© Cindy Ord/Getty Images
Thomas Lee Managing Director and Head of Research at Fundstrat Cindy Ord/Getty Images
- The US economy is entering a phase of expansion, not recession, Fundstrat’s Tom Lee said.
- That means this year’s stock-market rally, which has so far been led by the tech sector, will become more broad-based, he told CNBC on Monday.
- Many investors have now turned from being bearish to having a bit of FOMO, he said.
Buy these 52 top stocks now before a multi-year market recovery begins, according to BMO Capital Markets
- The days of low interest rates that allowed growth stocks to take off are over, according to BMO.
- Value names will outperform as a new bull market kicks off, the firm’s strategy chief said.
- Here are the 52 best investing ideas from BMO analysts in the first quarter of 2023.
A three-year stretch of chaos in markets will soon end, according to BMO Capital Markets.
Stocks have swung from feverish highs to crushing lows since the pandemic as interest rates rose from rock-bottom levels to historically high. That made money harder to come by, which unwound a once-in-a-generation rally for fast-growing companies and other riskier assets.
Though the era of easy gains for stocks is over, that’s not necessarily bad news for investors, wrote Brian Belski, BMO’s chief investment strategist, in a recent research report.
“The great unwind toward normalcy has begun,” Belski wrote. “But the news is not all dire. In fact, we believe this ‘great unwind and return to normalcy’ is actually very good news — with some bumps and bruises along the way.”
In this new normal, BMO believes that careful stock selection will be crucial. Unlike in the 2010s, investors shouldn’t count on index funds to deliver steady gains while growth and rates are low.
“We believe the reality of a higher-than-zero interest rate scenario, single-digit earnings growth, a moderation of valuation, and historical average stock market performance will spawn more active stock-picking strategies defined by bottoms-up characteristics instead of macro,” Belski wrote.
Expect a comeback from last decade’s losers
Naturally, a dramatically different investing landscape should produce a fresh set of winners.
Value stocks now appear to be at the start of a strong multi-year rally after they trailed their growth-focused peers for the better part of a decade, Belski wrote. The same is true for small- to mid-cap companies, which long lagged behind their large-cap counterparts.
However, those gains may not come easy. Belski reiterated his call for choppy performance for markets in 2023, especially since the risk of higher interest rates hasn’t fully been priced in.
“The market is likely to experience periods of heightened volatility (in both directions) during 1H23 until overall levels of inflation trend down closer to historical norms throughout the second half of the year,” Belski wrote.
For patient investors, volatility should present buying opportunities. If Belski is correct that the S&P 500 won’t fall back to its mid-October low, then the new bull market is already underway.
52 top stocks to buy now
In the report, dozens of BMO analysts listed 52 of their favorite stocks across nine market sectors to buy this quarter. Below are the top investing ideas from BMO, along with each company’s ticker, market capitalization, sector, price target, and thesis.
1. Base Carbon
Ticker: BCBNF
Market cap: $40.9M
Sector: Energy
Price target: $1.25
Thesis: “Base Carbon was developed to be a preferred partner for carbon projects, providing capital and development resources to projects involved in the voluntary carbon market (VCM) and broader ESG economy. The company remains one of the few ways to invest through public equity in the VCM, which we believe is slated for impressive growth.”
Source: BMO Capital Markets
2. Canadian Natural Resources
Ticker: CNQ
Market cap: $59.6B
Sector: Energy
Price target: $69.43 (95 Canadian dollars)
Thesis: “Canadian Natural boasts one of the lowest cash breakeven oil prices amongst its peer group due to its industry-leading operating performance, cost structure, scale, and commodity diversification. We believe this attribute should allow Canadian Natural to increase returns to shareholders at a faster and more consistent pace than many of its peers.”
Source: BMO Capital Markets
3. Schlumberger
Ticker: SLB
Market cap: $69.9B
Sector: Energy
Price target: $66
Thesis: “SLB is our top OFS [oilfield services] pick as we prefer greater international leverage this upcycle, with momentum expected to continue in 2023+. We believe upside exists to SLB’s guided >15% Y/Y revenue growth, while EBITDA growth is expected to be mid-20%. Middle East and offshore spending growth is only just beginning to inflect higher, with SLB well-positioned to provide differentiated outperformance in this multi-year upcycle.”
