Welcome to the third year of the S&P 500's bull market. And analysts are already calling some surprise winners in the historically choppy part of a bull market.
Analysts forecast 11 S&P 500 stocks, including consumer discretionary firms Bath & Body Works and General Motors plus communications company Dish Network, will jump by the most — jumping at least 50% and up to 70% — over the next 12 months, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. That would make them the top stocks in the third year of the S&P 500's bull market, which started on March 23, 2020.
Finding just bullish price targets for some S&P 500 stocks is welcome. The third year of bull markets are infamously choppy and disappointing, says CFRA market strategist Sam Stovall.
"Like every baseball player, bull markets went through hitting slumps and the third year seems to have been the time when most did, since the average price gain was only 8.1% since 1921 and the third year witnessed the demise of four bull markets (1935, 1966, 1970 and 1987) along with two that posted full-year declines," Stovall said.
How The S&P 500 Bull Has Done So Far
The S&P 500 is off to a shaky start, but the bull is still intact. Not once has the S&P 500 dropped 20% or more from its Jan. 3 high this year.
The S&P 500 jumped more than 93% over the past two years of its bull run. That's a solid showing despite falling roughly 5% this year so far. It's been a broad rally, too, with 10 of 11 S&P 500 sectors gaining and 73% of 148 sub-industries rising too, Stovall says.
In fact, all told, this ongoing bull market is pretty impressive already. It's less than 700 days old, less half the age of the other 17 bull markets since 1921. And yet in that relatively short time its up nearly 95%, while the typical bull usually fades after rising 164%, Stovall said. The ongoing bull market rocketed nearly 75% in its first year, which tops the typical 48.9% gain in the first year of a bull market. And it tacked on another 14% rise in its second year, also better than the 11.7% second-year average.
But that's all ancient history, now. What do the odds look like for the S&P 500's third year of a bull?
The S&P 500's Third Year Of A Bull? Not So Hot
Historically, the third year of an S&P 500 is the least impressive.
The S&P 500 only rose 8.1% in the third year of bulls that lived that long, Stovall says. That's the lowest annual gain of bull markets, on average, since 1921 that lived nine years or more. Just one bull market, the longest one ever from March 9, 2009 through Feb. 19, 2020 lived to see its tenth birthday. And returns that year were lackluster, falling by 1.6%.
But no matter if the S&P 500's bull market lives to see its third birthday, analysts are pointing to the individual stocks they like best for the next year. many are surprising, too.
Their top pick? Mall based skin care retailer Bath & Body Works. The stock has been a solid performer during the bull's prior two year, shooting up nearly 400% in that time to 49.68. It's been a rough year, though, so far with shares skidding nearly 30%. And yet analysts think the stock should hit 83.05 in 12 months. If they're right, that's 70% implied upside.
Driving A Solid Third Year Gain
General Motors is another favorite by analysts for the third year of the bull. Analysts think the automakers shares will reach 72.67 apiece in 12 months, up more than 65% from where they are now.
GM stock, though, has been taking a breather following a 141% in the bull market so far. They've lost roughly a quarter of their value just this year. Analysts are looking for the automaker's profits to skid 3% this year until rebounding a bit, nearly 6%, in 2023.
Not all of analysts favorite stocks, though, for a year from are down so much in 2022 so far. Satellite communications firm, Dish, for instance has seen shares fall just 4.7% to 30.90. That's marginally better than the S&P 500. And yet, analysts still think the stock is looking at more than 65% upside in the next 12 months. And they think that despite the company's profit is seen falling more than 20% this year.
Will analysts correctly pick stocks that dodge the S&P 500's typical lethargy in a third year of a bull? Not necessarily. But if the S&P 500 can extend its bull, there should be plenty of ways to make money if you find the leaders.
Analysts' Top Picks For Third Year Of The S&P 500 Bull Market
| Company | Symbol | Stock % ch. during bull so far* | Sector | Analysts' implied upside** |
|---|---|---|---|---|
| Bath & Body Works | 399.3% | Consumer Discretionary | 70.1% | |
| General Motors | 141.3 | Consumer Discretionary | 66.0 | |
| DISH Network | 56.4 | Communication Services | 65.8 | |
| PayPal Holdings, | 32.3 | Information Technology | 54.9 | |
| Under Armour | 107.5 | Consumer Discretionary | 54.0 | |
| PVH | 153.9 | Consumer Discretionary | 53.7 | |
| Meta Platforms | 42.6 | Communication Services | 53.6 | |
| Caesars Entertainment | 773.0 | Consumer Discretionary | 52.4 | |
| Penn National Gaming | 435.0 | Consumer Discretionary | 51.2 | |
| D.R. Horton | 150.3 | Consumer Discretionary | 50.8 | |
| IPG Photonics | 3.6 | Information Technology | 50.8 |
