Seems as though the markets are already pricing a recession into equities, despite the fact that almost all the indicators still point to slow, but steady growth. So here is the question: What are investors to do in a scenario that looks bleak but offers few investment alternatives? One way is to steer clear of high-momentum, low-earnings stocks. They already have been obliterated and could fall more.
A new Jefferies research note for this week focuses on growth ideas with solid earnings underpinnings. We screened the list and found three that look like they make very good sense for investors right now. The three are all rated Buy and are more suitable for aggressive growth accounts.
The technology giant is a top pick on Wall Street for 2016 and reported incredible fourth-quarter numbers. Alphabet Inc. (NASDAQ: GOOGL) through its subsidiaries, builds technology products and provides services to organize information.
Google remains the undisputed leader in Internet search, and when you add in a diverse portfolio that includes everything from the Android platform, to YouTube, to the Google Wallet for automatic pay, to the Google Flights tool, continued growth is not out of the question. YouTube watch time accelerated a massive 60% year-over-year, and the average view session was up 50% to 40 minutes. The YouTube surge represented the best growth in two years.
Many Wall Street analysts have lauded the numerous upcoming catalysts and point out that the company showed consistent revenue growth, margin stabilization and finally gave cash back in the form of a $5.1 billion stock buyback last year. Last, but certainly not least, the company remains one of the best overall portfolio plays that focuses on the biggest Internet trends: the mobile/multiscreen shift, wearable devices, video, the Internet of Things, and much more. Alphabet delivers investors the full package.
The company reported outstanding earnings that continue to astound by posting constant currency growth of 24%, and non GAAP earnings per share that jumped 26% year over year. Jefferies cites YouTube, mobile growth and the aforementioned stock buyback as continuing positives and reasons for owning shares.
The Jefferies price target for the stock is $950, and the Thomson/First Call consensus target is $924.07.The stock closed trading on Monday at $704.16 per share.