Source: BMO Capital Markets
4. Parex Resources
Ticker: PARXF
Market cap: $1.9B
Sector: Energy
Price target: $33
Thesis: “With political and fiscal clarity in Colombia moving forward, we view Parex as a catalyst-rich story with three high-impact exploration wells expected near- to mid-term that have transformational potential. The dividend is currently yielding 6.5%, and we estimate the company can buy back 10% of its shares (for the fifth consecutive year) within excess free cash flow at $85/bbl Brent.”
Source: BMO Capital Markets
5. Enerflex
Ticker: EFXT
Market cap: $768M
Sector: Energy
Price target: $13
Thesis: “EFX’s Q4/22 results (its first as a combined Enerflex/Exterran entity) were strong and demonstrated the pro-forma company’s potential moving forward. Near-term leverage remains elevated and creates some risk for investors, although we feel the shares hold upside over the longer term as the proforma business is proven, which should result in multiple expansion.”
Source: BMO Capital Markets
6. Linde Plc
Ticker: LIN
Market cap: $168B
Sector: Materials
Price target: $378
Thesis: “In 2023, LIN should see robust price/vols, gains from efficiency, new projects coming online, and tailwinds from a normalized energy/power cost environment that all drive earnings toward/above the higher-end of its double-digit EPS growth range.”
Source: BMO Capital Markets
7. Arch Resources
Ticker: ARCH
Market cap: $2.5B
Sector: Materials
Price target: $200
Thesis: “In our view, ARCH’s overall earnings power, FCF generation, and capital return potential remain meaningfully undervalued by the equity market.”
Source: BMO Capital Markets
8. OceanaGold
Ticker: OCANF
Market cap: $1.5B
Sector: Materials
Price target: $3.50
Thesis: “OceanaGold currently holds an attractive relative valuation compared to industry peers, and with a successful production ramp-up at the Haile underground mine we believe there is strong upside potential for the re-rating of the stock in the near term.”
Source: BMO Capital Markets
9. Barrick Gold
Ticker: GOLD
Market cap: $29.8B
Sector: Materials
Price target: $23
Thesis: “Barrick’s clear growth focus should leave the market with few surprises about the company’s long-term strategy. Barrick continues to have limited downside risk with more incremental positive news flow and optimization this year (versus disappointment) and by laying out a clearly variable dividend.”
Source: BMO Capital Markets
10. Azek Company
Ticker: AZEK
Market cap: $3.4B
Sector: Materials
Price target: $33
Thesis: “In the near term, we think there is modest upside potential to Azek’s FY23 guidance. Among the key drivers are: 1) Sell-through in the Residential segment is off to a better-than-expected start. Azek is seeing MSD drop in sell-through vs. FY23 guidance of -10% y/y. 2) Pointing to channel inventories at/below normalized levels. 3) Expects to meet/exceed $30mm cost deflation target.”
Source: BMO Capital Markets
11. BHP
Ticker: BHP
Market cap: $152.7B
Sector: Materials
Price target: N/A
Thesis: “BHP is our top pick amongst the diversified miners, offering an attractive mix of cash-generation and commodity exposure including copper, iron ore, coking coal, and thermal coal.”
Source: BMO Capital Markets
12. Capstone Copper
Ticker: CSCCF
Market cap: $3.1B
Sector: Materials
Price target: $6.75
Thesis: “Capstone’s diversified portfolio of producing mines separates it from peers. Capstone is expected to generate strong cash flow and, supported by the company’s balance sheet, will provide the potential to pursue additional value-enhancing opportunities.”
