Key points
- Five key trends should be at the forefront of investors’ minds as they enter the new quarter.
- Working through fundamental trends, down to industry-specific interests in the stock market, there are opportunities at every turn.
- Wall Street price targets and EPS projections support the upcoming capital rotation.
- 5 stocks we like better than Taiwan Semiconductor Manufacturing
Global financial markets are like a machine, and each asset class acts like a gear that goes round and round every cycle. Today, there are some key trends that investors should be aware of before the end of the quarter to help them consider the best themes for growing their wealth.
Each stage of the machine’s makeup contains actionable steps that investors can follow and rotate some of their capital in and out of their respective asset classes. Broader market participants and even Wall Street analysts are aware of these trends, which could begin with the Federal Reserve’s potential push to cut interest rates this year.
Since the price of money is generally determined by interest rates, a sensible first step for investors is to understand where commodities (priced in US dollars) might be headed and how everything else might follow. For this first step, consider Hess Co. NYSE: YES. Oil’s new yearly high could have an interesting effect on iShares 20+ year Treasury bond ETF NASDAQ: TLT.
Starting the car: oil and bonds
The FedWatch tool al CME Group Inc. says traders have priced in these potential cuts by September 2024. Potentially lower interest rates could lower the value of the dollar index, driving the price of a barrel higher. Reaching a near nine-month high, oil may currently have priced in these cuts.
Finding the right oil trade could be dangerous, so here’s what Wall Street likes. The integrated oil and gas industry is expected to grow its earnings per share (EPS) at an average rate of 11% this year. In contrast, Hess analysts believe Hess could lose 32%.
Knowing that growth will be the primary focus in these uncertain times, Mizuho Financial Group Inc. raised its price target on Hess to $205 per share, predicting a 30% upside from today’s prices. More than that, The PNC Financial Services Group Inc. bought $373,100 worth of Hess stock in the last quarter.
Hess shares are trading 94% of their 52-week high, so the momentum has already begun for energy stocks. Then there are bonds, which have attracted few buyers, pushing yields lower and reflecting potential Fed cuts.
Because of this, the iShares bond ETF is trading at around $90 per share, a price not seen since 2011. As bond prices move opposite to yields, investors could pick up this ETF at a cyclical low and ride it higher when the Fed throws in the towel. and cut rates.
American manufacturing is at stake
As the dollar is set to decline, American exports could become more attractive to foreign buyers. The ISM manufacturing PMI report for February saw export orders rise 6.4% from the previous month, as the sector prepares for the next export activity.
The Japanese steel giant Nippon Steel OTCMKTS: NISTFin December 2023 it submitted an offer to purchase United States Steel Co. New York Stock Exchange: for 14.9 billion dollars. Now that the Japanese yen is at a 30-year low against the dollar, buying an American manufacturing company seems like the cyclical choice.
Another name to remember is Entegris Inc. NASDAQ: ENTG. This is looking to grow its EPS by 36% over the next 12 months, leveraging the CHIPS and Science Act mission for onshore semiconductor manufacturing in the US
It’s all about the consumer
Now that US consumer confidence is at a 3-year high, stocks that enable consumer spending could see another rally. This time, names like Simon Property Group Inc. NYSE: GSP afford inflation-beating dividends to sponsor shareholders through this new cycle.
Even after rallying 32% over the past year, Simon Property (a shopping center owner-operator) still pays a 5.3% dividend yield. Additionally, its P/E valuation of 20.8x puts it more than 50% below the 44.5x multiple of the real estate investment trust (REIT) sector.
In the last quarter, Morgan Stanley AND The Goldman Sachs Group Inc. Analysts increased their price targets on the stock. Despite persistent inflation rates in the United States, the prospect of potentially lower rates has investors excited about this consumer discretionary play.
The race for artificial intelligence
And who remembers the technology stocks that brought the indices to all-time highs? After wearing the crown for a while, Nvidia Co. NASDAQ:NVDA is starting to raise questions about whether its price is excessive.
After allocating $11 billion to Taiwan Semiconductor Manufacturing Co. New York Stock Exchange: TSMthe US government has inherently expressed its preference – and confidence – for TSMC to move forward with its plan for onshore semiconductor manufacturing.
TSMC expects to grow its EPS by 24% this year, nearly double the 13% projection for Nvidia. TSMC still trades at a P/E of 28.4x, 68% lower than Nvidia’s 75.4x valuation.
Over the past 12 months, TSMC shares have underperformed Nvidia by as much as 173%, a gap that favored fundamentals and U.S. support could close.
Before you consider Taiwan semiconductor manufacturing, you’ll want to hear this.
MarketBeat tracks daily Wall Street’s highest-rated and best-performing research analysts and the stocks they recommend to their clients. MarketBeat identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market takes hold… and Taiwan Semiconductor Manufacturing wasn’t on the list.
While Taiwan Semiconductor Manufacturing currently has a “Moderate Buy” rating among analysts, top-rated analysts believe these five stocks are better buys.
View the five stocks here
Do you expect global energy demand to decrease?! If not, it’s time to take a look at how energy stocks can play a role in your portfolio.
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