The Buy rating is now around 62%, up 19 percentage points from last year.
Stocks that haven’t had great returns for years are often called "dead money" by investors. Many of these stocks are value traps that lure investors in only to frustrate them. However, there are some titles ready to come back to life.
Stocks such as Verizon (VZ) and AT&T (T) have fallen 11% and 16% respectively over the past three months, leaving both with single-digit price/earnings ratios and dividend yields close to 8%. Attractive stocks, but both have caused investors to lose about 4% a year on average over the past five years, while the S&P 500 and Dow Jones Industrial Average have averaged about 11% and 9% a year, respectively.
Are they ready to reverse the trend? Wall Street doesn’t seem to think so. Approximately 19% of analysts who follow Verizon stocks rate them as Buy while on average the Buy rating for stocks in the S&P 500 is approximately 55%. Additionally, the Buy rating for Verizon’s stock is essentially unchanged over the past year. Not a very compelling case for a trend reversal.
The metrics for AT&T’s stock look similar, although 30% of analysts following its stock rate it as Buy, slightly more than Verizon.
Other stagnant stocks look more promising. In particular, there are 10 stocks where an improvement in analyst sentiment could signal better days ahead:
1) the motorcycle company Harley-Davidson (HOG)
2) the packaged food company TreeHouse Foods (THS)
3) the biotechnology company Biocryst Pharmaceuticals (BCRX)
4) the investment bank Lazard (LAZ)
5) lawn care giant Scotts Miracle-Gro (SMG)
6) the biotech company Biogen (BIIB)
7) the lubricants company Quaker Chemical (KWR)
8) the trustee bank Bank of New York Mellon (BK)
9) the music streaming service Spotify Technology (SPOT)
10) the air transport company United Airlines (UAL)
The average annual returns on these stocks for the past five years have ranged from a 1% gain to an 8% loss. Not very exciting, but analysts are starting to look favorably on these stocks. The average rating of Buy that has been assigned is now approximately 62%, up 19 percentage points from 43% a year earlier.
Estimated price-to-earnings ratio for 2024 is approximately 12x, below the market multiple of 18x. This shouldn’t surprise investors. “dead money” stocks often have low P/E ratios, another element that entices investors before they realize that stocks are cheap for a reason, such as maximum profits in a cyclical industry or due to a declining business.
Original article published on Money.it Italy 2023-08-22 12:15:00. Original title: Le 10 azioni pronte al rimbalzo. I titoli da comprare