Source: BMO Capital Markets
13. Corteva Agriscience
Ticker: CTVA
Market cap: $41.8B
Sector: Materials
Price target: $76
Thesis: “We view CTVA as best-in-class among ag/ferts stocks for compelling multi-year double-digit EBITDA CAGR and margin expansion. This as both seeds and crop chems have positive drivers amid movement to a more-streamlined operation that has been desired for years.”
Source: BMO Capital Markets
14. Dundee Precious Metals
Ticker: DPMLF
Market cap: $1.3B
Sector: Materials
Price target: $12.50
Thesis: “We believe DPM offers an underappreciated investment opportunity given its discounted valuation. The company has a consistent operational track record and solid balance sheet along with a peer-leading near-term FCF profile (2023 FCF/EV yield ~20%).”
Source: BMO Capital Markets
15. Ero Copper
Ticker: ERO
Market cap: $2.1B
Sector: Materials
Price target: $21
Thesis: “Well-positioned for low-risk, near-term growth in copper, which builds on Ero’s successes in minelife extension and asset optimization to date. Beyond the near-term growth at Tucumã, Ero’s assets boast significant optionality, which the company continues to pursue, and which we expect will drive the next waves of growth.”
Source: BMO Capital Markets
16. Wesdome Gold Mines
Ticker: WDOFF
Market cap: $727.4M
Sector: Materials
Price target: $14
Thesis: “Wesdome operates two high-grade underground mines in Ontario and Quebec. The company has a meaningful production growth profile, and after an operationally challenging 2022, we expect the shares to begin to re-rate as the company advances the recently restarted Kiena mine towards full production levels.”
Source: BMO Capital Markets
17. AGCO
Ticker: AGCO
Market cap: $9.6B
Sector: Industrials
Price target: $175
Thesis: “We are confident that the agricultural-equipment cycle has several years to run, and that AGCO is the best way to participate in what looks to be an enduringly strong upturn. This strength is being augmented by AGCO’s refreshed product portfolio and budding precision agricultural technologies.”
Source: BMO Capital Markets
18. Air Canada
Ticker: ACDVF
Market cap: $5B
Sector: Industrials
Price target: $29
Thesis: “Still long runway for passenger travel demand recovery. We estimate that broader consumer and corporate expenditure on air transport (inflation adjusted) remain below 2019 levels. We expect demand will expand in 2023 to ~10% below 2019 levels, up from roughly 29% last year, with further growth runway into 2024.”
Source: BMO Capital Markets
19. CN Railway
Ticker: CNI
Market cap: $77.4B
Sector: Industrials
Price target: $131.57 (180 Canadian dollars)
Thesis: “CNR operations are at their best level since 2016, with the company focused on improving revenue quality and asset velocity under new CEO, Tracy Robinson. We believe that management aims to improve adherence to PSR principles, improve service and pricing, and ensure greater collaboration between marketing and operations, which has lacked in recent years.”
Source: BMO Capital Markets
20. Finning International
Ticker: FINGF
Market cap: $3.8B
Sector: Industrials
Price target: $43
Thesis: “Demand is expected to be strong in Finning’s territories over the intermediate term, and the company has meaningful market share growth opportunities in product support and South American mining. Recent financial performance has benefitted from the multiyear effort to improve execution and cost performance that we believe has meaningfully lifted the earnings power of the business.”
Source: BMO Capital Markets
21. Capri Holdings
Ticker: CPRI
Market cap: $5.2B
Sector: Consumer
Price target: $70
Thesis: “CPRI is one of our top ideas, having reset the bar with a FY guide that we expect to prove conservative, setting up a year of beat-and-raise quarters for one of the few companies explicitly committed to maintaining price (even at the expense of volume). We believe CPRI at ~$50 with a $6.40 EPS bar is very compelling. It still trades at a meaningful discount vs. peers despite material self-help-driven earnings upside potential.”
Source: BMO Capital Markets
22. Starbucks
Ticker: SBUX
Market cap: $113.3B
Sector: Consumer
Price target: $125
Thesis: “Although investments pushed out earnings expectations, fundamentals remain strong and earnings growth is at an inflection point. We see upside to expectations over time owing to the strength of the US and eventual recovery in China.”
