Stocks stabilized after a choppy start to Thursday's session, with the main indexes climbing into the close. In focus were a heavy batch of economic data as well as a number of high-profile earnings reports.

The Census Bureau's release of June retail sales data was the marquee event on today's economic calendar. The report showed that retail sales rose 0.6% from May to June. This is much better than the 0.9% decline seen in May and the 0.2% increase economists expected.

"Consumers are flexing their spending muscle again," says Gina Bolvin, president of Bolvin Wealth Management Group.

Today's report "shows that the American shopper is alive and well – and that matters for markets," Bolvin adds. "Strong retail sales are like oxygen for the economy, and Wall Street is breathing a sigh of relief today."

Indeed, the Dow Jones Industrial Average climbed 0.5% to 44,484. The S&P 500 rose 0.5% to 6,297 and the Nasdaq Composite added 0.7% to 20,884 – new record highs for these two indexes.

Also helping lift sentiment were weekly jobless claims, which came in at a better-than-expected 221,000 – their lowest level since April.

President Donald Trump has made it well known that he'd prefer the Fed to start cutting rates sooner rather than later. But today's strong economic data only increased expectations the central bank will stay on hold at its policy meeting later this month.

According to CME Group's FedWatch, futures traders are now pricing in a 97.4% chance the central bank keeps the federal funds rate at its current range of 4.25% to 4.5% at its next meeting – up from 92.8% one week ago.

PepsiCo, TSM lead post-earnings gainers

Over on the earnings calendar, soft drink and snack maker PepsiCo (PEP) reported higher-than-expected second-quarter earnings and revenue and reiterated its full-year forecast.

Shares rose 7.5% in reaction, making PEP one of the best-performing S&P 500 stocks of the day.

Taiwan Semiconductor Manufacturing Company (TSM) was also in the green after earnings, gaining 3.4% as sizzling demand for artificial intelligence (AI) chips sparked a 61% year-over-year surge in Q2 profit.

The company also forecast 38% year-over-year revenue growth for its third quarter, well above analysts' estimates.

"TSM faces actual and potential tariff impacts," says Argus Research analyst Jim Kelleher, though he adds that the company "could also benefit from the recent thaw between the U.S. and China."

And the analyst expects solid growth for the company over the long term "as generative AI moves into the mainstream and electronic device demand accelerates."

Kelleher has a Buy rating and a $290 price target on the semiconductor stock, representing implied upside of 17% to current levels.

Starbucks stock gets slapped with a new Sell rating

Starbucks (SBUX) rose 0.7%, extending a rebound off the blue chip stock's early May lows. Shares are now up 16% since May 9 on a total return basis (price change plus dividends) and have gained nearly 26% in the past 12 months.

But Jefferies analyst Andy Barish thinks Starbucks has run too far, too fast, and downgraded the coffee chain to Underperform (Sell) from Hold. Barish also has a $76 price target on SBUX, which is nearly 18% below current levels.

"We think the stock has surpassed reasonable expectations for improving fundamentals, in our view," Barish writes in a note to clients, adding that credit and debit card data, as well as foot traffic, suggest downside to earnings estimates.

The analyst adds that "complex people and operational issues could take a longer time than expected for management to make progress on," while significant investments could weigh on earnings.

Such a bearish outlook toward Starbucks is relatively rare. Of the 35 analysts covering SBUX who are tracked by S&P Global Market Intelligence, 10 say it's a Strong Buy, six have it at Buy and 17 rate it at Hold. Just two say it's a Sell.

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Stocks hit their session lows late morning Wednesday after several news outlets indicated President Donald Trump is seriously considering firing Federal Reserve Chair Jerome Powell. The main indexes quickly stabilized, though, as Trump denied the reports.

The main indexes opened with comfortable gains thanks to encouraging inflation data. According to the Bureau of Labor Statistics, the Producer Price Index (PPI), which measures what businesses are paying suppliers for goods, was unchanged from May to June. Year over year, wholesale prices were up 2.3%.

Core PPI, which excludes volatile food and energy costs, was also flat month to month and 2.5% higher on the year. All the figures were lower than what was seen in May.

"PPI was considerably cooler than expected in June as lower prices for travel services offset the effect of tariffs," says Bill Adams, chief economist for Comerica Bank.

He notes that while tariffs are raising the prices of goods, this is "being offset by lower prices of nontraded services."

And while Adams believes that the "the inflationary impact of tariffs will likely increase in coming months," the inability of businesses to raise prices too high "may continue to brunt their effect on inflation."

For now, it seems President Trump's tariffs are having a marginal impact on inflation, which all but guarantees that the Fed will hold rates steady at its next policy meeting later this month.

Rumors of a potential Powell ouster swirl

But President Trump would prefer the Federal Reserve to start cutting interest rates as soon as possible – and the central bank's reluctance to do so has sparked a flurry of "Can Trump fire Powell?" headlines.

The latest firestorm erupted mid-morning Wednesday when media reports said President Trump had asked House Republicans on Tuesday evening if he should fire Powell. The New York Times suggested the president had even drafted a letter to remove the Fed chair from his post.

However, speaking to reporters in the Oval Office around lunchtime on Wednesday, Trump said it is "highly unlikely" he'll fire Powell.

The main indexes sold off sharply after the initial reports, but were back in positive territory by the close. The Dow Jones Industrial Average added 0.5% to end at 44,254, the S&P 500 gained 0.3% to 6,263, and the Nasdaq Composite rose 0.3% to 20,730.

Blue-chip earnings roll in

The earnings calendar gave market participants plenty to talk about too. Financial stocks continued to struggle in the wake of their results, with Bank of America (BAC, -0.3%) and Morgan Stanley (MS, -1.3%) closing lower despite Q2 profit beats.

Goldman Sachs Group (GS) was an outlier, adding 0.9% after the big bank reported a 22% year-over-year jump in second-quarter trading revenue.

