With the S&P 500 having lost 8.6% so far this year, even after its rebound Tuesday and Wednesday, you might be wondering what stocks you should have in these market conditions.
J.P. Morgan has created a list of stocks to own during a market pullback. The list was assembled from stocks that the bank’s equity analysts identified as the most compelling in their coverage group.
The roster includes Netflix (NFLX), Amazon (AMZN), McDonald’s (MCD), Nike (NKE), Target (TGT), Exxon Mobil (XOM), American Express (AXP), Boston Scientific (BSX), DexCom (DXCM), Uber (UBER), UPS (UPS), Alaska Air (ALK), Intuit (INTU), Broadcom (AVGO), Salesforce (CRM), Celanese (CE) and Jones Lang LaSalle (JLL).
As for Amazon, Morningstar analyst Dan Romanoff is bullish on the stock too. He puts fair value at $4,100, compared to a recent quote of $3,066.
“Amazon dominates its served markets, notably for e-commerce and cloud services,” he wrote last month. “It benefits from numerous competitive advantages and has emerged as the clear e-commerce leader given its size and scale, which yield an unmatched selection of low-priced goods for consumers.”
Romanoff is impressed with Amazon’s Prime service. “Prime ties Amazon’s e-commerce efforts together and provides a steady stream of high margin recurring revenue from customers who purchase more frequently from Amazon’s properties,” he said.
“The Kindle and other devices further bolster the ecosystem by helping attract new customers, while making the value proposition irresistible in retaining existing customers.”
Romanoff lauds Amazon’s cloud division too. “Through Amazon Web Services (AWS), Amazon is also a clear leader in public cloud services,” he said.
“Additionally, the firm’s advertising business is already large and continues to scale, thus offering an attractive option for marketers looking to access a vast audience with a variety of proprietary datapoints about those very consumers.”
As for McDonald’s, Morningstar analyst Sean Dunlop has a fair value estimate of $250 for it, compared to its recent quote of $237.72. Looking at the impact of the Russia-Ukraine war, “the long-term state of both markets [is] exceedingly unclear,” he wrote last week. McDonald’s has temporarily closed 847 restaurants in Russia.
“In a bear-case scenario, … the complete deconsolidation of those units (which together constitute 9% of company revenue and 2%-3% of operating income) would result in a mid-single-digit decrease in our intrinsic valuation, suggesting about a $15 per-share impact,” Dunlop said.
In terms of his overall view on the company, “As the leader in global food-service sales, McDonald's is taking adequate steps to adjust to an evolving competitive landscape, leveraging its scale to invest heavily in digital acuity and menu innovation and generate compelling unit economics,” he said.
“While we expect an uneven return to normalcy due to varying paces of pandemic recovery globally, we're encouraged by management's vision for the business, which we believe should enable McDonald's to maintain its edge.”