Source: BMO Capital Markets
23. Brunswick
Ticker: BC
Market cap: $5.8B
Sector: Consumer
Price target: $122
Thesis: “Retail demand in the marine market continues to be solid, with strength in the high end — the area of the market that BC primarily caters to. We also see channel fill opportunity in large fiberglass boats and outboard engines that, along with stable P&A sales, should help the company mitigate the effects of a broader slowdown in consumer spending.”
Source: BMO Capital Markets
24. Linamar
Ticker: LIMAF
Market cap: $2.8B
Sector: Consumer
Price target: $92
Thesis: “Linamar is a high-quality, mid-cap auto parts company that we believe will participate in the outperformance of the auto parts sector we are predicting. In addition, the forward earnings prospects for auto parts companies are impacted by the outlook for vehicle production volumes. Over the last few months, the outlook for vehicle production volumes has stabilized, which should be positive for Linamar over the short term.”
Source: BMO Capital Markets
25. Stride
Ticker: LRN
Market cap: $1.73B
Sector: Consumer
Price target: $48
Thesis: “Stride is the largest operator of US virtual public schools through its General Education business. While there was clearly a pandemic-peak, we believe enrollment has troughed and will grow from here. Its Career Learning segment, which provides skills training, should be a growth driver for the company with potentially higher margins than its General Education business.”
Source: BMO Capital Markets
26. Village Farms
Ticker: VFF
Market cap: $100.8M
Sector: Consumer
Price target: $4.50
Thesis: “In the challenging Canadian rec market, VFF appears to continue to buck the trend. Q3/22 results were strong as a result of sustained demand for existing products. VFF’s cannabis segment continues to generate positive EBITDA, a rarity among Canadian LPs. We can see a pathway to modest +EPS and +FCF in 2024 and continue to believe the stock warrants a higher multiple (our target: 3x) than current levels (1.3x).”
Source: BMO Capital Markets
27. Walmart
Ticker: WMT
Market cap: $371.1B
Sector: Consumer
Price target: $165
Thesis: “We believe Walmart’s F2024 guidance will prove conservative, especially given current trends, and are highly encouraged that management noted the model was at an inflection point to accelerate margin expansion. We continue to believe that as WMT moves past and cycles the nonstructural challenges of 2022, investor focus will return to higher-margin initiatives where further catalysts and disclosures could come during WMT’s investor day in April 2023.”
Source: BMO Capital Markets
28. Eli Lilly
Ticker: LLY
Market cap: $309.7B
Sector: Healthcare
Price target: $410
Thesis: “We have more confident expectations for Mounjaro in T2D given rapid uptake since June 2022 launch, and large opportunity in obesity, with potential approval in late 2023 / early 2024. Lilly’s share premium (37x 2023E EPS vs. 17x peers) has shown durability in a challenging market, reflecting confidence in the company’s metabolic franchise anchored by Mounjaro.”
Source: BMO Capital Markets
29. Ionis Pharmaceuticals
Ticker: IONS
Market cap: $4.8B
Sector: Healthcare
Price target: $67
Thesis: “We believe IONS has a very underappreciated pipeline with multiple shots on goal and overall good risk/reward across its robust RNA platform that has considerable value.”
Source: BMO Capital Markets
30. ImmunoGen
Ticker: IMGN
Market cap: $929.1M
Sector: Healthcare
Price target: $19
Thesis: “IMGN’s first commercial product, Elahere (mirvetuximab soravtansine), gained accelerated approval in 4Q22 in ovarian cancer and we continue to view IMGN as significantly undervalued based on 1) our level of conviction for the 2Q23 readout of the Phase 3 MIRASOL trial, which will enable full approval of Elahere in the US as well as filings for approval in Europe and China; 2) an opportunity in ovarian cancer that is underappreciated by the Street; and 3) pipeline optionality not reflected in the stock at these valuations.”
