15 Hard-hit Stocks to Buy Now Ahead of a Market Rally: Evercore

  • After falling nearly 20% in recent months, the stock has risen over the past week.
  • Evercore strategist Julian Emanuel says there are some signs the rally will continue.
  • He says that if a bear market is avoided, badly hit but highly profitable stocks will outperform.

No one wants to be premature and say the stock market crash is over, but with stocks up more than 6% from their lows last week, some signs of hope are emerging.

Julian Emanuel, who heads Evercore’s equities, derivatives and quantitative strategy team, says there are some signs that the worst is over, including the drop in the 10-year US Treasury yield and the fact that the dollar has fallen from its recent highs. .

Other factors, such as strong corporate earnings, the easing in the stock-to-bond correlation that emerged this year, and an improving economy in China, could also contribute to a more positive environment for stocks. But he acknowledges that not all the evidence points to an imminent recovery.

“Pockets of capitulation action have appeared in some areas, including a rise in the Nasdaq 100


Volatility

(VXN),” he wrote in a recent note. “It remains to be seen whether this fear in Big Tech will be followed by more traditional signs of capitulation in the broader market, or if it was enough to signal the beginning of the ‘bottoming out process.’ . .”

But in any case, Emanuel says that after a strong liquidation, one that has either just lost being a


bear market

based on the closing prices of the index, or one that barely got there based on intraday levels – plenty of opportunities have arisen.

“With signs that the stock market crash could be complete or near completion, we remain focused on stock-specific insights in an uncorrelated environment that continues to reward alpha over beta,” he said.

While a bear market and a


recession

could force investors to take a radically different approach, Emanuel says that if they look at other markets that are not entirely bearish, it will show them a profitable path forward.

He says that in the near bear markets of 1998, 2011 and 2018, stocks that fared worst in the recession ended up leading the way as investors became convinced a recession wasn’t really close.

What is most likely to work in that scenario? Emanuel says that companies that have been hit hard but are posting strong earnings growth and where Wall Street is unusually bearish, meaning stocks would get an extra boost when those investors changed their minds, as happened after the market crash at the end of 2018.

He describes the group this way: “Stocks with bottom quartile Index performance since Jan 4 SPX peak, but top quartile EPS growth in 2022e, positive earnings and strong options bias.”

The 15 stocks identified by Emanuel and his team as falling into that category have fallen between 29% and 64% since Jan. 4, when the S&P 500 hit its most recent closing high. But based on analyst estimates, they are all forecast to see strong earnings growth in 2022.

Stocks are ranked below based on how much they have fallen since the last market high. The percentages were calculated based on Friday’s closing prices.

In the case of Boeing, Snowflake, Zscaler, Lyft and Under Armour, Emanuel also recommends buying July upside calls and selling downside puts as a way to take extra profit.

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