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Heading into the end of the June quarter, investors are reassessing the outlook for stocks as the global economy continues its post-COVID recovery.
Josh Gilbert, analyst at global trading platform eToro, has picked out a few stocks he thinks are tied to the H2-2021 growth themes.
Gilbert’s focus is on the US, but his stock picks tie back to cyclical sectors such as banking, travel and consumer discretionary that are relevant to most global markets.
Here are four companies he likes the look of in the second half of the year.
JP Morgan Chase & Co
The bull run for commodities and high-growth tech stocks has often left traditional banks out of the headlines, but Gilbert reckons the sector could still offer strong returns.
Like the big Aussie banks, JP Morgan has benefitted from the post-COVID bull market and its share price is now higher than it was before the pandemic.
However, “it’s important to note that JPMorgan Chase & Co’s stock P/E ratio is still low at 13.21 and above the financial sector average of 14.26, which demonstrates that it is still undervalued compared to the broader sector”, Gilbert said.
He added that bank stocks should continue to benefit the shift towards cyclical stocks since last November, in the wake positive vaccine results and the US election.
As a result, traditional banks will “continue to benefit in the near term from investors looking to diversify their portfolios out of tech and into stocks such as financials”.
Gilbert’s pick of the big US tech names is cloud-based software giant Salesforce, which is coming off a big earnings beat in the March quarter on q/q revenues of almost US$6bn.
The company is also bedding down its high-profile $37.5bn acquisition of Slack, which it says will contribute an immediate revenue boost of around US$500m, Gilbert said.
While Salesforce has slightly underperformed against the broader market in the last 12 months, it’s expected that the company will grow significantly, mainly if it can deliver another better-than-anticipated result with its upcoming Q2 earnings,” Gilbert said.
United Airlines Holdings Inc
The outlook for travel stocks has been one of the most oft-discussed thematics in the wake of the pandemic.
After falling from US$90 to below US$20/share last year, shares in United have made a steady move back above $US50 since the vaccine news in November.
“Two weeks ago, the airliner announced that it would add 400 more daily flights to its schedule in July 2021, as summer travel bookings increase by 214 per cent from 2020,” Gilbert said.
The consensus view on United’s position as a stable business was further enhanced following its decision to acquire 15 new planes from high-speed jet manufacturer Boom Supersonic, Gilbert added.
Still, the stock is still trading at a discount of around 40pc to is pre-pandemic highs, leaving some runway for steady longer-term growth.
Ultimately, Gilbert said travel stocks such as airline “will continue to be a longer-term play for investors, as it may take a few years before traveller numbers return to pre-pandemic levels”.
Lastly, Gilbert likes the look of consumer discretionary in the form of Nike, the global footwear and apparel manufacturer.
With high savings rates and a stronger outlook for consumer spending, Gilbert said big players such as Nike are poised to benefit.
In addition, “as a cyclical stock, Nike is less sensitive to rising bond yields, which we may start to see within the next few months — especially as the solid economic recovery continues in the US”, Gilbert said.
As a global manufacturer, Gilbert said the company has faced supply bottlenecks in the first half of this year due to shipping delays.
However, those costs have been offset by strong sales in greater China, where revenue rose by 54 per cent.
“With Nike’s share price currently trading lower than it has been over the last six months, this represents an opportunity for investors to pick up the stock at a fair value,” Gilbert said.