Goldman's results were "what was expected, especially around the sizable trading beat," says David Wagner, head of equity and portfolio manager at Aptus Capital Advisors.

Wagner adds that the company "has sizable dry powder to either put back into share buybacks or into growth," which should make investors happy.

But Johnson & Johnson (JNJ) emerged as the best Dow Jones stock Wednesday, adding 6.2% after the pharmaceutical giant forecast a $200 million hit from tariffs in 2025 – down from the $400 million it forecast earlier this year.

J&J also beat top- and bottom-line estimates for its second quarter and raised its full-year outlook.

ASML sinks on growth concerns

Elsewhere, ASML (ASML) plunged 8.3%, making it the worst S&P 500 stock Wednesday, after the Dutch chip-equipment maker said that it cannot guarantee growth next year.

"Looking at 2026, we see that our AI customers' fundamentals remain strong. At the same time, we continue to see increasing uncertainty driven by macro-economic and geopolitical developments," said ASML CEO Christophe Fouquet in the earnings release.

Fouquet added that the company is preparing for growth in 2026, but "cannot confirm it at this stage."

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Love the Apple Card and Apple products? If so, you may be interested to know that the Consumer Financial Protection Bureau (CFPB) has ordered Apple and Goldman Sachs to pay more than $89 million in penalties for the mishandling of customer disputes and misleading customers about payment options for Apple devices.

The CFPB is also banning Goldman Sachs from introducing a new credit card unless the company can provide a credible plan that the product will comply with the law. In fact, if Goldman Sachs makes another attempt to enter the credit card market, the CFPB plans to police the company to avoid repeat offenses.

“Apple and Goldman Sachs illegally sidestepped their legal obligations for Apple Card borrowers. Big Tech companies and big Wall Street firms should not behave as if they are exempt from federal law,” said CFPB Director Rohit Chopra.

What were the Apple Card failures?

The CFPB found that Apple and Goldman Sachs misled consumers about interest-free payment plans for Apple devices. And, although many customers thought they would automatically get interest-free monthly payments when buying Apple devices with their Apple Card, they were instead charged interest. The interest-free payment option on certain browsers wasn’t even shown on Apple’s website. Beyond that, the CFPB also found:

• Apple failed to send tens of thousands of consumer disputes of Apple Card transactions to Goldman Sachs, and when Apple did send disputes, Goldman Sachs did not follow federal requirements for investigating the disputes.
• Apple and Goldman Sachs launched the Apple Card despite third-party warnings that the Apple Card disputes system was not ready due to technological issues.
• Consequently, consumers faced long waits to get money back for disputed charges, and some had incorrect negative information added to their credit reports.
• Goldman Sachs misled consumers about applying some refunds, which led to consumers paying additional interest charges.

Of the $89 million, the CFPB is ordering Goldman Sachs to pay a $45 million civil money penalty and at least $19.8 million in redress to victims for its role in marketing, offering, and servicing the Apple Card. It is also ordering Apple to pay a $25 million civil money penalty to the bureau’s victims relief fund. Goldman Sachs is ordered to pay a $45 million civil money penalty and at least $19.8 million in redress to victims for its role in marketing, offering, and servicing the Apple Card. Payments from the Civil Penalty Fund depend on the amount of money available and other factors.

Apple Card / Goldman Sachs partnership

Because many of Apple’s products, such as the iPhone, are more expensive than other brands, many consumers favor financing purchases with payment plans and credit products. When Apple introduced the Apple Card in partnership with Goldman Sachs Bank in August 2019, the partnership allowed Apple to provide a financing program to help increase sales of its devices and induce spending at Apple’s retail stores and through the Apple App. At the time, the Apple Card partnership offered Goldman Sachs an opportunity to establish itself in the market.

With the Apple Card, Goldman Sachs extends credit to consumers and handles account servicing. Apple designed the customer-facing interfaces to manage Apple Card accounts on Apple devices. That includes a “Report an Issue” feature, which allows consumers to dispute Apple Card transactions. Apple was also deeply involved in marketing and advertising.

In December 2019, Apple and Goldman Sachs launched a new feature called Apple Card Monthly Installments. This feature allows users to finance the purchase of certain Apple devices with Apple Card directly from Apple through interest-free monthly installments, similar to a Buy Now, Pay Later product. However, when Apple’s customers experienced improper charges or filed disputes, the systems developed by the companies failed to address them.

Are you affected by the CFPB action?

According to the Civil Penalty Fund’s website, you could be eligible to receive a payment through the fund if you “were harmed by an unlawful activity where a fine was imposed in a CFPB case,” and you “won’t otherwise receive full compensation from the wrongdoer.” But you’ll have to wait until details about the distribution are available. Until then, you can submit complaints about financial products and services by visiting the CFPB’s website. Or, if you think you may be due a portion of the funds, call (855) 411-CFPB (2372).

If you're worried it's the end of the line for the Apple Card, think again. For the third consecutive year, Apple Card has been recognized with a No. 1 ranking in their segment in the U.S. Credit Card Satisfaction Study. Apple announced in November 2023 that it would end its credit card partnership with Goldman Sachs and has not announced which bank might be its new partner.

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Goldman Sachs (GS) stock jumped more than 3% at Tuesday's open after the investment banking giant disclosed its third-quarter results, but was last seen in negative territory.

In the quarter ended September 30, Goldman's net revenue increased 7.5% year-over-year to $12.7 billion, led by a 16.2% surge in revenue in its Asset & Wealth Management segment to $3.8 billion. The company also said earnings per share (EPS) were up 53.6% from the year-ago period to $8.40.

"Our performance demonstrates the strength of our world-class franchise in an improving operating environment," said Goldman Sachs CEO David Solomon in a statement. "We continue to lean into our strengths – exceptional talent, execution capabilities and risk management expertise – allowing us to effectively serve our clients against a complex backdrop and deliver for shareholders."

