Now may not be the best time to load up on stocks.
The forward price-earnings ratio for the S&P 500 registered 17.9 as of Friday, according to FactSet. That’s close to the 5-year average of 18.7 and the 10-year average of 17.5.
So it may be a good time to leave your stock weighting where it is. But if you do want to increase your exposure to stocks, here are 10 well-known names on Goldman Sachs’ list of 24 high-conviction stocks. They’re in alphabetical order.
- Amazon AMZN
- Apple AAPL
- Chevron CVX
- First Solar FSLR, a solar panel maker
- JPMorgan Chase JPM
- Merck MRK
- Nvidia NVDA
- PPG Industries PPG, a coatings company
- Republic Services RSG, the second-largest U.S. solid waste services company
- Warner Brothers Discovery, the entertainment company WBD
Morningstar Commentary
Amazon
Moat (competitive advantage) rating: wide. Fair value estimate: $150. Monday’s closing price: $128.95.
“We are maintaining our fair value estimate, as the Federal Trade Commission and 17 state attorneys general filed a lawsuit against the company for a variety of alleged anticompetitive practices,” wrote Morningstar analyst Dan Romanoff.
“Our initial opinion is that a settlement is the most likely outcome, with a fine being levied and possibly some minor changes in business practices. We are highly skeptical that Amazon will be broken up.”
The lawsuit aside, “Amazon dominates its served markets, notably e-commerce and cloud services,” Romanoff said. “It benefits from numerous competitive advantages and has emerged as the clear e-commerce leader, thanks to its size and scale.”
Apple
Moat rating: wide. Fair value estimate: $150. Monday’s closing price: $173.75.
“We maintain our fair value estimate after the company announced its annual update to its iPhones and watches,” wrote Morningstar analyst Brian Colello.
“We’re delighted with Apple’s innovation within these devices, as the firm continues to show off its cumulative expertise (and competitive advantage) in hardware, software, services, and semiconductors.”
But Colello still views Apple shares as modestly overvalued, because he anticipates only mid-single-digit revenue growth over the next few years.
Still, “Apple’s consumer hardware dominance stems from its ability to package [all its hardware and software] into appealing devices,” he said.
JPMorgan
Moat rating: wide. Fair value estimate: $153. Monday’s closing price: $143.75.
“The bank entered the second half of 2023 in a strong position,” wrote Morningstar analyst Eric Compton.”
“Its adjusted return of tangible common equity of 23% [in the first quarter] reinforces our wide moat rating and the fact that the bank's fundamentals are some of the strongest under our coverage.”
Compton didn’t hold back praise from the bank. “JPMorgan Chase is arguably the most dominant bank in the U.S.,” he said
“With leading investment bank, commercial bank, credit card, retail bank, and asset and wealth management franchises, JPMorgan is truly a force to be reckoned with.”
The author of this story owns shares of Amazon, Apple, and JPMorgan.
