Matt Murphy, CEO, Marvell Technology
Scott Mlyn | CNBC
Investors seem to be welcoming the latest earnings season with renewed optimism despite lingering concerns about inflation, recession and rising interest rates.
Indeed, strong quarterly results from a number of key companies helped propel major stock averages to weekly gains.
That being said, identifying good investment opportunities is not limited to observing the evolution of a stock. Investors with a long-term perspective need to look beyond the immediate noise.
Here are five companies that top Wall Street pros have chosen for creating long-term value, according to TipRanks, which ranks analysts based on their performance.
Trucking Company Knight-Swift Transportation (KNX) is no stranger to the supply chain congestion that has plagued industries since the pandemic began. This was also reflected in its recently released second quarter results. Weak network fluidity has kept its intermodal business – which involves transporting goods by rail in containers and other towing equipment – under pressure.
Nevertheless, Cowen analyst Jason Seidl expects intermodal volumes to recover in the second half of this year, in line with Knight peers JB Hunt (JBHT) and CSX (CSX). (See Knight Transportation Hedge Fund Trading Activity on TipRanks)
Moreover, its other operating segments, namely its truckload (TL) and less than truckload (LTL) businesses, have shown immense resilience and strength. Seidl highlighted the strong outperformance of both segments, despite spot rates in the truckload business. These are payments made by a shipper to move a shipment at the freight market price.
Knight’s LTL business, which strengthened with its acquisitions of AAA Cooper and Midwest Motor Express last year, has particularly bolstered Seidl’s confidence in the company. “KNX expects demand for LTL to remain strong, with yields also improving, which should help offset the weakness in TL. Confidence in LTL is met by the continued expansion of terminals, the number number of KNX doors now exceeds 4,300,” said Seidl.
The analyst, who is ranked No. 4 among nearly 8,000 analysts tracked on TipRanks, maintained a buy rating on Knight, with a price target of $55. “We see the diversity of KNX business easing pressure on TL’s anticipated weakness in 23,” he said.
Seidl achieved successful stock ratings 73% of the time, with each rating yielding an average return of 26.1%.
Truist Financial (TFC) is the sixth-largest commercial bank in the United States, formed after the merger of two major banks, BB&T and SunTrust, in 2019. Truist skillfully integrates the assets of the two banks while delivering shareholder value. Additionally, the higher interest rate environment is proving beneficial to Truist in the form of higher interest income.
RBC Capital Markets analyst Gerard Cassidy believes Truist will be able to fully focus on elevating the bank once the entire integration process is complete. “Furthermore, when the merger is complete and TFC fires on eight cylinders, its 20+% ROTCE (Return on Tangible Common Equity) target should be consistently achievable,” the analyst said. (See Truist Financial’s dividend date and history on TipRanks)
The bank’s recently released second quarter results reflect strong benefits from the sequential rise in insurance revenue, as well as robust revenue from higher card and payment fees. However, a drop in residential mortgage income was a drag.
That said, Cassidy acknowledged that Truist’s strong underwriting standards and high credit quality will help its credit metrics “outperform its peer group over the next 24 months.”
Cassidy reiterated a buy rating on Truist with a price target of $70. Ranked #26 among nearly 8,000 analysts tracked on TipRanks, Cassidy’s ratings have a 68% success rate and an average return per rating of 22.5%.
Bank of America
Another of Cassidy’s favorite stock picks is financial services giant Bank of America (BAC), whose diversified activity helps him to hold on in these difficult times. Needless to say, the company thrives in a higher interest rate environment.
The company’s second quarter results showed that rising interest rates drove the growth in its net interest margin. Additionally, credit quality remains strong, which is another factor that prompted Cassidy to maintain a buy rating on BAC shares.
However, the analyst anticipates a drop in the volume of share buybacks in the coming quarters. Therefore, he reduced the price target to $40 instead of $45. (See Bank of America Stock Investors on TipRanks)
Nonetheless, Cassidy is optimistic about BAC’s filing growth. Notably, total deposits reached $1.98 trillion in the second quarter. The analyst predicts that the company will outperform its peers during the current downturn, in terms of credit quality and profitability. “We anticipate that the transformed and ‘derisked’ BAC will weather any economic storm that presents itself over the next 12 to 24 months much better than the financial crisis,” Cassidy said.
Additionally, the analyst shed some light on the company’s mobile offerings. “Additionally, we believe the company’s mobile offerings are among the best in the industry, and as usage grows, we expect BAC to see an increase in profitability and earnings,” Cassidy said.
GlobalFoundries Semiconductor Foundry (SFP) has not been immune to global supply chain issues. Nevertheless, the growing demand for chips should continue to drive the company’s business. (See the Global Foundries stock chart on TipRanks)
Recently, Deutsche Bank analyst Ross Seymore said he believes the entire semiconductor industry is going through a phase of “purgatory” during this earnings season, in which investors prefer to stay on the sidelines despite expectations of fundamental strength in earnings and earnings per share. metric.
The analyst expects the company to be among those likely to benefit from an easing of supply chain bottlenecks. However, the supply-side benefits are likely to be offset by a slowdown in demand for the remainder of 2022, prompting Seymore to lower his price target for Global Foundries to $55 from $70.
However, Seymore believes that GlobalFoundries and its peers should be able to respond to “continuing strong demand” for improved supply, “providing a tailwind for 2Q22 growth while signaling that a balance may be in place.” on the horizon”.
Seymore reiterated a buy rating on GFS shares, keeping in mind its strong long-term outlook. The analyst ranks 16th among nearly 8,000 analysts in the TipRanks database. He passed on 74% of his grades, generating a 24% return per grade on average.
Another on Ross Seymore’s list of top picks is Marvell Technology (LMRV), a semiconductor company specializing in the production of analog, mixed and digital signal processing products and integrated circuits.
The company has significant long-term growth opportunities, such as global 5G infrastructure developments, the bandwidth upgrade cycle in data centers, and increased demand for faster Ethernet from of the emerging market for autonomous and electric vehicles. (See Marvell Insider Trading Activity on TipRanks)
Nevertheless, Seymore warns of a slowdown in demand in end markets, despite the unchallenged fundamental strength of semiconductor companies. As a result, the analyst recommended investors to remain selective when picking semi-stocks to invest in.
With these near-term headwinds in mind, the analyst cut the price target on MRVL to $65 from $75. Nonetheless, according to Seymore, Marvell has several underappreciated growth drivers that will help overcome short-term concerns and generate longer-term value, making him one of his best defensive picks.