Investors’ attention has returned to the Federal Reserve after a hot November jobs report last week.
Because even though the central bank has raised interest rates, the economy continues to create jobs and wages continue to rise. Friday’s report on last month’s payrolls surprised investors and cooled sentiment.
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Still, investors need to keep a longer-term view when deciding how best to position their portfolios. To that end, here are five stocks picked by Wall Street’s top pros, according to TipRanks, a service that ranks analysts based on their track records.
While software company Vmware (VMW), which was rocked by lackluster quarterly results, Monness Crespi Hardt analyst Brian White maintained his positive view on the stock.
Importantly, the company will soon be acquired by Broadcom (AVGO). Under the terms of the agreement between the companies, VMware shareholders can either redeem their shares at $142.50 per share or exchange their shares for 0.2520 Broadcom shares for each VMware share. In all likelihood, however, shareholders could end up with a 50:50 split between cash and stock.
That’s important since this deal has allowed VMware to “dodge the tech apocalypse of 2022,” as White puts it, with the stock up 4% in 2022.
Given the upcoming acquisition, VMware gave no guidance. However, White remains optimistic based on VMware’s shareholder value and stable position in the technology sector.
“VMware profits remain depressed after aggressive investment initiatives and a model change. At the same time, the current economic and geopolitical environment is daunting, leading to a more uncertain future and greater attraction to large, well-managed, stable technology companies with benefits from digital transformation like VMware,” White theorized.
White ranks 697th among more than 8,000 analysts tracked on TipRanks. The analyst has achieved 55% successful ratings over the past year, with each rating generating an average return of about 8.7%.
Oil and natural gas exploration company Diamondback Energy (CATCH) has caught the attention of RBC Capital Markets analyst Scott Hanold after he recently made two significant strategic acquisitions. The analyst expects the acquisitions to boost its 2023 and 2024 earnings per share estimates by 7% to 9%.
Importantly, thanks to its recent acquisition of Permian Basin assets from Lario, Hanold sees solid upside potential for Diamondback’s near-term free cash flows at a time when almost every company has a worrying near-term outlook. (See Diamondback Dividend Date and History on TipRanks)
The analyst is also optimistic about Diamondback’s monetization plan and believes it will help the company maintain a clean balance sheet even after its two recent acquisitions. “We believe that FANG will still maintain an adjusted leverage ratio below 1.0 following the closing of the two transactions. However, we believe the company will continue to make progress towards exceeding its $500 million asset monetization goal, with a focus on midstream assets that are trading more resilient values in the market,” said Hanold, the one reiterated a Buy rating and a price target of $182 for the stock.
Impressively, Hanold holds the 8th Position among more than 8,000 analysts on TipRanks and boasts a 70% success rate. Each of his reviews has generated an average return of 33.7%.
The next stock on our list is microchip (MCHP), a leading manufacturer of embedded control solutions. The company’s commitment to long-term growth trends in the 5G, artificial intelligence/machine learning, Internet of Things (IoT), advanced driver assistance systems (ADAS) and electric vehicle end markets bode well for the company over the long term.
Recently, Stifel analyst Tore Svanberg reconfirmed a Buy rating on MCHP shares and even raised the price target from $77 to $80. (See Microchip stock chart on TipRanks)
The analyst believes Microchip is well-positioned to “create a softer landing versus peers during a broader industry correction” based on a solid near-term order history, defensive end-market exposure, robust pricing of proprietary products, etc.
Svanberg is ranked 41st among more than 8,000 analysts tracked and ranked on TipRanks. The analyst also has a solid track record of 65% profitable ratings and average returns of 20.4% each.
Analog Devices (ADI) is another stock on Tore Svanberg’s buy list. The manufacturer of high-performance integrated circuits for analog, mixed-signal and digital signal processing holds the largest market shares in the data converter and amplifier market.
“We believe ADI is an impressive high-performance analog/mixed-signal powerhouse with pro forma CY21A sales of (nearly) $10 billion and the leading challenger to current industry heavyweight TXN (Texas Instruments)” said Swanberg.
Analog Devices also has strong cash flow generation capabilities that kept Svanberg optimistic: The company made $3.50 billion over the trailing 12 months. (See Analog Devices Hedge Fund Trading Activity on TipRanks)
The analyst expects Analog Devices to outperform its peers in the current challenging macro environment. Based on his observations, Svanberg increased his price target to $195 from $190.
A leading name in cybersecurity, CrowdStrike (CRWD) disappointed investors and analysts alike with weaker-than-expected guidance. This underscored the software sector’s vulnerability to macroeconomic forces.
Still, Deutsche Bank analyst Brad Zelnick remained focused on CrowdStrike’s longer-term prospects, listing it as one of the top three security companies best positioned to weather the strong headwinds. (See CrowdStrike Holdings Financial Statements on TipRanks)
Zelnick observed solid traction on large deals and a strong existing customer base that can support the company during challenging times.
The analyst also noted that CrowdStrike, while unable to deliver the top-line portion of the business, has consistently maintained solid margins, reflecting “the flex/leverage in the business model.”
Although Zelnick cut the target price to $150 from $230 to reflect its lower estimates, the analyst maintained a buy rating after looking beyond the storm.
Interestingly, Zelnick ranks 128th out of more than 8,000 analysts on TipRanksth, after delivering successful reviews 67% of the time over the past year. Additionally, each of its reviews has yielded an average return of 15.10%.