With a new trading month underway, some stocks are due for outperformance, according to JPMorgan. The Wall Street bank’s August “focus list” released last Thursday came amid the market’s rough start to the month. Following a sell-off on Thursday that saw the Dow Jones Industrial Average drop nearly 500 points, stocks continued to slide Friday, sending the blue chip index down more than 600 points after July’s weaker-than-expected nonfarm payrolls data raised fears of a recession. As traders brace for more economic data in the second half of the year, with a potential rate cut on the horizon coming as soon as next month, JPMorgan updated its Analyst Focus list, which includes its top ideas accounting for growth, income, value and short selling strategies. Some stocks have been added and others on this month’s list. EQT Corp. has been added, while Arista Networks and Coherent Corp. – two names on last month’s list – have been removed. Here are some of JPMorgan’s top picks for August: EQT was named as part of the bank’s value strategy. The bank has an overweight rating on the oil and gas production company that also operates pipelines with a price target of $42, implying 33% upside from Friday’s close. This year, shares of EQT are down more than 18%. Against such underperformance, JPMorgan now sees a favorable risk-reward ratio for the stock because of “attractive” natural gas fundamentals as well as confidence in EQT’s plan to pay down debt. Of consumer stocks, McDonald’s is also viewed as a value play, with shares of the fast-food chain down 7% this year. Earlier this week, McDonald’s posted second-quarter earnings and revenue that missed Wall Street’s estimates. That came as consumers, especially those with lower incomes, pulled back spending at fast-food restaurants amid runaway menu prices , leading several chains, including McDonald’s, to offer value meals. McDonald’s, for example, recently extended its $5 value meal in most U.S. markets to boost traffic. “At the end of the day, we expect customers will continue to feel the pinch of the economy and a higher cost of living for at least the next several quarters in this very competitive landscape,” said Joe Erlinger, McDonald’s U.S. president, on an earnings call with analysts. For growth stocks, Amazon made the cut. JPMorgan has an overweight rating on the dominant e-commerce platform and a $240 target, implying about 43% upside from Friday’s close. On Friday, Amazon plummeted nearly 9% after the company’s second-quarter revenue missed analysts’ estimates and it gave a disappointing forecast for the current quarter. Amazon’s finance chief Brian Olsavsky said he expects a drop in online shopping this quarter, citing consumer distraction caused by the Paris Olympics and lead-up to the presidential election in November, even citing last month’s assassination attempt on former President Donald Trump. “Customers only have so much attention,” Olsavsky said on a post-earnings call with reporters. “When high-profile things happen, or the assassination attempt a couple of weeks ago, you see that people shift their attention to news. It’s more about distractions.” Other growth names that made the JPMorgan focus list included Eli Lilly – whose shares rallied Thursday after positive late-stage trial results of its weight loss drug Zepbound showed benefits in patients with a common type of heart failure and obesity – and Microsoft , which fell about 4% last week after it posted disappointing cloud results in its fiscal fourth quarter.
Discussion about this post