ETFOptimize | High-performance ETF-based Investment Strategies

Quantitative strategies, Wall Street-caliber research, and insightful market analysis since 1998.


ETFOptimize | HOME
Close Window

Why Value Stocks Are the Best Bet Today—and Goldman Sachs Agrees

LVIV, UKRAINE - October 03, 2020 : Nike label editorial photo. Trainers closeup. — Stock Editorial PhotographyThe stock market is not the same as it was 20 or 30 years ago when every asset class and product was isolated in its own price action and narrative. However, today’s market is very different, as everything is connected, from bonds to basic materials and commodities. In this way, stocks and exchange-traded funds (ETFs) and their correlations become all the more important for investors to keep track of in their portfolios and idea-generation processes.

This is why today’s price action between growth and value stocks matters, especially as the Federal Reserve (the Fed) has cut interest rates for the third consecutive time. Investors can check out this article to see how the spreads between the iShares S&P 500 Value ETF (NYSEARCA: IVE) and the iShares S&P 500 Growth ETF (NYSEARCA: IVW) are at multi-year lows, giving a rare opening into today’s value stocks.

Knowing this opportunity is present here, and how Goldman Sachs’ chief equity strategist claimed that “risk-adjusted” return stocks are the best picks for 2025. The translation would say that stocks with lots of upside and very little downside are the best picks, also known as value stocks. That’s where names like PepsiCo Inc. (NASDAQ: PEP), Nike Inc. (NYSE: NKE), and ASML Holdings (NASDAQ: ASML) come into play for this opportunity.

PepsiCo Stock’s Discount Won’t Last Long

After a recent decline in food and beverage stocks like Coca-Cola Co. (NYSE: KO) and McDonald’s Co. (NYSE: MCD), Pepsi got dragged into the implications that the new head of health for the United States proposed. This proposal would call for most brands to stay away and abandon high-fructose syrup as their sweetener of choice.

Given that most of these brands use this ingredient for their sweetening, investors and markets panicked, as the implications are not yet known regarding margins and potential market share. One thing is certain, however, and that is that PepsiCo has enough scale and reach to pivot underlying ingredients without a large hit to its financials.

That might be why, as the stock traded down to 84% of its 52-week high, Wall Street analysts now see double-digit upside in the brand from here. Especially those at Deutsche Bank decided to boost their ratings on Pepsi stock as of December 2024 from a previous hold to a buy.

At the same time, they also boosted their valuations to $184 a share, representing up to  21.1% upside from where the stock trades today. This gives investors one way to tap into the upside potential inherent in value stocks today.

Nike Stock, an Institutional Pick Today

Bill Ackman, manager of the Pershing Square hedge fund, has been buying the dip in Nike stock, especially now that it trades at a low of 62% of its 52-week high. Nike’s global reach and brand penetration will be the factors that help it stand out again in the consumer discretionary sector.

But Ackman wasn’t the only one willing to express an optimistic view on Nike stock; those at State Street decided to boost their holdings in Nike stock by as much as 3.3% as of November 2024, bringing their net position to a high of $5.1 billion or 3.8% ownership in the company.

Then, there is the Wall Street analyst sentiment side of the equation. As of today, the consensus price target on the stock is set at $91.7, calling for up to 19% upside from where it trades today. However, as institutions start betting on this stock ahead of earnings, higher valuations will likely be called for.

That’s where the lead from those at Evercore becomes useful; their outperform rating alongside a $97 share price target would call for a more realistic 25.8% upside from today’s levels.

ASML: The Best Risk/Reward Setup in Semiconductors

Everyone is focused on the popular names in the semiconductor industry, such as NVIDIA Co. (NASDAQ: NVDA). However, there are better risk-to-reward setups in the market that give investors the best effects of this value stocks setup relative to all others.

This better setup comes through ASML stock, as it trades at only 68% of its 52-week high compared to a much higher 85% for NVIDIA stock. More than that, its current price-to-earnings (P/E) ratio of 37.7x gives investors a major discount to the rest of the computer sector and its average valuation of 271x P/E today.

Wall Street analysts are now forecasting up to $25.62 in earnings per share (EPS) for the next 12 months, a significant boost from today’s $19.1 level, enough of an expansion to justify the stock returning toward its 52-week highs.

That is why today’s analyst ratings reflect this potential EPS growth. Mainly, those at J.P. Morgan Chase saw it fit to keep an overweight rating on ASML stock since October 2024, along with a $1,148 price target to call for a 61.6% upside from today’s prices.

Stock Quote API & Stock News API supplied by www.cloudquote.io
Quotes delayed at least 20 minutes.
By accessing this page, you agree to the following
Privacy Policy and Terms Of Service.


 

IntelligentValue Home
Close Window

DISCLAIMER

All content herein is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor should it be interpreted as a recommendation to buy, hold or sell (short or otherwise) any security.  All opinions, analyses, and information included herein are based on sources believed to be reliable, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. We undertake no obligation to update such opinions, analysis or information. You should independently verify all information contained on this website. Some information is based on analysis of past performance or hypothetical performance results, which have inherent limitations. We make no representation that any particular equity or strategy will or is likely to achieve profits or losses similar to those shown. Shareholders, employees, writers, contractors, and affiliates associated with ETFOptimize.com may have ownership positions in the securities that are mentioned. If you are not sure if ETFs, algorithmic investing, or a particular investment is right for you, you are urged to consult with a Registered Investment Advisor (RIA). Neither this website nor anyone associated with producing its content are Registered Investment Advisors, and no attempt is made herein to substitute for personalized, professional investment advice. Neither ETFOptimize.com, Global Alpha Investments, Inc., nor its employees, service providers, associates, or affiliates are responsible for any investment losses you may incur as a result of using the information provided herein. Remember that past investment returns may not be indicative of future returns.

Copyright © 1998-2017 ETFOptimize.com, a publication of Optimized Investments, Inc. All rights reserved.