it closed at a record Thursday, rising above 4,000 for the first time. But not all stocks have shared in those gains so far this year.
While most stocks in the S&P 500 are positive for the year, about one in five has declined in the first quarter of 2021. Some are down for fundamental reasons, while others appear to be undergoing the change in market momentum. growth stocks to cyclical and cyclical stocks. values names.
However, once the headwind subsides, the names that have been left behind are likely to catch up as their earnings estimates remain strong. In some cases, analysts have adjusted their expectations further this year. That presents a good opportunity to buy stocks in fundamentally strong companies at discount prices.
Among the nearly 100 S&P 500 companies whose stocks are in negative territory to date, roughly half are expected to post earnings per share in 2021 that are at least 20% higher than fiscal 2019 earnings. Among them , around 30 are expected to see the strength remain in 2022, which means their 2022 earnings are expected to grow at least another 10% from 2021 levels.
To find stocks whose earning potential is not reflected in the stock price, Barron It took those 30 names and eliminated any stocks that were trading at more than 30 times the 2021 earnings estimates. That left us with nine names.
Even better, analysts have raised their earnings estimates for 2021 and 2022 for all stocks since late last year, which means Wall Street is getting more bullish on them. These discounted names are primarily growth stocks in the healthcare, technology, telecommunications and consumer sectors.
Note: Earnings per share for 2021 and 2022 are consensus estimates.
(ticker: QCOM), for example, has seen its shares fall almost 10% to date. Investors don’t seem impressed by the company’s first-quarter revenue, which was 62% higher than a year ago, but has yet to meet analyst expectations. In the long term, the company, known for the chips that power smartphone processors, could benefit from the global transition to 5G networks and the infrastructure spending proposed by the Biden administration.
Stocks (VTRX) are another example where a recent pullback due to negative events may have gone too far. In mid-October, the biotech company canceled development of a once-promising drug after trial results disappointed. Its shares have plummeted 23% since then and are down 10% to date. Despite the failure of that drug, Barron wrote in March that Vertex remains a powerhouse in the treatment of cystic fibrosis and is developing a promising line beyond that.
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