Which stocks represent growth at a reasonable price?
In this market environment, stocks that have “growth at a reasonable price” are attractive, said BMO strategists led by Brian Belski.
They’ve compiled a list of those stocks, including semiconductor company Broadcom (AVGO) – Obtain report from Broadcom Inc.pharmaceutical giant Pfizer (DFP) – Get the report from Pfizer Inc. and the insurer Cigna (THIS) – Get Cigna Corporation report.
So, what is the current market environment?
“The next 12-month earnings growth differentiation among S&P 500 companies has increased sharply, recently reaching its highest level since the start of the pandemic,” BMO strategists wrote in a commentary.
Meanwhile, “the dispersion of valuations has exhibited a similar pattern and is currently well above its post-financial crisis average,” they said.
“This tells us that companies operate at significantly different fundamental rates. Additionally, intra-stock price performance correlations remain significantly below historical norms, and earnings per share continue to be the primary driver of S&P 500 returns.”
This emphasizes active stock selection, the strategists said. “Our work shows that employing a growth-at-a-reasonable-price strategy could be beneficial for investors in this type of environment,” they said.
BMO strategists selected stocks that are rated outperforming by BMO analysts, those that have a forward price-to-earnings ratio below the median value of the S&P 500, those that have future earnings per share growth above the median value of the S&P 500 and those that have a price/earnings growth ratio lower than the median value of the S&P 500.
Other stocks on the list include Fortune Brands Home & Security (FBHS) – Get the report from Fortune Brands Home & Security, Inc., a security products company; clothing retailer Ross Stores (ROST) – Get the report from Ross Stores, Inc.; Parker-Hannifin (pH) – Get the Parker-Hannifin Corporation report, a motion and control technology company; CSX Corp. Railroad (CSX) – Get the CSX Corporation report; and international paper (IPs) – Get the International Paper Company report.