The first quarter ended with the index up by 10.6%. Of this rise, about half (4.8% to be precise) depended on the usual magnificent 7 shares, of which about a quarter was due to NVIDIA Corporation (NASDAQ:) alone.
At a time when many think that this is a trend destined to continue over time (and perhaps it will be for a few more quarters) I would suggest doing a check in 3-5 years from now. The market is cyclical, the market experiences ups and downs, and this concerns both the psychology of investors and the price trend, or to use more technical language, the speculative factor (the P/E multiple).
The golden rule that every investor should remember is that “high valuations TODAY often equate to LOW expected future returns tomorrow” (and vice versa). If you don’t believe this rule, just look at the Treasuries 10+ just to name a few asset classes (see below).
In fact, the magnificent 7 are having the excellent returns seen in 2023 and 2024… because in 2022 almost no one wanted them (I remember when I bought Meta Platforms Inc (NASDAQ:) on declines but everyone was sure with the stock below 100 dollars that it would go bankrupt due to TikTok’s competition).
Now that we have made some firm points, what could be some interesting companies in this sense?
Here I have put a list of 7 possible titles that could benefit from similar considerations…
They are securities that reflect some filters used with InvestingPro, in particular:
- ROIC > 10%
- Upside potential of at least 10%
- Current Ratio > 1
- Debt/Capital Ratio less than 0.9
- LENGTH > 5%
- Market capitalization > 50 Billion
Do not forget Of Take advantage of the 10% discount on InvestingPro+ on the annual plan (click WHO), to find out which stocks are undervalued and which are overvalued thanks to a series of exclusive tools: ProPicksstock portfolios managed by artificial intelligence and human expertise. ProTipssimplified information and data. Fair Value and Financial Health2 indicators that provide an immediate view of the potential and risk of each security. Screener of titles and Financial data historians on thousands of titles, and many other services!
THE RESULT
The companies you see listed below are 7 very well-known stocks, with all the characteristics above, and I add with a P/E valuation lower than 17 (historical average area S&P 500)
- PayPal Holdings Inc (NASDAQ:)
- Alibaba Group Holdings Ltd ADR (NYSE:)
- Berkshire Hathaway Inc Class A (NYSE:)
- Total Energy Services Inc (TSX:)
- Rio Tinto ADR (NYSE:)
- Stellantis NV (BIT:)
- Cisco Systems Inc (NASDAQ:)
Many of these have been experiencing difficult situations for a long time, not so much in terms of fundamentals, but in terms of falling prices. And as always happens, they are first denigrated, then ignored.
Not all of them statistically will be able to come back into vogue, but at least we can start evaluating something where the probability of higher future expected returns is more on the investor’s side, after a few years.
Not all actions can become magnificent, but a magnificent action can be hidden within each action.
Until next time!
“The author holds long positions on Paypal, S&P 500 and . This article was written for information purposes only; it does not constitute a solicitation, offer, advice, consultancy or investment recommendation as such it is not intended to incentivize in any way the purchase of assets. I remember that any type of asset is evaluated from multiple points of view and is highly risky and therefore, every investment decision and the related risk remain the responsibility of the investor”.
2024-04-02 22:57:58
#magnificent #titles #reserve #surprises #coming #years
