Last week provided investors the proverbial roller-coaster ride of a lifetime. Huge up and down moves culminated in the S&P 500 being up over 10%. Needless to say, the discussion across Wall Street and in the financial media has been if a bottom was put in. The massive selling of corporate debt suggests that it is possible, and money market funds are currently bursting with an estimated $245 billion in assets. There was so much selling in the bond markets that by an assets under management percentage, the outflows exceeded the worst week of the global financial crisis by two times. Toss in the gigantic number of first-time claims for unemployment, and the water is indeed muddied.
Given the gigantic downside move made before last week, it’s a good bet that many investors are too shell shocked to consider moving right back into equities. A chorus of voices on Wall Street suggests, like in most bear market sell-offs, that we will retest the bottom, which means the intraday low of 2,191 and the closing low of 2,237on the S&P 500.
If that is indeed the case, then we may indeed have what legendary value investor Bill Miller called recently one of the five best opportunities to buy stocks in the past 50 years. In what is clearly a new time for investing and investors, we screened the Merrill Lynch research universe looking for companies that are “must owns” for growth investors looking to the future. All are rated Buy at Merrill.
Alphabet
The search giant continues to expand and, while search remains king, the cloud presence is growing fast. Alphabet Inc. (NASDAQ: GOOGL) is a global technology company focused on key areas, such as search, advertising, operating systems and platforms, enterprise and hardware products. It generates revenue primarily by delivering online advertising and by selling apps and contents on Google Play, as well as hardware products. The company provides its products and services in more than 100 languages and in 190 countries, regions and territories.
Alphabet offers performance and brand advertising services. It operates through Google and Other Bets segments. The Google segment includes principal internet products, such as Search, Ads, Commerce, Maps, YouTube, Apps, Cloud, Android, Chrome and Google Play, as well as technical infrastructure and newer efforts, such as virtual reality.
Google has outlined expanding capabilities to facilitate commerce, capitalizing on the “treasure trove” of data provided by seven different properties, each with at least a billion active users (Android, Search, Chrome, Maps, Play, YouTube and Gmail).
Advertising remains a huge growth area as well, and the analysts expect the company to be a huge winner as product and service vendors look to reach the biggest possible audience.
Merrill has a $1,372 price target for the shares, but the Wall Street consensus target is up at $1,559.20. Alphabet stock closed Friday’s trading at $1,110.26 a share.
Amazon
This company is the absolute leader in online shopping and is on the Merrill Lynch US 1 list of top stock picks. Amazon.com Inc. (NASDAQ: AMZN) serves consumers through retail websites that primarily include merchandise and content purchased for resale from vendors and those offered by third-party sellers. It has one of the most valuable brands in the world.
The company serves developers and enterprises through Amazon Web Services, which provides computing, storage, database, analytics, applications and deployment services that enable virtually various businesses. AWS is also the undisputed leader in the cloud now, and many top analysts see the company expanding and moving up the enterprise information value chain and targeting a larger total addressable market.
The company is also rolling out its checkout-free Go technology in a large grocery store and plans to license the cashier-less system to other retailers. Amazon Go Grocery opened in Seattle on Tuesday. It uses an array of cameras, shelf sensors and software to allow shoppers to pick up items as varied as organic produce and wine and walk out without stopping to pay or scan merchandise. Accounts are automatically charged through a smartphone app once shoppers leave the store.
The Merrill target price is a whopping $2,480, and the consensus target is $2412. Amazon stock was last seen trading at $1,900.10.
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