VMware at NYSE, December 14, 2021.
Investor attention returned to the Federal Reserve following a November jobs report last week.
Indeed, even though the central bank has pushed interest rates up, the economy continues to create jobs and wages continue to rise. Friday’s report on last month’s payrolls surprised investors and dampened sentiment.
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Nonetheless, investors should keep a longer-term perspective when deciding how best to position their portfolios. To that end, here are five stocks picked by top Wall Street pros, according to TipRanks, a service that ranks analysts based on their track record.
While the software company vmware (vmw) rattled by lackluster quarterly results, Monness Crespi Hardt analyst Brian White maintained his positive belief on the stock.
Above all, the company will soon be acquired by Broadcom (AVGO). Under the agreement between the companies, VMware shareholders can either cash in their shares at $142.50 per share or choose to exchange their holdings for 0.2520 Broadcom shares for each VMware share. However, in all likelihood, shareholders could end up with a 50-50 split between cash and stock.
That’s important, because this deal allowed VMware to “dodge the tech apocalypse of 2022,” in White’s words, with the stock up 4% in 2022.
Given the pending acquisition, VMware has not issued any guidelines. However, White remains optimistic based on the shareholder benefit as well as VMware’s stable position in the technology sector.
“VMware earnings remain depressed after aggressive capital initiatives and model transition. At the same time, the current economic and geopolitical environment is discouraging, leading to a more uncertain future, creating greater appeal for large enterprises stable and well-managed technologies benefiting from digital transformation, such as VMware,” White theorized.
White is ranked #697 among more than 8,000 analysts tracked on TipRanks. The analyst has a record 55% successful ratings over the past year, with each rating generating average returns of around 8.7%.
oil and gas exploration company Diamondback Energy (CROC) caught the attention of Scott Hanold, analyst at RBC Capital Markets, after recently making two significant strategic acquisitions. The analyst expects the acquisitions to be accretive to his earnings per share estimates for 2023 and 2024 of 7% to 9%.
Crucially, at a time when nearly every company has worrisome near-term prospects, Hanold sees a solid upside to Diamondback’s near-term free cash flow, thanks to its latest acquisition of the Permian Lario Basin assets. (See Diamondback dividend date and history on TipRanks)
The analyst is also optimistic about Diamondback’s asset monetization plan and believes it will help the company maintain a healthy balance sheet even after the two recent acquisitions. “We believe FANG will still maintain an adjusted leverage ratio below 1.0x after the close of both transactions. However, we believe the company will make further progress to exceed its $500 million asset monetization target, putting focus on midstream assets that are trading at more robust market values,” said Hanold, who reiterated a buy rating and price target of $182 for the stock.
Impressive, Hanold holds the 8e position among more than 8,000 analysts on TipRanks, and has a success rate of 70%. Each of its ratings generated average returns of 33.7%.
The next stock on our list is Microchip (MCHP), a leading manufacturer of in-vehicle control solutions. The company’s exposure to secular growth trends in the 5G, artificial intelligence/machine learning, Internet of Things (IoT), advanced driving (ADAS) and electric vehicles bodes well for the company in the long run.
Recently, Stifel analyst Tore Svanberg recently reiterated a buy rating on MCHP shares and even raised the price target to $80 from $77. (See Microchip stock chart on TipRanks)
The analyst believes that Microchip is well positioned to “manage a soft landing against its peers during a broader industry correction,” based on strong near-term order book visibility, defensive exposure to the end market, resilient pricing of proprietary products, etc.
Svanberg ranks 41st among more than 8,000 analysts tracked and ranked on TipRanks. The analyst also has a strong track record of 65% profitable ratings and average returns of 20.4% each.
Analog devices (ADI) is another stock on Tore Svanberg’s buy list. The maker of high-performance analog, mixed and digital signal processing ICs holds the largest market shares in data converters and amplifiers.
“We believe ADI is a formidable high-performance analog/mixed-signal powerhouse with pro forma CY21A revenue of (nearly) $10 billion, and the primary challenger to current industry heavyweight TXN (Texas Instruments),” Svanberg said.
Analog Devices also has strong cash flow generation capabilities, which has kept Svanberg optimistic: the company has generated $3.50 billion in the past 12 months. (See Analog Devices hedge fund trading activity on TipRanks)
The analyst sees Analog Devices outperforming its peers in the current difficult macroeconomic environment. Based on his observations, Svanberg raised his price target from $190 to $195.
A leading name in cybersecurity, CrowdStrike (CRUD) recently disappointed investors and analysts with weaker-than-expected forecasts. This underscored the vulnerability of the software sector to macroeconomic forces.
Nonetheless, Deutsche Bank analyst Brad Zelnick remained focused on CrowdStrike’s longer-term prospects, calling it one of the three security companies best positioned to weather headwinds. (See CrowdStrike Holdings financial statements on TipRanks)
Zelnick has seen strong traction in large deals and a strong base of existing customers, which can sustain the business through tough times.
The analyst also observed that while unable to deliver the top end of the business, CrowdStrike was consistent in maintaining strong margins, reflecting “the flexibility/leverage of the business model. “.
Although Zelnick lowered the price target to $150 from $230 to accommodate his lower estimates, the analyst maintained a buy rating after looking past the storm.
Interestingly, among more than 8,000 analysts on TipRanks, Zelnick is ranked 128e, having received positive ratings 67% of the time in the past year. Additionally, each of its ratings has averaged returns of 15.10%.
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