The results crushed analysts expectations. Wall Street was anticipating revenue of $11.8 billion and earnings of $6.89 per share, according to Yahoo Finance.

Goldman also proudly noted that its Assets Under Supervision (AUS) reached a record $3.1 trillion, an increase of 15.8% over the year-ago period.

Is Goldman Sachs stock a buy, sell or hold?

Goldman Sachs has been one of the best Dow Jones stocks on the price charts this year, up 38.1% on a total return basis (price change plus dividends) through the October 14 close. Unsurprisingly, Wall Street is very bullish on the financial stock. According to S&P Global Market Intelligence, the consensus recommendation among analysts it tracks is a Buy.

However, analysts' price targets have struggled to keep up with the stock's outperformance in 2024. Currently, the average price target on GS is $526.63, which is a discount to where the blue chip stock is trading at the time of this writing. Price-target hikes could come down the pike if shares keep climbing.

"Goldman Sachs is poised for a 2024 recovery in investment banking from the market trough in 2023, which would benefit GS as the global leader," wrote CFRA Research analyst Kenneth Leon in an October 4 note. "A revamped strategy to focus on core businesses and drive more durable, recurring fee revenue is underway in Asset & Wealth Management."

Leon went on to note that his firm sees Goldman Sachs benefitting from an upturn in transaction fee activities and private equity funds exiting investments through initial public offerings.

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Ford Motor (F) stock is trading in positive territory Tuesday after Goldman Sachs upgraded the embattled automaker to Buy from Hold.

Goldman's upgrade of Ford is centered around the possibility of improving profitability, according to Barron's, particularly within its commercial business.

"We believe there is a margin opportunity driven by the company's more profitable commercial business," says Goldman Sachs analyst Mark Delaney. Ford's commercial business, Ford Pro, is its most profitable unit.

The analyst also provided positive commentary on Ford's growing software and services mix.

"The company is targeting $1 billion of software revenue in 2025, and for software and physical services to be 20% of Pro [operating profit] in 2026," Delaney said. "In addition, we believe cost actions – in internal combustion engines (ICE) and electric vehicles (EVs) – can help to offset industry headwinds."

Is Ford stock a buy, sell or hold?

Ford Motor shares down more than 26% since mid-July and Wall Street is on the sidelines when it comes to the consumer discretionary stock. 

According to S&P Global Market Intelligence, the average analyst target price for F stock is $13.02, representing implied upside of over 20% to current levels. Meanwhile, the consensus recommendation is a Hold. 

But like Goldman Sachs' Delaney, there are bulls to be found. Financial services firm BofA Securities, for instance, also has a Buy rating on the large-cap stock, along with a $20 price target.

"On August 21, Ford announced several changes to its product plans that should help improve the profitability and capital efficiency of its Core to Future transition," says BofA Securities analyst John Murphy. "Among the changes, Ford now plans to launch a new electric commercial van in 2026 and two new electric pickup trucks in 2027."

Murphy adds that Ford's initiatives include shelving plans "to build an electric three-row SUV, but instead will leverage its hybrid technology in the next three-row SUVs." He believes "these changes will position Ford to benefit from growing demand for EVs, while also focusing on areas in which it has a Core competitive advantage."

BofA's $20 price target is the highest on Wall Street and sits nearly 90% above where Ford is currently trading. 

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Goldman Sachs (GS) stock closed higher Monday after the investment banking giant beat expectations on the top- and bottom-lines for its second quarter and reiterated news of its quarterly dividend hike.

In the second quarter ended June 30, Goldman's net revenue increased 17% year-over-year to $12.7 billion, driven by a 27% rise in its Asset & Wealth Management segment to $3.9 billion. Its earnings per share (EPS) jumped to $8.62 from $3.08 the year-ago period.

"We are pleased with our solid second quarter results and our overall performance in the first half of the year, reflecting strong year-on-year growth in both Global Banking & Markets and Asset & Wealth Management,” Goldman Sachs CEO David Solomon said in a statement. “Our One Goldman Sachs operating approach is allowing us to bring the whole firm to our clients, deepening our relationships and serving them in an improving, but complex environment."

The results handily beat analysts' expectations. Wall Street was anticipating revenue of $12.5 billion and earnings of $8.34 per share, according to CNBC.

Goldman also increased its quarterly dividend by 9.1% to $3.00 per share, which it first indicated it would do on June 28 following the release of the Federal Reserve's stress test results. The first dividend at this increased rate will come on September 27 to shareholders of record on August 30.

Is Goldman Sachs stock a buy, sell or hold?

Goldman Sachs is one of the best Dow Jones stocks this year, up more than 26% on a total return basis (price change plus dividends). Unsurprisingly, Wall Street is bullish toward the financial stock. According to S&P Global Market Intelligence, the consensus recommendation among analysts it tracks is a Buy.

However, analysts' price targets have struggled to keep up with the stock's run higher. Currently, the average price target is $469.86, representing a discount of nearly 5% to current levels.

Financial services firm BofA Global Research is one of the more bullish outfits on GS stock with a Buy rating and $563 price target, citing its longer-term earnings-per-share expectations.

BofA's $563 price target represents implied upside of more than 14% to current levels. 

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Stocks opened higher Thursday after data from the Labor Department showed that weekly jobless claims rose last week. Earlier this week, Federal Reserve Chair Jerome Powell warned that the central bank is prepared to issue more rate hikes should economic data continue to come in strong. 

But the enthusiasm was short-lived, with the major benchmarks turning lower in afternoon trading as investors reduced risk ahead of tomorrow's highly anticipated February jobs report. 

Taking a quick look at today's economic data shows initial claims for unemployment benefits jumped by 21,000 to 211,000 last week, the most since the week ending Dec. 24. The four-week moving average rose to 197,000 from 193,000 in the week prior, its highest level since late January.

