Key points
- Wall Street is looking for high-growth stories that trade at discounts, and they may have found three good candidates.
- Following all the same tailwinds, potential interest rate cuts could bring double-digit upside for investors.
- Analysts like them and institutions saw enough in them to start buying.
- 5 stocks we like best about The PNC Financial Services Group
Earnings growth typically drives stock prices. Three stocks are set to grow at double- and even triple-digit rates this year, but their prices remain at discounts of more than 30% from their 52-week highs. Whether undervalued or simply forgotten, they are cheap stocks that shouldn’t be.
Names to keep in mind for your “growth at a discount” watchlist may include Hecla Mine NYSE:HL, Wayfair Inc. NYSE: Wand even Mobileye Global Inc. NASDAQ: MBLY. The combination of positive factors in the global economy and above-average earnings per share (EPS) growth may allow investors to grow their portfolios by double digits in this new cycle.
Professional traders use a process called “top-down” analysis to understand the macro developments at play. By understanding what’s about to happen in the economy, investors can better decide where their money could get better returns.
Get ready for a money shift
Analysts at The Goldman Sachs Group Inc. NYSE:GS gave Main Street an insight into their strategy for 2024. In their macro outlook report, it is clear that the investment bank expects to see a turnaround in the manufacturing sector of the US economy.
Their expectations became evident after the ISM PMI manufacturing index reported a 6.4% jump in new export orders, the highest expansionary reading for the month of February. This means demand for precious metals, home furnishings and even original equipment manufacturers (OEMs) could increase.
Of course, Goldman is betting that potential interest rate cuts by the Federal Reserve (Fed) will boost the manufacturing sector. So far they are right. As the PMI shows, lower interest rates could lower the dollar, making U.S. exports more attractive to foreign nations.
But the responsibility doesn’t stop there; Lower interest rates could create greater demand for luxury goods (silver), spur home-buying activity (furniture), and spur auto loan financing (need for OEM parts).
Precious metals are in play
After rising to all-time highs, gold prices also gave way to the rise of other precious metals. For silver, this means a 23% rally from the fourth quarter of 2023 to today. While investors can take the risk and bet on futures contracts to profit from rising silver prices, there is a better way to beat the market.
Mining stocks tend to follow – and even amplify – the price action of the commodities they extract. This is why mining analysts at Hecla expect EPS growth of up to 700% over the next 12 months.
As a silver miner, the company will sell more expensive silver and report profits in upcoming quarterly reports. As the stock trades at just 61% of its 52-week high, institutions like Vanguard increased their position in the stock by 0.6%, requiring a $1.6 million transaction.
Additionally, Hecla’s Forward P/E valuation of 53.3x Forward P/E makes it 252% more expensive than the Mining sector’s average valuation of 15.2x. There must be a good reason for the market to overpay for this stock; now investors know this reason.
Lower interest rates make the dollar weaker, and silver is priced in dollars, so it may be an obvious investment to continue to expect higher silver prices in the future.
Furnishing the house with double-digit growth
For Wayfair, another important trend is helping Wall Street identify potential upside in its stock. Since Warren Buffett has spotted an opportunity in upcoming real estate stocks, others affected by this boom, such as furniture, could also benefit.
The overall cost of buying a home could be much lower now that interest rates may lower mortgage costs and the National Association of Realtors (NAR) just changed how agents get paid commissions. Stimuli to homebuying activity may be why analysts do so Morgan Stanley NYSE:MS see an $80 price target for Wayfair.
Calling for 27% upside, the ratings come from the 176% EPS growth expected this year. These hypotheses could only be justified by the winds blowing on the real estate market, which could call Wayfair to furnish newly purchased homes.
Cars are the next step, as are spare parts
Since lower interest rates also spur new car financing, retail companies need to replenish their OEM inventory, which is where Mobileye comes in.
There must be a good reason why The PNC Financial Services Group Inc. NYSE:PNC and Vanguard have both increased their exposure to Mobileye stock, especially in the latest quarter, when the stock rallied 36%. Trading at 66% of its 52-week high prices makes the stock a cheap growth story today.
Expecting EPS growth of 358% this year, analysts are correct in their upward projections of 42% with a stock price target of $44.3. After all, its forward P/E valuation of 42.7x puts it 324% above the industry average of 10.1x valuation. Again, “It has to be expensive for a reason” and investors are starting to understand what that reason might be.
Before you consider PNC Financial Services Group, you’ll want to hear this.
MarketBeat tracks Wall Street’s highest-rated and best-performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market takes hold… and The PNC Financial Services Group wasn’t on the list.
While PNC Financial Services Group currently has a “Hold” rating among analysts, top analysts believe these five stocks are better buys.
View the five stocks here
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