ripe for the discerning investor.
The Zacks Rank continuously amazes me with its ability to identify leading stocks, and here I will show you three of my favorites. Not only do these stocks have top Zacks Ranks, but they are also showing relative strength, cheap valuations, and have rock solid business fundamentals and growth.
Alphabet
Google parent company Alphabet (GOOGL - Free Report) experienced some hefty upgrades to its earnings estimates this last week, boosting it to a Zacks Rank #1 (Strong Buy) rating.
Analysts have unanimously revised earnings estimates higher, with FY24 climbing by nearly 12%. EPS are forecast to grow at 17.2% annually over the next 3-5 years, which is an incredible pace for a mammoth company like Alphabet.
Image Source: Zacks Investment Research
Price action in Alphabet stock has also made some encouraging advances in recent months. After showing some questionable action early in the year, GOOGL stock has significantly outperformed the Nasdaq index and its mega-cap technology counterparts over the last three months.
Additionally, it has been forming what looks like a compelling bull flag. If the stock can break out from the recent highs, it should make another bull run.
Image Source: TradingView
PDD Holdings
PDD Holdings (PDD - Free Report) also known as Pinduoduo, is a Chinese e-commerce platform that specializes in group buying deals. It utilizes a social commerce model, encouraging users to share deals with friends and family to unlock additional discounts. The company's business model focuses on leveraging social networks and innovative marketing strategies to drive sales and engagement.
Revenue at PDD Holdings has exploded in the last few years, growing annual sales from $2 billion in 2018 to $35 billion in the last year. This huge pace of growth is expected to continue with sales expected to climb 50% this year and 35% next year.
Image Source: Zacks Investment Research
Pinduoduo has also seen some hefty upgrades to its earnings estimates, giving it a Zacks Rank #1 (Strong Buy) rating. Current quarter earnings were revised higher by 27% over the last two months and FY24 have increased by 18% over the same period.
PDD Holdings is currently trading at a significant discount too. Its one year forward earnings multiple of 16.5x is well below the market average, and its two-year median of 25.6x.
But what makes this valuation appear especially cheap is PDD’s PEG Ratio which considers EPS growth. Over the next 3-5 years EPS are forecast to grow 49.3% annually, giving it a PEG ratio of just 0.3.
PulteGroup
PulteGroup (PHM - Free Report) , one of the leading homebuilding businesses in the US and recently jumped up to a Zacks Rank #1 (Strong Buy), reflecting strongly upward trending earnings revisions.
PulteGroup along with the other homebuilder stocks are extremely well positioned for the current economic environment.
While some investors worry about the strong price appreciation in the residential home market over the last few years, it is unlikely to slow down. The reality of the US home market is that there is a huge shortage of available housing. Not even 7% mortgage rates could slow down the market!
Because of the limited supply of housing, homebuilders are likely to score strong profits in the coming years.
But what makes PulteGroup especially appealing is its earnings growth expectation in relation to its valuation.
PHM is currently trading at a one year forward earnings multiple of 9.2x, which is just below its 10-year median of 9.6x and the industry average of 10.4x. But analysts are anticipating EPS to grow 17.7% annually over the next 3-5 years, giving PulteGroup a PEG ratio of 0.52.
That is an extremely appealing level based on the metric.
Image Source: Zacks Investment Research
Bottom Line
For investors looking to add exposure to stocks, these three stocks are worth diving into.
I also particularly like this mix of stocks because it gives you a rather broad and diversified mix of companies. You have big tech, which include cloud, content and search at Alphabet, housing with PulteGroup, and China with PDD Holdings.
Diversification like this gives investors the luxury of various exposures. So, if one sector or geography underperforms, there is a possibility another will outperform.