Since February, markets have been taking us for a roller coaster ride. Since the bottom fell out, sending the S&P index plunging 34% in the steepest bear market on record, volatility has ruled the day. Coronavirus fears spurred the drop, as investors watched economies sputter to a halt during the prolonged lockdown policies.
Since then, markets have stabilized. Financial experts originally believed that the S&P would find resistance levels in the 2,750 to 2,850 range – but the rebound carried the index higher. Through the month of June, despite some notable ups and downs, the S&P has stayed in the 3,000 to 3,200 range. It appears to be a solid consolidation, giving investors reason for a positive outlook.
So, where does the market go from here? One way to navigate all of the stock market uncertainty is to rely on a more comprehensive stock analysis.
TipRanks offers a Smart Score that collects and collates datapoints on every stock from across the TipRanks database, bringing together 8 separate factors that are commonly used to assess the strength of an investment. The amalgamated score is presented as a single digit, on a 1 to 10 scale, letting investors see at a glance the likely direction that a stock will take.
We’ve pulled three ‘Perfect 10’ stocks out of the TipRanks database, investments that present a compelling case for market traders. Let’s look behind the curtains, to find out what makes them stand out.
VMware, Inc. (VMW)
We’ll start with VMware, a software company providing cloud computing and virtualization services. VMware was one of the first software companies to successfully virtualize the x86 architecture, and is well known for its hypervisor products.
VMW's Smart Score features three key points that add up to a 10. First is the blogger opinion. These financial experts are not part of the Wall Street analyst corps, but they do command followings – and they are highly bullish on HIG shares. Next is the news sentiment, which is 100% bullish on this stock. And finally, hedge fund activity is highly positive on HIG, with major funds adding 1.63 million shares to their holdings in the last quarter.
Unlike many companies, VMware showed a strong sequential earnings gain in Q1. The $1.56 EPS reported was double the Q4 value of 78 cents. While Q2 earnings, at $1.10, were lower, they did beat the 66 cent estimates by a wide margin. Both quarters fit the company’s historical pattern – calendar Q1 is typically the strongest earnings quarter.
Wedbush’s 5-star analyst Daniel Ives is bullish on VMW’s forward prospects. He writes of the company, “…we believe VMW is well positioned heading into the rest of FY21 despite an unpredictable macro backdrop with its key AWS and Azure partnerships paying dividends in the field, coupled with a product strategy that has significant cross selling opportunities…”
Ives raises his price target on the stock from $160 to $175, implying an 17% upside potential to back his Buy rating. (To watch Ives’ track record, click here.)
VMware has a Moderate Buy rating from the analyst consensus, with 13 Buy and 7 Hold reviews set recently. The average share price of $170.31 suggests an upside premium of 14% from the current share price of $149.5. (See VMware stock analysis on TipRanks)
Lennar Corporation (LEN)
The real estate and construction businesses were hard-hit by the coronavirus pandemic, but Lennar, one of the largest home construction companies in the US, has managed to weather the storm. The company’s shares have rebounded strongly since bottoming out in March, adding over 100% from its lowest value. Size has helped to insulate Lennar; the company has a $18 billion market cap, and operations in 21 states.
The share price rebound has been supported by better-than-expected quarterly results in 1H20. The company saw a sequential decline from Q4 2019, as expected – but Q1 and Q2 results both beat the forecasts by wide margins. The Q2 EPS result of $1.65 was 27% above the estimates, and up 29% sequentially. Revenues for the two quarters together totaled $9.8 billion.
Strong performance despite the coronavirus could explain why hedge funds increased their holdings in LEN in the last quarter. This was a key factor in LEN’s Smart Score. Other positive points were the news sentiment, at 100% bullish, and the financial bloggers.
Covering the stock for BTIG, analyst Carl Reichardt notes, “We expect yoy order growth to resume in 2Q21, potentially earlier. More importantly, despite the challenge presented by COVID, LEN's considerable efforts to improve its business are now tangibly appearing in gross margin, which improved 150 bps yoy…”
Reichardt puts a $75 price target on LEN to support his Buy rating. His target indicates confidence in a 25.5% upside potential for the coming 12 months. (To watch Reichardt’s track record, click here)
LEN's Moderate Buy rating is based on 7 each Buys and Holds. LEN shares are selling for $59.76, and the $68.50 average price target suggests an upside potential of 15%. (See Lennar stock-price forecast on TipRanks)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.