Wolfe Research has a selection of favorite long-term stock ideas to weather the stock market's summer volatility. Recent market action has been unpredictable, as the three major U.S.
indexes climbed to records in July, followed by a steep global sell-off in early August and a recent rebound rally. The S & P 500 slipped on Thursday, however, moving away from levels near the mid-July peak, as traders await clues on Friday from Federal Reserve Chair Jerome Powell about the central bank's rate-cutting path. The 30-stock Dow and Nasdaq Composite also edged lower.
"While we expect continued choppy trading in the market, we expect companies with solid fundamentals to outperform," Wolfe Research chief investment strategist Chris Senyek wrote in a recent note to clients. He presented the firm's "Greatest Hits List," representing companies that appear most frequently on the firm's 31 long idea stock screens encompassing a range of investable themes, including value, growth, capital creation, earnings quality, cash use and dividends. Ten of the stocks that made the Wolfe screen include these: Expedia and Walgreens Boots Alliance are among the companies that appear most frequently on the firm's stock screens.
According to Wolfe, Expedia has returned just 3% over the last twelve months and an estimated 2024 price-to-earnings ratio of 10. The online travel agency is rated overweight by analysts polled by FactSet, who have a consensus price target implying 11% potential upside. Shares are down about 12% this year.
Bernstein analyst Richard Clarke, who has a $118 price target on Expedia, thinks the company can grow volumes faster than other online travel agencies even with rising competition. Expedia has adjusted its business model to focus more on business-to-business sales and its core brands, which has helped the company adapt to competition while leading to margin pressure, Clarke said. Walgreens is another long-term favorite that popped up on Wolfe's screens.
The stock has 25.3 % potential upside, according to analysts' consensus price target of $12.57, according to FactSet.
Meanwhile, Walgreens sells for 3.8 times 2024 estimated earnings, Wolfe said. Shares of Walgreens are down 62% this year — a symptom of the retail pharmacy industry's recent struggle to attract consumers .
The Deerfield, Illinois-based chain has been hit by higher prices, theft, competition from Amazon and lower reimbursement rates for prescription drugs. Walgreens slashed its profit outlook and warned of a "challenging" consumer environment after missing Wall Street estimates in its latest fiscal third quarter ended in May. Paramount Global , another stock that tops Wolfe's long-term picks, is the target of competing buyout offers from Skydance Media and an investment group led by Edgar Bronfman Jr.
The company also announced a broad cost-cutting plan in early July. Shares are down 24% this year, but the stock rose nearly 2% after a special committee of the board announced that it was extending the "go shop" period of its merger agreement. Shares edged higher Monday after Bronfman's group submitted a $4.
3 billion bid to acquire National Amusements, owner of a controlling interest in Paramount. Other stocks that made Wolfe's "Greatest Hits List" included coffee chain Starbucks , automaker General Motors and medical device maker Medtronic ..