Next up is the monthly jobs report, slated for release ahead of tomorrow's open. Jan Hatzius, chief economist and head of research at Goldman Sachs, believes the U.S. added an above-consensus 250,000 new jobs in February. "Job growth tends to remain strong in February when the labor market is tight – we believe because some firms front-load spring hiring in anticipation of spring labor shortages – and all four Big Data employment indicators we track were indeed strong in the month," Hatzius says. 

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The financial sector was the biggest decliner today, shedding 4.1% after several bank stocks suffered significant losses. Shares of Silvergate Capital (SI) slumped 42.0% after the California-based financial firm said it is shutting down operations and liquidating assets at its subsidiary, Silvergate Bank. The lender, which offered a real-time payments system that cryptocurrency clients could use for quick currency transactions, could not escape the chaos enveloping the digital asset space – in particular the collapse of crypto exchange FTX.

However, SVB Financial Group (SIVB) had an even worse day than Silvergate stock, shedding more than 60% of its value. Last night, the financial services company said it will take a $2 billion charge due to the sale of Treasuries and other assets. SIVB also said it will sell around $1.25 billion of common stock and $500 million of depositary shares. In reaction, Moody's downgraded the credit rating for both SVB and its subsidiary, Silicon Valley Bank, due to "a deterioration in the bank's funding, liquidity and profitability."

As for the major indexes, the Dow Jones Industrial Average fell 1.7% to 32,254, the S&P 500 gave back 1.9% to 3,918, and the Nasdaq Composite shed 2.1% to 11,338.

The best stocks to sell or avoid

As we've said many times in this space, investing is a marathon, not a sprint. This is often why we look at the best stocks to buy or the best ETFs to buy from all corners of the market, because they provide investors with solid long-term opportunities. For instance, we recently updated our list of the best mid-cap stocks to buy, given they are considered the "sweet spot" of investing due to their ability to provide both stability and growth potential. And for income investors, we continually update this list of the Dividend Aristocrats – the 67 best dividend stocks for income growth.

But it's also good to take the pulse on positions that could be worth removing from your portfolio. Maybe a stock has a history of underperforming or the company is running up against a tough business environment. Whatever the reason, there are times when it's just better to cut a stock loose. One place to find red flags is by looking at analyst ratings. Sell recommendations are rare on Wall Street, but these are the top five stocks to sell or avoid right now, according to the pros. 

Stocks closed mostly higher Monday, with two of the three major benchmarks building on Friday's positive momentum. 

Amid a relatively bare economic and earnings calendar, investors took in a deluge of single-stock news, including reports of a potential nationwide TikTok ban – which sent Snap (SNAP) stock soaring. 

The Dow Jones Industrial Average outpaced its peers today, adding 0.1% to 33,431, while the S&P 500 edged up 0.07% to 4,048. The Nasdaq Composite, however, slipped into the red near the close, giving back 0.1% to 11,675.

While moves for the major benchmarks were modest, Snapchat parent Snap jumped 9.4% amid reports Congress is considering a nationwide ban of Chinese social media platform TikTok. 

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Last week, the U.S. House Foreign Affairs Committee advanced legislation that would give President Joe Biden the authority to ban TikTok in the U.S. due to national security concerns. The bill will now proceed to the House of Representatives for a full vote. In December, Congress passed a bill that banned the platform from use on devices owned by the federal government. Social media stock Pinterest (PINS, +1.1%) also closed higher.

Elsewhere, Apple (AAPL, +1.9%) was one of the best Dow stocks today – second only to healthcare giant Merck (MRK, +3.9%) – after Goldman Sachs analyst Michael Ng initiated coverage on the iPhone maker with a Buy rating. "Apple's installed base growth, secular growth in services, and new product innovation should more than offset cyclical headwinds to product revenue, such as a reduced iPhone unit demand due to a lengthening replacement cycle and reduced consumer demand for the PC & tablet category," Ng wrote in a note to clients. 

The best blue chip dividend stocks

The rest of the week will draw more economic headlines. Fed Chair Jerome Powell is set to kick off his two-day congressional testimony tomorrow, with investors anxious for more clarity on the central bank's future plans for interest rates. Economic data has come in relatively strong recently, and the next big data point is due out at the end of this week. Specifically, the February jobs report will be released ahead of Friday's open.

"This week will likely deliver a make-or-break moment for risk appetite as we will hear Fed Chair Powell's testimony to Congress and find out if the hot January jobs report was an aberration," says Edward Moya, senior market strategist at currency data provider OANDA.

With inflation data due out next week, and the next Fed meeting scheduled for the end of this month, the potential for volatility is high. As such, investors should stay focused on the best blue chip stocks that are poised to weather the storm – and what better place to start than with the best blue chip dividend stocks? This short list of high-quality names can deliver both income and outperformance in a turbulent market.

The major benchmarks opened higher Thursday, with tech stocks leading the way on an impressive outlook from graphic chipmaker Nvidia. 

And while investor sentiment temporarily waned midday as "good news is bad news" jobs data amplified rate-hike fears across Wall Street, stocks found their footing by the close. 

Specifically, weekly jobless claims unexpectedly fell by 3,000 last week to 192,000. This marks the sixth straight week initial unemployment claims have been below 200,000, underscoring a tight labor market. 

"The Fed has repeatedly and consistently pointed to the labor market as being one of the, if not the key, indicators it is watching when making monetary policy decisions," says Scott Wren, senior global market strategist at Wells Fargo Investment Institute. "The tighter the labor market the more upward pressure on wages and the more cash consumers have in their pockets. American consumers with cash in their pockets tend to spend it. The Fed wants demand to fall relative to supply, theoretically allowing price pressures to ease. A softer labor market would help."

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Also on the economic front, the second reading on fourth-quarter gross domestic product (GDP) showed the U.S. economy grew at a 2.7% annual pace in the final three months of 2022. This was revised lower from the initial reading of 2.9% released in January amid a slowdown in consumer spending.

