Here are Wall Street’s favorite Nasdaq stocks as "signals of bottoms are beginning to appear."
The Nasdaq-100 Index has fallen 14% from its 52-week high. Analysts predict a 72 percent increase in the value of eight recommended companies.
The previous two years have been lucrative for stock investors, but lately the market — notably tech companies that trade high compared to profits — has been sensitive to the potential of increasing interest rates.
Analysts at Jefferies said in a note to investors on Jan. 22: "After a nearly two-year era of ripping stocks, this downturn has been especially painful."
But they notice "signals that tend to flare up near the bottom are beginning to appear."
But in the spirit of "the market values things in before they happen," there doesn’t appear to be a whole lot of the picture that the investing community is missing.
If they are accurate, that indicates investors have already priced in the uncertainty of a rising-rate environment and geopolitical worries, and the market should be back on an upward path shortly.
The stocks in the Nasdaq-100 Index listed below are highly rated by analysts and are expected to rise in price by up to 72 percent over the next year.
Here’s how much the broad indices have plummeted from their all-time intraday highs:
Except for the Nasdaq Composite Index COMP, -2.42 percent, and the Nasdaq-100 Index NDX, -2.19 percent, all are considered to be in the correction zone, with falls of at least 10% from their 52-week intraday highs (all four indexes are at all-time highs).
The Jefferies team emphasized that it would be too soon to presume that the end of last week was the worst of the retreat, but they also cited numerous reasons why it might be:
"[T]he current 42-day fall since the NDX all-time high on 11/19 is already almost as lengthy as the tightening-caused ’18 selloff (which lasted 64 days)."
The market is pricing in four rises in the federal funds rate by the Federal Reserve this year, which may be unduly aggressive.
"Most of the pain tends to occur during the first month," according to the past seven interest-rate-increase cycles, and the S& P 500 SPX, -2.09 percent, and Russell 2000 RUT, -2.46 percent indexes tend to perform better during the first 12 months following an initial rate increase than they do during a "typical" 12-month period.
The 12-month performance of the S&P 500 was "positive following every single one of the past seven initial hikes."
Screening for the Nasdaq-100
The Nasdaq-100 Index is made up of the 100 non-financial equities in the complete Nasdaq Composite Index, by market capitalization. It is tracked by the Invesco QQQ Trust (QQQ), which is down 2.19 percent.
Among the Nasdaq-100, approximately two-thirds of the stocks are rated "buy" or the equivalent by a majority of analysts surveyed by FactSet. To narrow it down to a "conviction list," here are the eight stocks with at least 85 percent "buy" ratings, ranked by upside potential over the next 12 months as suggested by FactSet consensus price forecasts:
You may click on the tickers for information about each firm.
Then read Tomi Kilgore’s extensive introduction to the plethora of information accessible for free on the MarketWatch quotation page.
To the right, you can see how much the stocks have declined from their 52-week intraday highs. CrowdStrike Holdings Inc. CRWD, -6.60 percent, has suffered the most, but analysts expect it to recover the most.