Source: BMO Capital Markets
31. 4D Molecular Therapeutics
Ticker: FDMT
Market cap: $602.2M
Sector: Healthcare
Price target: $50
Thesis: “4DMT develops differentiated gene therapies harnessing its directed evolution platform that is based on a Nobel Prize winning technology and has been clinically validated through 4DMT’s five clinical programs.”
Source: BMO Capital Markets
32. Regeneron Pharmaceuticals
Ticker: REGN
Market cap: $83.1B
Sector: Healthcare
Price target: $1,001
Thesis: “Our positive outlook for Regeneron is based on confidence in high-dose (8mg) aflibercept as a leader in the increasingly competitive wAMD space. We believe the strong data validates the company’s approach to lifecycle management, extending the broader franchise.”
Source: BMO Capital Markets
33. Apollo Global Management
Ticker: APO
Market cap: $35.8B
Sector: Financials
Price target: $87
Thesis: “Today ~90% of APO’s earnings stem from highly visible FRE (from its Asset Management business) and SRE (from Athene). Significant investments in proprietary asset origination are supporting record organic volume growth at Athene, with strong associated credit quality, while Athene’s profitability is also expanding due to rising rates and wider credit spreads.”
Source: BMO Capital Markets
34. Brookfield Asset Management
Ticker: BN
Market cap: $47.9B
Sector: Financials
Price target: $49
Thesis: “The price of BN’s stock is fundamentally disconnected from value, in our view, with the investment portfolio trading at a 25%+ discount to our target. Potential catalysts to unlock value include 1) the consistent realization of carried interest; 2) reduced capital intensity; 3) the return of capital via shareholder distributions.”
Source: BMO Capital Markets
35. Capital One
Ticker: COF
Market cap: $36.2B
Sector: Financials
Price target: $141
Thesis: “We recommend COF shares on valuation, after COF distinguished itself among US banks and specialty lenders by building loan loss reserves prudently in 4Q22, well ahead of the impending consumer credit cycle. COF is a fully deposit-funded diversified lender; as such, it is worthy of a valuation multiple on par with domestic regional banking peers.”
Source: BMO Capital Markets
36. Goeasy
Ticker: EHMEF
Market cap: $1.3B
Sector: Financials
Price target: $196
Thesis: “Goeasy continues to deliver on 1) growing loan receivables; 2) having access to low cost of capital; and 3) containing credit losses. GSY remains one of our best total return ideas, underpinned by ~20% earnings CAGR potential and 22%+ ROE valued at 9x earnings.”
Source: BMO Capital Markets
37. Nuvei
Ticker: NVEI
Market cap: $5.7B
Sector: Financials
Price target: $93
Thesis: “We recommend NVEI shares on valuation; NVEI’s +20% annual organic revenue growth potential implies a fair value of 31x rolling two-year-forward P/E, and yet shares trade at only 10x. Consequently, our growth-derived target price implies that NVEI shares could more than triple in value. Meanwhile, NVEI remains a highly profitable organic market share gainer among digital merchant acquirers globally, with a strong balance sheet to enable further accretive acquisitions.”
Source: BMO Capital Markets
38. Fairfax Financial
Ticker: FRFHF
Market cap: $16.4B
Sector: Financials
Price target: $1,150
Thesis: “Traditionally FFH’s heavy reliance on investment gains to drive EPS/BVPS growth has given us pause. But going forward we see EPS/BVPS growth driven by much more reliable sources (strong underwriting income on hard market conditions, stronger interest income as FFH puts its cash to work, rebounding earnings from associates/subsidiaries on improving market conditions), which improves earnings visibility and gives us more confidence in the EPS/BVPS growth outlook.”
Source: BMO Capital Markets
39. Altus Group
Ticker: ASGTF
Market cap: $1.9B
Sector: Real Estate
Price target: $73
Thesis: “Altus shares offer attractive risk-reward considering Altus’s long runway for growth. Notably, underlying growth trends at Analytics remain robust (Q4/22 organic growth +28% y/y) and an expanding pipeline reflects future revenue opportunities (Q4/22 recurring new bookings +22% y/y).”