"Despite GDP being revised down, the outright number points to an economy that remains strong," says Alexandra Wilson-Elizondo, head of multi-asset retail investing at Goldman Sachs Asset Management. Nevertheless, Wilson-Elizondo believes "this year will not be a repeat of last year as the Fed's approach will prove to be more balanced while they wait to see the impact of current policy," and says that the "re-pricing in rates" and subsequent drop in stocks creates "a buying opportunity."

At the close the S&P 500 was up 0.5% at 4,012, and the Dow Jones Industrial Average was 0.3% higher at 33,153. The Nasdaq Composite outperformed, adding 0.7% to 11,590, as Nvidia (NVDA) rallied 14.0% after reporting earnings – lifting its fellow semiconductor stocks. 

While NVDA reported sharp year-over-year declines in its fourth-quarter earnings and revenue, optimism around the company's chips – which are used to power generative AI systems like ChatGPT – and an expected recovery in its gaming division boosted the shares.

Hedge funds' top blue-chip stock picks

"What's the smart money doing?" This is a question we try to answer each quarter through regulatory filings. This is not done to duplicate the actions taken by hedge funds, institutional investors and high-net-worth individuals. Instead, we do this as a learning exercise, to see what those with access to research and insights typically not available to the average retail investor are doing with their money – especially during periods of market volatility and economic uncertainty.

For instance, among the stocks Warren Buffett was buying and selling in Q4 was Taiwan Semiconductor Manufacturing (TSM). This created a bit of whiplash for investors who follow the Oracle of Omaha, as the chip stock was first added to the Berkshire Hathaway equity portfolio only a quarter earlier. Buffett also continued to cut back on bank stocks in what was a fairly quiet quarter for the billionaire investor.

As for hedge funds, they "played defense in 2022," says Ben Snider, senior strategist on the U.S. Portfolio Strategy macro team for Goldman Sachs, and "entered 2023 with the most anti-Momentum tilt in their long portfolios on record." Mostly, hedge funds spent the fourth quarter selling off blue-chip stocks, particularly Dow Jones stocks. Here's a quick look at hedge funds' 21 top blue-chip stock picks as of Dec. 30, 2022.

Stocks took different directions to start the short week. (Monday was a stock market holiday to celebrate Martin Luther King Jr. Day.) 

While the tech-heavy Nasdaq kept its win streak alive, disappointing earnings from financial giant Goldman Sachs (GS) pressured the blue-chip Dow Jones Industrial Average. 

This morning, Goldman Sachs said fourth-quarter profit plunged 66% year-over-year to $3.32 per share as merger-and-acquisition activity dried up amid rising interest rates and an uncertain economic backdrop. Revenue fell 16% to $10.6 billion. Both figures fell short of analysts' consensus estimates, and the stock plummeted 6.5% in reaction. 

Travelers Companies (TRV) also created headwinds for the Dow on Tuesday. Shares slid 4.6% after the insurance company said it expects Q4 earnings to come in lower than expected due to what CEO Alan Schnitzer called "catastrophic weather." TRV is slated on the earnings calendar to report its full fourth-quarter results before the market opens next Tuesday, Jan. 24.

At the close, the Dow was down 1.1% at 33,910, while the S&P 500 shed 0.2% to 3,990. The Nasdaq Composite, meanwhile, gained 0.1% to 11,095, its seventh straight win. 

The Best Dow Dividend Stocks

Despite today's lower finish for the Dow and S&P 500, it's been a pretty strong start for the equities market. Year-to-date gains for the major benchmarks range from 2.3% to 6%. According to John Osterweis, founder and co-chief investment officer at Osterweis Capital Management, investors can expect higher future returns, too. 

But there's no clear timeline as to when the market will shift from bear market to bull market, and stock prices could go lower in the meantime. So what are investors to do? "The key is to position portfolios to withstand the near-term risks stemming from possible recession and inflationary cost pressures on the one hand, and on the other, to benefit from the eventual economic upturn that will inevitably follow any slowdown," Osterweis says. 

This can include buying the best dividend stocks, which Osterweis says can "prove to be superior investments." Additionally, investors should seek out companies "with strong balance sheets and substantial cash flows" as they "are better able to navigate difficult times and are thus able to gain market share during rough periods." These are qualities found in the best Dow dividend stocks, which provide investors with reliability and stability, as well as market-beating yields. 

Stocks struggled for direction Tuesday after an early morning speech from Fed Chair Jerome Powell failed to give any hints on the central bank's plans for monetary policy moving forward. Instead, investors looked ahead to a pair of potentially market-moving events occurring later this week: Thursday's release of the December consumer price index (CPI); and Friday's start of the fourth-quarter earnings season. 

Tuesday's choppy price action followed Monday's mixed finish for the major market indexes. At today's close, however, all three benchmarks were higher, with the Dow Jones Industrial Average gaining 0.6% to 33,704, the S&P 500 adding 0.7% to 3,919, and the Nasdaq Composite rising 1.0% to 10,742.

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Thursday's CPI data will be key for investors in gauging the effectiveness of the Fed's aggressive policy of interest rate hikes on combating inflation. Additionally, fourth-quarter earnings season will be critical in showing how corporate America fared at the end of 2022 – and how it is perhaps planning for a possible recession in 2023. More and more companies are announcing layoffs these days, with investment banking giant Goldman Sachs (GS, +1.3%) and cryptocurrency exchange Coinbase Global (COIN, +13.0%) being just two of the most recent examples. 

The Best Semiconductor Stocks to Buy

The tech sector has been a solid performer so far in 2023, with semiconductor stocks in particular putting in a strong showing. Just look at the iShares Semiconductor ETF (SOXX), which is up nearly 8% for the year-to-date. That easily outpaces the S&P 500's gain of roughly 2%. 

The positive price action follows a rough year for semis. In addition to a broader selloff in growth stocks, the industry encountered a number of headwinds over the past 12 months, including a decision by the Biden administration to suspend sales of some U.S. chips to China. 

