Nvidia qualifies as a growth stock. It trades for about 30 times estimated 2022 earnings.
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Stocks are struggling. Everything is going down, even stocks with improving outlooks. But falling stocks and improving outlooks typically spells opportunity for investors.
Through Monday, the Nasdaq Composite, S&P 500 and Dow Jones Industrial Average and are down about 10%, 7% and 5%, respectively, over the past few trading days. It has been brutal.
Investors, however, might be throwing the baby out with the bathwater—selling even if things, for some individual companies, don’t appear all that bad. Barron’s looked for S&P 500 stocks with rising full year 2022 earnings estimates that have been hammered. We came up with a dozen to take a look at.
These are stocks where analysts have raised estimates over the past four weeks while simultaneously getting sold by investors over the same span.
The dozen in not particular order are: Warner Bros Discover (ticker: WBD), West Pharmaceutical Services (WST), Nvidia (NVDA), miner Freeport-McMoRan (FCX), cybersecurity provider Fortinet (FTNT), backup power pioneer Generac (GNRC), solar inverter company Enphase Energy (ENPH), Tesla (TSLA), Charter Communications (CHTR), medical device maker Edwards Lifesciences (EW), Signature Bank (SBNY), and Comcast (CMCSA).
Down but not out
Beaten up stocks with improving outlooks
| Name / Ticker | Market Cap | Change One Month | 2022E PE Ratio |
|---|---|---|---|
| Warner Bros Discovery / WBD | 41.5 | -30.1 | 11.2 |
| West Pharma / WST | 22 | -28.1 | 31.9 |
| Nvidia / NVDA | 424.7 | -26.6 | 29.8 |
| Freeport / FCX | 51.7 | -27.2 | 9.1 |
| Fortinet / FTNT | 39.3 | -27 | 48.2 |
| Generac / GNRC | 14.9 | -20.4 | 19.5 |
| Enphase / ENPH | 20.1 | -23.6 | 43.5 |
| Tesla / TSLA | 815.7 | -23.2 | 66 |
| Charter / CHTR | 85.9 | -16.8 | 15.1 |
| Edwards / EW | 58.9 | -23.6 | 36.9 |
| Signature Bank / SBNY | 13.9 | -17.4 | 10 |
| Comcast / CMCSA | 178.1 | -16.2 | 11.2 |
Source: Bloomberg
It is an eclectic group. Tesla and Nvidia qualify as growth stocks. They trade for about 66 and 30 times estimated 2022 earnings, respectively. Warner Bros isn’t a growth stock. It trades for 11 times estimated 2022 earnings.
For the group, 2022 earnings estimates are up an average of 0.3% over the past month. That isn’t a lot, but it is up. Only about 175 of the 500 companies in the S&P 500 can boast rising 2022 earnings estimates over the past four weeks. This 12, however, are the most badly beaten up of the ones with rising estimates, falling an average of about 23% over the past month.
That divergence is the opportunity.
A stock screen, of course, is never a substitute for research. It is only the starting point for an investment thesis—a tool to whittle down the universe of investible stocks to a manageable level.
In this case, maybe investors can find some good stocks at a discount after a tough few days of indiscriminate selling.
Write to Al Root at [email protected]