Source: BMO Capital Markets
40. Boardwalk REIT
Ticker: BOWFF
Market cap: $1.9B
Sector: Real Estate
Price target: $64
Thesis: “We believe Boardwalk is best-positioned vs. its Canadian multifamily peers to drive top-line growth in 2023 due to its significant weighting to strong markets (AB and SK) that are not subject to rent control. Boardwalk should also be somewhat resilient to operating expense inflation over the next several quarters owing to its low-cost natural gas hedge book and continued focus on internal efficiencies.”
Source: BMO Capital Markets
41. Digital Realty Trust
Ticker: DLR
Market cap: $30.5B
Sector: Real Estate
Price target: $125
Thesis: “We believe DLR is well-positioned, benefitting from record leasing levels driven by robust hyperscale demand that is pushing down vacancy rates and meaningfully improving the pricing narrative and DLR’s 2023 releasing spread outlook of 3%+ is its best in nearly ten years. Revenue growth visibility has also improved, with DLR’s backlog as a percentage of annualized rent at 13%, well above the long-term average of 7%.”
Source: BMO Capital Markets
42. Rexford Industrial
Ticker: REXR
Market cap: $11.1B
Sector: Real Estate
Price target: $77
Thesis: “We remain bullish on the SoCal industrial market given the favorable supply/demand imbalance, driven by the desire to improve supply chains and inventory levels, and ecommerce demand. REXR’s +52% leasing spreads and +73% portfolio mark-to-market should continue to drive near-term earnings growth as leases continue to rollover.”
Source: BMO Capital Markets
43. Welltower
Ticker: WELL
Market cap: $34.7B
Sector: Real Estate
Price target: $86
Thesis: “We remain bullish on the needs-based, multi-year senior housing (SH) recovery post-COVID with a leading demographic portfolio, driven by a growing and aging population with limited supply. SH has exhibited stronger-than-expected pricing power with labor costs pressures starting to abate. We also expect significant SH consolidation opportunities to favor WELL’s disciplined & strong management team with a solid balance sheet.”
Source: BMO Capital Markets
44. Advanced Micro Devices
Ticker: AMD
Market cap: $138.4B
Sector: Technology
Price target: $110
Thesis: “Over the last few years, AMD has continued to build on its compute franchise. AMD has achieved this via a combination of factors ranging from architectural innovation, its partnership with TSMC, and superior execution on its roadmap. The company has gained share against its rival Intel, most notably in the important data center market.”
Source: BMO Capital Markets
45. Calian Group
Ticker: CLNFF
Market cap: $534.4M
Sector: Technology
Price target: $80
Thesis: “Calian offers strong defensive qualities in technology amidst rising macro risks, in our view. This includes diversity across four distinct businesses, a 20-year track record of profitability, 15 years of dividend growth, and a highly accretive growth-by-acquisition strategy. This has led to 18% revenue growth (8% organic), 27% EBITDA growth, 810 bps gross, and 300 bps EBITDA margin expansion and 12% average ROIC over the last five years.”
Source: BMO Capital Markets
46. Constellation Software
Ticker: CNSWF
Market cap: $36.1B
Sector: Technology
Price target: $2,650
Thesis: “Constellation is our Best of BMO pick given the uncertain economic backdrop. The business has demonstrated its resilience through prior downturns, due to a high mix of recurring revenue; a very high level of diversification across different geographies and end markets; and the fact that much of its software is mission-critical (rather than discretionary) for the customers that use it.”
Source: BMO Capital Markets
47. Palo Alto Networks
Ticker: PANW
Market cap: $55.5B
Sector: Technology
Price target: $228
Thesis: “PANW remains our top pick and has been our lone top pick since September 2021. First, we expect security spend to remain largely durable against ongoing macro headwinds, and we think security will remain a top priority for organizations. We believe that the elevated threat landscape continues to raise the importance of having robust security capabilities.”