Still, while Wells Fargo analysts maintain a cautious stance on semis to start the new year, they believe the end of this downdraft could be near. Specifically, they think a bottom could be reached in the first half of 2023, which might be the catalyst for investors to get back into chip stocks. "Upon such a bottoming event, we think investors should be prudent and invest in high-quality, secular growth stories that have the potential to re-rate higher as we move through the downturn in the semiconductor cycle," the analysts write in a note. Investors keen on the sector might want to do some due diligence on the best semiconductor stocks, which range from well-known leaders to under-the-radar gems. 

Earlier this month, the Federal Reserve raised interest rates by 0.75% to a range of 3.75% to 4%. The Fed expects rates to top out between 4.5% and 4.75% in 2023. Others, such as Goldman Sachs, believe they could go as high as 5.0% next year.

The story of why the Fed is raising rates is known to most investors. They are intended to tamp down inflation and runaway prices for everything from gas to groceries. Average Americans are feeling the pinch, too. However, in the long run, the Fed and many economists argue that the pain will be much more severe if the central bank doesn't take steps to kill inflation. 

The Fed's target for inflation is 2%. In October, the inflation rate was 7.7%, down from June's peak of 9.1%, but well above the central bank's goal.

So interest rates continue to climb, albeit at a slower pace than recent months. 

At this point, what happens to stocks if the Fed is wrong about inflation?

True Inflation Might Be Far Lower

Economist Paul Krugman believes the true inflation rate is possibly below 4%, half the September rate, due to cooling housing rental rates and slowing wage growth. 

"A quick and dirty calculation: core CPI inflation was 6 percent annualized over the past 3 months; about half of this was shelter, which rose at 8 percent. But if market shelter inflation is 3 or less, as Goldman thinks, 'true' core is ~4 percent," Krugman tweeted on Nov. 5.

He goes on to say that slowing wage growth might lead to "substantial disinflation," but the standard measures used to calculate the headline inflation rate have yet to be captured.

Ultimately, Krugman argues that core inflation, which excludes volatile food and energy prices, could be as low as 3%, not the 6.3% rate seen in the October CPI report.

That's Good for Stocks, Right?

If Krugman is correct, the data will take a while to show up in the monthly inflation numbers. Maybe even years. In the meantime, investors worry that the ongoing fight against inflation will continue to put downward pressure on stock prices, which generally don't like periods of higher interest rates.

However, given what happened to inflation in the 1970s and 1980s, the Fed has no appetite for letting it off the hook and pivoting to lower interest rates.

As The Globe and Mail reported in October, inflation in Canada went from near zero in 1970 to above 12% in 1975. It then fell to 4.9% in November 1976, only to bubble up to 13.3% in April 1981, before falling to below 3% in October 1984.

While these are Canadian inflation numbers, the data is from the Federal Reserve Bank of St. Louis. The inflation rates in the U.S. over these 14 years were very similar.

The only way the Fed will stop raising rates is when it is 100% confident that inflation is dead and buried. In the meantime, stocks will likely continue to find new lows.

On Nov. 7, UBS economists said they see the S&P 500 falling another 16% over the next nine months, at which point the Fed takes its foot off the pedal of interest rate hikes.

"For the U.S., we now expect near zero growth in both 2023 and 2024, and a recession to start in 2023," wrote UBS chief economist Arend Kapteyn in a note to clients.

According to UBS, if you buy between April and June 2023, you could achieve double-digit returns by the end of 2023. But of course, market timing only sometimes works. It's time in the market that wins the day more often than not.

UBS sees the federal funds rate cut to 1.25% by early 2024. If so, investors will come charging back into the market.

In the meantime, investors better hope Paul Krugman's wrong about the true inflation rate because if he's not, there will be a lot more carnage in the markets from future rate hikes that turned out to be unnecessary. 

In the 45 days between former UK Prime Minister Liz Truss being elected the new leader of the Conservative party and her subsequent resignation announcement, the FTSE 100 lost nearly 5% of its value. 

Year-to-date, the 100 largest companies by market cap on the London Stock Exchange are down nearly 6%. Most of the losses came in the fall due to the now-former Prime Minister’s disastrous mini-budget that provided tax cuts of 45 billion British Pounds ($52.3 billion) for the country’s wealthiest individuals. 

Recently, the UK markets have rallied on news that the other former Prime Minister, Boris Johnson, would not run to be head of the Conservative party and Prime Minister, putting Rishi Sunak in the job.  

The markets feel the former Goldman Sachs analyst is a better choice for the moment. 

Despite the gains, the FTSE 100 is still down nearly 6% over the past five years. This compares to a 49% gain for the S&P 500. In addition, according to Bloomberg Intelligence, the FTSE 100 is trading at 8.7x earnings, its lowest multiple since 2011. 

“It doesn’t just look cheap relative to its own history — it looks cheap relative to other markets too,” Bloomberg contributor John Stepek wrote on Oct. 24. 

“In terms of valuation, the FTSE 100 trades at a discount of around 20% compared to euro-area stocks (as measured by the Stoxx 600 index), and a whopping 45% compared to the S&P 500.”

So the question is: Should U.S. investors be looking to the UK for their next stocks to buy? 

Banks, builders healthcare, telecom look cheap

 Stepek provides four industries where investors might look for beaten-down stocks that will rally in the future: asset management, homebuilders, healthcare, and telecoms. 

However, as Stepek points out when stocks are cheap, they’re cheap for a reason and possibly could get even more affordable, so it makes sense to wait. 

In addition, a big problem with the FTSE 100, according to Russ Mould, Investment Director of UK investment platform AJ Bell, is the type of companies included in the index. 

“[The FTSE 100 earnings] are heavily reliant on the unforecastable (oils, mining, commodities), the indigestible (banks, life-and non-life insurers) and the interminably slow (telcos, utilities, tobacco),” the Financial Times reported Mould’s comments recently.

