Oil, chips and consumption take over the new selection of ‘elMonitor’

Ecotrader’s international investment tool, the monitor, which was born in 2012 to go beyond the borders of the Ibex 35 and serve as a fishing ground for the most attractive ideas from the most important stock markets, is now renewed in the same spirit, but in a more automated and transparent in your selection criteria.

As of this Monday, January 24, 2022, the portfolio of the investment strategies portal premium from the Economist It will be comprised of the 15 Stoxx 600, Nasdaq 100, and S&P 500 companies with a following of 20 or more analysts, growth in profitability (based on ROE or return on equity) of more than 3 percentage points, and, finally, with the best recommendations that arise from that sieve. this selection will be renewed weekly automatically, thanks to the FactSet aggregator.

Five S&P 500 companies

The oil companies start as the favorites within the S&P 500 after the revision of the composition of elMonitor, thanks to the fact that their businesses have been favored by an environment in which crude oil prices are soaring, with the barrel of Brent at 2014 highs and with a price of around 87 dollars per unit. This has been made clear by the presence of Diamondback, Schlumberger and Devon Energy in the new election, although they are also joined by Micron Technology and Visa among the most attractive to the market.

Diamondback, which has the best market consensus recommendation compared to the other two oil companies, also stands out for being the cheapest, taking into account that it offers a PER (times that the profit is reflected in its share price) of 7.3 times. Likewise, among its peers, Diamondback will be the one that will improve its profits the most in 2022 (66%), to 2,743 million dollars, according to analyst estimates. By contrast, Devon is the one that will increase its financial profitability the most this year (almost ten percentage points compared to 2021) while Schlumberger stands out for its increases so far in 2022, above 20% to 32.5 dollars.

Where investors can see an opportunity is in recent sessions’ declines of nearly 10% at Micron Technology. Thus, a gap has been opened up to the target price granted by the market consensus of almost 30%. Visa, which would close all five of the S&P 500, offers the greatest upside potential of the five, based on estimates compiled by FactSet; almost 25% travel to its target price of $237.2.

Five Nasdaq 100 companies

From the technology index par excellence, the new monitor has selected three microchip manufacturers, a cybersecurity provider and an e-commerce firm. Among the semiconductor companies, Marvell Technology stands out, which last year posted a rise in the stock market of 84.6%. The US company, founded by two Asian émigrés (Sehat Sutardja and Weili Dai), derives nearly three-quarters of its revenue from Asia-Pacific. Precisely, these revenues will reach 5,200 million euros this year, according to the consensus of analysts collected by FactSet, which would imply double sales 2021. Marvell stock receives a buy recommendation, has 31% upside potential and could reach the consensus target price of $102.68 in the next twelve months. Multiples of 35 times are paid for your 2022 benefits.

Another of the new members of the monitor is Broadcom, which is engaged in the design and manufacture of integrated circuits and also offers a wide range of infrastructure software. If it stands out for anything, it is for having the highest financial return in the portfolio: 74%. The market consensus values ​​its share price at $614.72, which is still could go up 23% from the current price. According to estimates, Broadcom will see its turnover grow by 17% in 2022 compared to the previous year. Its expected profits for this year are listed on the stock market at 17.1 times.

The latest Nasdaq chipmaker to join the portfolio is Massachusetts-based Analog Devices. Your income will increase 45% this year compared to 2021 and the sales will exceed 10,000 million of euros. Multiples of 21.7 times are paid for its 2022 earnings, and the upside potential of its shares is 28%, which could approach $210 in the next twelve months.

On the other hand, there is CrowdStrike, a North American company that provides solutions to threats and cyberattacks. For 2022, the market consensus forecasts a financial return of 18%, as well as revenues of 1,763 million euros, a figure that doubles that of 2021. However, the price/earnings ratio is skyrocketing. According to forecasts, the PER 2022 is 196.4 times at current prices and the PER 2023 is 126.4 times. CrowdStrike shares present a 58% upside potential, which could take them to 283 dollars.

And, finally, Mercadolibre, an Argentine company of electronic commerce, present in much of Latin America and listed on the Nasdaq. Its shares are trading in the $1,130 zone and could rise 67% to $1,894 in the coming months, according to analyst consensus. Mercadolibre’s profits are bought expensive, with a multiplier of 144.1 times in 2022 and 73.1 times in 2023. The income of the South American firm will also double this year, exceeding 8,000 million euros.

Five companies of the Stoxx 600

In Europe stock selection has brought greater sector diversification, as the best positioned to start this new Monitor are AstraZeneca, Puma, Vinci, Ryanair and Associated British Foods. The investment thesis on the former is very clear. The British pharmaceutical company is one of the clear winners of the pandemic with its vaccine and will increase its return on equity to 25% this year.

The German Puma belongs to a sector “that is averaging close to 20% annual growth“, they point out in Bank os America and it is the brand with “a greater growth profile, greater media presence and more tailwinds”, they add.

At Vinci, experts highlight the high quality of its assets as the best hedge against inflation, in addition to a high earnings growth and the acquisition of Cobra (ACS), which will increase its profitability. The consensus gives it a 13% upside potential.

The Ryanair’s case is different, since it belongs to one of the sectors that the pandemic has sunk in recent months. However, their titles are already trading above the levels prior to the start of the crisis, contrary to what has happened with the rest of the airlines thanks to the fact that their short-haul profile has been the least affected by the restrictions on mobility. Analysts give their titles almost a 15% rise.

The latest of these is AB Foods, a company that among many businesses in food in uk, is the owner of Primark, one of the leading textile firms in Europe. “One of their main advantages is that they have hedges on the pound that will allow them not to have to increase prices this year, unlike their direct competitors,” they point out from Credit Suisse. It has a path in the stock market of more than 18% from current levels.