Source: BMO Capital Markets
48. Workday
Ticker: WDAY
Market cap: $47B
Sector: Technology
Price target: $205
Thesis: “Workday is a core beneficiary of digital transformation in enterprise back office software, which is advancing at a reasonable pace despite an uneven macro backdrop. We see a multi-year high-teens growth runway, reflecting low/mid-teens-like growth in the scaled HCM business and further gains in the financial suite driven by renewed momentum in mid-market and key industry verticals.”
Source: BMO Capital Markets
49. TELUS
Ticker: TU
Market cap: $27.8B
Sector: Technology
Price target: $32
Thesis: “TELUS is our top pick in the sector based on superior operating metrics and attractive growth prospects. TELUS has a solid path to material increases in FCF in 2023 and 2024 after completing its accelerated fiber build. The company has strong growth potential from recent acquisitions and its diversified asset mix through TELUS International, TELUS Agriculture, and TELUS Health with the potential for future asset monetization.”
Source: BMO Capital Markets
50. AltaGas
Ticker: ATGFF
Market cap: $4.6B
Sector: Utilities
Price target: $35
Thesis: “We continue to favor AltaGas’s premium infrastructure assets and rate the shares Outperform based on: (i) attractive valuation at ~12x P/E (vs. ~16.5x for utility and ~15.5x for pipeline/midstream); (ii) upside to EPS is still possible with robust demand for LPG exports (10% CAGR), iii) near-term debt reduction following the $1.1B sale of the Alaska gas utilities should result in leverage moving towards the 5x net debt/EBITDA target and potentially lower if more non-core assets are monetized (~4.5x long-term target); (iv) 5-7% dividend growth through 2027; and (v) likely near-term certainty around the new CEO (appointment expected 1H/23).”
Source: BMO Capital Markets
51. Exelon
Ticker: EXC
Market cap: $40.8B
Sector: Utilities
Price target: $45
Thesis: “Trading at low single-digit relative P/E discount to its regulated peers, EXC shares continue to anchor the GARP/Relative Value side of our BMO Utility Barbell strategy given its attractive relative valuation. As management executes its regulated growth strategy over the next 12-18 months we believe this will catalyze a rerating of the stock towards a premium multiple and supporting a 15% total return potential.”
Source: BMO Capital Markets
52. SolarEdge Technologies
Ticker: SEDG
Market cap: $17.6B
Sector: Utilities
Price target: $385
Thesis: “SEDG offers investors exposure to an attractive combination of upside from current robust European distributed solar generation growth and longer-term upside from U.S. manufacturing tax credits for solar inverters that we believe remains underappreciated.”
Source: BMO Capital Markets
The US is entering economic expansion and not recession, and that means the stock-market rally is set to become more broad-based, Fundstrat’s head of research Tom Lee has said.
The economy looks strong against a backdrop of softer commodity prices, businesses restocking inventory and an easing of labor-market tightness, according to Lee – one of the most bullish voices on Wall Street who has repeatedly predicted equities to gain despite other experts warning of a coming recession.
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“Instead of a recession unfolding, it looks like the economy is slipping into an expansion – and that’s because we don’t have a commodity shock….we have businesses that de-stocked starting to restock, and we have things like employment, you know, the tightness kind of cooling off,” he told CNBC on Monday.
“I think these are conditions for profits to actually outperform and at a time when investor positioning is so offside it’s really been very obvious people have been really cautious and I think they’ve now turned from being bearish to having a bit of FOMO,” he added.
Lee pointed to the strong performance of the S&P 500 share index this year, with the benchmark gauge rising 13% from levels in January largely on the back of US mega-cap tech stocks.
“I don’t think stocks are extended. I think the FAANGS did the heavy lifting and I think if we are slipping into an expansion, a lot of other groups are going to participate,” Lee said, referring to the five largest US tech companies including Facebook (now Meta Platforms), Amazon, Apple, Netflix and Google.
However, investors understandably have been wary – in large part because the Federal Reserve has a “tough job” of bringing inflation down with its monetary tightening campaign.
“So I think inflation is going to start to look more acceptable to the market and to the Fed and then the question is: is the Fed okay with where stocks are? And I think they are,” he added.