Buy these stocks on earnings momentum as the market trades at all-time highs
According to Liberum, some stocks have future earnings momentum that investors don’t want to ignore. Joachim Klement, an analyst at the investment bank, screened for S&P 500 stocks that have increased earnings over the past one, three and six months. He noted that companies with this momentum outperformed their counterparts by 0.2% over the past month. Earnings momentum can be a good sign for a company because it tends to be in line with revenue growth, margin improvements, or cost cuts, or some combination of these factors. this factor. Klement noted that earnings per share growth has had a “very difficult past” in the US market. It’s somewhat between Europe, where it works effectively as a performance predictor, and the UK, where he says it’s “absolutely terrible”. In the US, he noted that high-growth names performed well during market meltdowns like 2008-09 and 2020, but lost those outsized returns in the years immediately after. It also comes as the broader market has been trading near all-time highs, forcing traders to look more closely for individual stocks with more room to run. With those in mind, here are 10 names that surpassed the performance: Artificial intelligence company Nvidia makes the list, with 25% growth in forward earnings over the past three and six months. This buzzy stock attracted even more attention this week when it surpassed a $3 trillion market cap. Nvidia is up more than 140% in 2024, building on last year’s whopping gain of more than 230%. But despite the Buy rating, the average Wall Street analyst polled by LSEG expects the stock to fall more than 4% next year. NVDA YTD mount Nvidia, year to date. It is one of several large-cap tech stocks to make the list, with Amazon, Meta and Netflix also making the list. This comes as investors question what will happen next for the names in this group after being credited with helping push the market higher. In addition to technology, General Motors has also made cuts. The auto stock has seen its forward earnings expectations rise more than 35% over the past six months. General Motors stock also had a good year, outperforming the S&P 500 with a 27% gain. Wall Street sees more prospects ahead. The average analyst surveyed by LSEG issued a buy rating and a price target suggesting an upside of about 18.5%. Deutsche Bank’s head of research, Tim Rokossa, called General Motors “safer than Ford” last month in a note to clients. He cited “lower dealer inventories, resulting in price reductions in 2024 guidance and strong signals of greater capital gains for shareholders later this year.”
