Half of 2023 is essentially over. It’s been quite a start to the year. Big Tech has roared ahead, leaving most other stocks in the dust. The
Nasdaq 100
is up about 37% year to date. That’s the best start to the year on record, based on data back to 1986.
Investors worried that there is little juice left to squeeze from the biggest names such as
Apple
(ticker: AAPL) and
Nvidia
(NVDA) should look for some stocks that can close the performance gap in the second half of 2023.
Barron’s tried to identify some candidates. We searched the
Russell 1000
for stocks with rising earnings estimates and falling stock prices. We found roughly 100 stocks where Wall Street has taken up estimates over the past three months and where investors have reacted to rosier outlooks by selling shares, pushing down prices.
| Company / Ticker | Market Cap (bil) | YTD Change | 3-Month EPS Revision | 2023 P/E |
|---|---|---|---|---|
| Moderna / MRNA | $46.9 | -32% | 2% | N/A |
| Enphase / ENPH | 22.1 | -39 | 2 | 29.1 |
| Alteryx / AYX | 3.1 | -14 | 68 | 63.7 |
| ChargePoint / CHPT | 3.0 | -12 | 1 | N/A |
| Nextera / NEE | 148.6 | -12 | 1 | 23.6 |
| CNH Industrial / CNHI | 19.0 | -12 | 1 | 8.3 |
| Harley-Davidson / HOG | 4.9 | -18 | 2 | 7.2 |
| Nasdaq | 24.3 | -18 | 1 | 18.4 |
Sources: Bloomberg; FactSet
That setup is an opportunity, but 100 is a lot. We paired that list by looking for stocks with either big differences between estimate revisions and stock returns or big year-to-date losses. There is a qualitative element to almost any screen. In this case, we want to avoid value traps—stocks that are getting cheaper for a reason.
(Any stock with rising estimates and a falling price is getting cheaper by definition.)
Eight stocks look like they have a chance to turn performance around. The octet in no particular order are:
Moderna
(ticker: MRNA), solar tech company
Enphase Energy
(ENPH), software maker
Alteryx
(AYX), EV charging company
ChargePoint
(CHPT), utility
NextEra Energy
(NEE), machinery maker
CNH Industrial
(CNHI),
Harley-Davidson
(HOG) and
Nasdaq
(NDAQ).
It’s an eclectic mix. Moderna and ChargePoint aren’t profitable. Moderna made a lot of money in 2022, but less Covid vaccination means less earnings. Still, the company has attractive technology despite its recent boom-bust cycle. ChargePoint is, essentially, a start-up benefiting from the rise of EVs. It’s the most valuable of the EV charging companies and a good place to start for investors looking to buy something other than
Tesla
(TSLA) stock, which has gained more than 100% so far in 2023.
NextEra and Enphase are both renewable energy giants. Utility stocks have fallen somewhat out of favor because technology has become a dominant market force. Enphase makes technology for solar and investors have been worried about falling prices. TD Cowen analyst Jeffrey Osborne, however, wrote recently that pricing was now “stable.”
Harley is the least popular of the stocks listed with just 50% of analysts covering the company rating shares Buy. The average Buy-rating ratio for a stock in the
S&P 500
is about 55%. Shares also trade for about 7 times estimated earnings making it a kind of value, contrarian pick.
CNH Industrial doesn’t trade for a big multiple either, at about 8 times 2023 earnings estimates, but its business is doing fine and it is a peer of
Deere
(DE). Both are benefiting from the trend toward smart farming technologies that save farmers money. Deere stock trades for about 13 times.
Nasdaq stock is down in part because of the big acquisition of Adenza. Investors might not be given the company enough credit to integrate the business and grow in the future.
Alteryx provides data analysis software growing sales are roughly 15% a year. At more than 60 times earnings, but earnings estimates are up about 68% over the past three months. Analysts now expect the company to earn about 68 cents in 2023, up from prior estimates of about 40 cents.
The eight situations are intriguing. A stock screen, of course, is just a start. After identifying attractive ideas the harder work of evaluation and valuation begins.
Write to Al Root at [email protected]
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