Not sure which S&P 500 stocks to buy if the market changes direction? Analysts don’t seem to have that problem.
Analysts are pounding the table for 10 S&P 500 stocks they’re most bullish on, including Alexandria real estate (ARE), Lamb Weston (LW) and Delta Airlines (DAL), says FactSet. All of these stocks are rated Buy by at least 93% and up to 100% of the analysts who follow them.
What do they like?
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S&P 500 analysts are becoming more optimistic
You might think analysts would cut back, considering the S&P 500 is down 3.1% since August. But the opposite is actually the case.
More than 54.4% of all 11,062 analyst ratings on S&P 500 stocks are buys, says FactSet’s John Butters. That’s slightly higher than the 54.3% of reviews that averaged a purchase over the past five years. And the percentage of purchase ratings has increased slightly since the end of August, from 54% to 54.4%.
Analysts are especially optimistic about the energy sector in the S&P 500. More than 64% of the ratings of stocks in this sector are buys. That’s higher than the 45% Buy ratings for stocks in the second-ranked consumer staples sector.
Bullishness goes beyond ratings. Analysts now expect S&P 500 earnings to be 0.2% higher in the third quarter, Butters says. That’s more than the 0% growth expected on June 30. This is the first time since the fourth quarter of 2021 that analysts have upgraded their earnings estimates.
Analysts’ Top Buys: Alexandria Real Estate and Lamb Weston
Those who follow Alexandria Real Estate and Lamb Weston have no doubt that these stocks are a bargain. Every analyst covering both stocks rates them Buy.
Based in Pasadena, California, Alexandria owns and leases office space used for life sciences. It has been a turbulent year for the company. Investors pushed the stock down more than 22% this year. Many worrying companies that normally rent lab space are still trying to figure out the role of remote work. And Alexandria’s profits are likely to fall nearly 16% this year.
But in the long term, the company is making the case that lab work should still be done primarily in physical labs and with teams. “This is the nature of life science companies’ research workflows, critical aspects of which clearly cannot be done from home,” Jenna Foger, the company’s vice president, said in a latest call with investors.
Analysts agree. They demand that the company’s earnings per share rise by almost 43% by 2024.
Lamb Weston is a play about food. Investors have already sent the company’s shares up 11.6% this year. Lamb Weston is a giant in a niche market: frozen potatoes. Rising food prices are a boost. The company’s earnings in fiscal 2024 are expected to rise 12%. That matches the S&P 500’s expected earnings growth of 12% in calendar 2024, FactSet says.
Energy is where it’s at according to analysts
S&P 500 energy sector stocks are the only ones higher in the second half so far. And that does not go unnoticed by analysts.
Three of the ten stocks they think are the biggest buys are in the energy sector. That includes Targa Resources (TRGP), Schlumberger (SLB) and Halliburton (HALL). Rising oil prices are impacting the entire sector’s earnings – and share prices.
And for analysts, it’s time to buy.
Analysts are making the biggest stock buys in the S&P 500
|Company||Symbol||YTD % ch.||% purchase ratings||Sector|
|Alexandria Real Estate Stocks||(ARE)||-22.1%||100%||Property|
|Lamb Weston Holdings||(LW)||11.6%||100%||Consumer goods|
|Amazon.com||(AMZN)||67.5%||94%||Discretionary consumer products|
|T-Mobile USA||(TMUS)||1.3%||93%||Communication services|
Source: FactSet, S&P Global Market Intelligence, IBD
Follow Matt Krantz on Twitter (X) @matkrantz
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