The Financial Times suggests that about 50% of the valuation discount for the FTSE 100 is due to poor sector composition. The other 50% valuation gap is attributed to the lengthy U.S. bull market and a higher cost of capital for UK companies due to Brexit. 

For many global investors, equities of any kind remain unattractive, so even if the premise that UK stocks are cheap is accurate, there’s little appetite for buying right now. 

For aggressive investors that want to take a chance on the UK market’s cheaper valuation, ETFs such as the Franklin FTSE United Kingdom ETF (FLGB) or the iShares MSCI United Kingdom ETF (EWU) might be the safer bet to make.  

Stocks closed higher for a second straight day as the latest batch of third-quarter earnings rolled in.

Goldman Sachs (GS, +2.3%) continued a trend seen in big bank earnings recently, reporting higher-than-expected top- and bottom-line results for its third quarter. Defense contractor Lockheed Martin (LMT) was another post-earnings winner, climbing 8.8% after Q3 profit came in higher than expected.

On the economic front, the National Association of Home Builders (NAHB) housing market index, which measures sentiment among homebuilders, fell to 38 in October from September's reading of 46. This came in well below economists' consensus forecast of 43 and helped alleviate some of the anxiety over the Fed's rate-hike plans. 

"The U.S. housing market is the most interest-sensitive sector of the economy and the housing market is reflecting the strong increase in interest rates engineered by the Federal Reserve," says Eugenio Alemán, chief economist at Raymond James. "Higher mortgage interest rates are doing what they are expected to do: reduce the pool of potential homebuyers and weaken the U.S. housing market."

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While the major market indexes finished well off their intraday highs, they still ended the day with solid gains. The Dow Jones Industrial Average closed up 1.1% at 30,523, the S&P 500 Index gained 1.1% to 3,719, and the Nasdaq Composite added 0.9% to 10,772.

Can the Rally Keep Going? The Charts Say Yes.

So how long will this rebound last? No one knows for certain, but there are several reasons to believe the rally could have legs. For one, the October-to-December period is a historically positive one for stocks. Since 1928, the S&P 500 has averaged gains of 0.5% in October, 0.8% in November and 1.4% in December, according to Yardeni Research. 

Plus, midterm election years tend to be bullish for the stock market – no matter who wins in Congress. What's more, technical analysis, or the study of charts, is hinting at more upside to come. "While economic conditions have not changed – and therefore do not warrant a shift in the cyclical outlook – technical conditions are pointing to a potential rebound," BCA Research says in a note to clients. Read on to see what else they and other technical strategists are saying about the stock market's recent run higher.

U.S. stocks rallied for a second straight day on Tuesday as solid quarterly results from Goldman Sachs and Lockheed Martin dampened worries of a dismal earnings season as it begins to pick up steam.

Goldman Sachs Group Inc gained 2.07% after reporting a smaller-than-expected drop in quarterly profit as a boost in net interest income cushioned the blow from a slowdown in investment banking.

The investment bank, which is reorganizing its business into three units, largely closed out earnings from major financial firms on a largely positive note, even though several lenders raised the loan loss provisions in anticipation of troubled times ahead.

Lockheed Martin shot up 8.49% after the weapons maker posted stronger-than-expected quarterly revenue and maintained its 2022 revenue view. The gains help lift the S&P industrials index 1.79%, the strongest performance of the 11 major sectors.

"This is why the rally happened yesterday and the rally is going on today is none of the six-month views that we get from the earnings reporting businesses is overly dour, and that kind of goes against every last person that is saying we are going to have a recession in six months," said Kim Forrest, chief investment officer at Bokeh Capital Partners in Pittsburgh.

"Companies are actually really very good, catastrophes and crises aside, at being able to forecast within their pipeline now."

Analysts now expect quarterly earnings growth for S&P 500 companies of just 2.8% from a year ago, much lower than an 11.1% increase expected at the start of July, according to Refinitiv data.

The Dow Jones Industrial Average rose 215.81 points, or 0.71%, to 30,401.63, the S&P 500 gained 21.19 points, or 0.58%, to 3,699.14 and the Nasdaq Composite added 19.23 points, or 0.18%, to 10,695.03.

Also providing a boost was a 4.28% climb in Salesforce Inc after a media report that activist investor Starboard Value LP has picked up stake in the enterprise software firm.

Signs the U.S. Federal Reserve's aggressive rate hike path may be starting to crimp the labor market were beginning to appear. Microsoft Corp, edged down 0.32% after a report it was laying off under 1,000 employees this week, becoming the latest U.S. technology company to cut jobs or slow hiring amid a global economic slowdown.

The Fed's path has left many investors worried it could tilt the economy into a recession by making a policy mistake and raising rates too much. Fed officials have largely been in sync in comments about the need for the central bank to tamp down inflation.

A report said ratings agency Fitch has slashed U.S. growth forecasts for this year and next and was set to warn that the Fed's interest rate hikes and inflation will drive the economy into a 1990-style recession.

But economic data on Tuesday indicated the manufacturing sector remains on reasonable footing despite the Fed's efforts, although they appear to be sharply weighing on the housing market.

Netflix lost 1.90% ahead of its earnings report after markets close, with all eyes on the video-streaming company's subscriber growth, which is seen falling in the third quarter.

Advancing issues outnumbered declining ones on the NYSE by a 2.31-to-1 ratio; on Nasdaq, a 1.68-to-1 ratio favored advancers.

The S&P 500 posted 3 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 61 new highs and 81 new lows.

(Reuters reporting by Chuck Mikolajczak; Editing by David Gregorio)

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Stocks kicked off the new week on a high note, with all three major indexes notching solid gains Monday.

Wall Street cheered headlines out of the U.K., where newly installed finance minister Jeremy Hunt walked back major tax cuts unveiled by his predecessor, Kwasi Kwarteng, in late September. The tax cuts sparked excessive volatility across financial markets at the time they were announced – including sending the pound tumbling to a record low against the dollar.

And while today's economic calendar was relatively light, investors parsed earnings from Bank of America (BAC, +6.1%) and Bank of New York Mellon (BK, +5.1%), which both reported higher-than-expected top- and bottom-line results – continuing a trend seen in last week's big bank earnings. 

At the close, the Dow was up 1.9% at 30,186, the S&P 500 was 2.7% higher at 3,678, and the Nasdaq had gained 3.4% to 10,676.

What Q3 Earnings Say About the Economy

 Today's corporate updates showed more silver linings in what's expected to be a brutal Q3 earnings season. While the earnings calendar only bulks up from here – with big bank Goldman Sachs (GS), pharmaceutical giant Johnson & Johnson (JNJ) and streaming giant Netflix (NFLX) among those reporting tomorrow – there have been signs of strength in a handful of names that have already reported. 

"While the pundits are mostly focused on what can go wrong this earnings season, there are several reasons to expect the numbers for this quarter to be decent," says Jeffrey Buchbinder, chief equity strategist at independent broker-dealer LPL Financial.  For one, "companies typically generate about three percentage points of upside, even in challenging profit environments, as they bring expectations down low enough to beat them."

Plus, economic activity likely picked up in Q3, which will be beneficial to companies, and "generating earnings growth in a tough economic environment is a little easier when inflation is the source of the weakness," Buchbinder adds. In other words, higher prices means more revenue. So what can Q3 earnings tell us about the economy as a whole? A few, like Domino's Pizza (DPZ) and Delta Air Lines (DAL) are offering hints.

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The stock market roared out of the gate Tuesday, with all three major market indexes up at least 1% in early action. However, the rebound attempt quickly ran out of steam, with stocks sliding into negative territory by lunchtime.

Comments from Chicago Fed President Charles Evans helped give stocks an initial lift. The central bank official told CNBC's "Squawk Box Europe" this morning that he is a "little nervous" that the Fed's aggressive rate-hike efforts are "not leaving much time to sort of look at each monthly release." 

However, markets began to ease back after a couple of "good news is bad news" economic reports. The Commerce Department said that new home sales were up 28.8% month-over-month in August. The report points to signs of continued strength in the economy, suggesting the Fed still has a lot of work to do to slow growth.

Additionally, the Conference Board's consumer confidence index hit a five-month high of 108 in September. "Stocks pared some gains after an impressive consumer confidence report suggested the Fed could remain aggressive a lot longer," says Edward Moya, senior market strategist at currency data provider OANDA. "The end to the Fed tightening cycle is in view, the question is how restrictive will rates get."

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The Dow Jones Industrial Average extended its slide into bear-market territory, shedding 0.4% to 29,134. The S&P 500 Index also ended in the red, down 0.2% at 3,647, while the Nasdaq Composite held on for a 0.3% gain to 10,829.

Other news in the stock market today:

• The small-cap Russell 2000 added 0.4% to 1,662.
• U.S. crude futures gained 2.3% to settle at $78.50 per barrel as Hurricane Ian shut down production across several Gulf of Mexico production platforms.
• Gold futures stabilized, adding 0.2% to finish at $1,633.40 an ounce.
• Bitcoin edged up 0.7% to $19,053.30. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
• Energy stocks rose alongside oil prices. Among the day's notable gainers were Exxon Mobil (XOM, +2.1%), Marathon Petroleum (MPC, +3.7%) and Shell (SHEL, +2.7%).
• Keurig Dr Pepper (KDP) fell 3.5% after Goldman Sachs analyst Bonnie Herzog downgraded the consumer staples stock to Neutral (Hold) from Buy. "KDP continues to execute well in a challenging environment, and we have been encouraged by the strong underlying momentum in both its coffee and packaged beverage businesses as well as its ongoing initiatives to expand/enhance its distribution capabilities," Herzog says. However, the analyst now sees "a more balanced risk/reward," as well as an increased risk to margins due to elevated commodity inflation.

The Best Bond Funds for Income Investors

Rising Treasury yields have kept investors on edge for much of September. The yields on the two-year and 10-year notes are set to end the month at their highest levels since 2007 and 2010, respectively. But while climbing bond yields have sparked volatility in the equities market, they have also created an opportunity for income-oriented investors.

"Now that interest rates have moved substantially higher, we believe opportunities in fixed income have improved and are looking to add back to certain areas within fixed income that may benefit," says Lawrence Gillum, fixed-income strategist at independent broker-dealer LPL Financial. Gillum adds that along with higher yields, the central bank's commitment to stave off "continuing inflationary pressure – even at the expense of an economic contraction" could have bonds acting like bonds again, and providing "the ballast for equities" within a diversified portfolio. 

Investors seeking out portfolio protection via the fixed-income market can take a look at these bond exchange-traded funds (ETFs), which cover a variety of strategies. Additionally, these top bond funds look attractive from both a value and yield perspective. Check them out.

The U.S. dollar is the strongest it’s been in decades, and it’s showing no signs of cooling off. Given the continuing focus by financial markets on the aggressive monetary policy tightening by the Federal Reserve, the dollar’s strength should continue against most foreign currencies at least until year-end. That has major implications for multinational companies, and for the investors who buy their stocks.

An easing of inflationary pressures and improving global growth conditions are likely needed to bring about a peak in the dollar, conditions that are unlikely to materialize anytime soon. Investors around the world have flocked to the dollar because it is a source of stability amid weak global economic conditions. The greenback has also benefited from the high commodity prices this year stoked by Russia’s war in Ukraine.

Nearly all currencies have fallen against the buck over the past several months. While currencies in emerging markets generally feel pressure when investors flock to the dollar, those of developed countries also have fallen this time. The ICE U.S. Dollar Index, which measures the dollar against a basket of currencies from major trading partners such as Japan, the U.K. and the eurozone, has mounted a steep climb this year. The index is up more than 13% in 2022.

The strong dollar will likely have an impact on earnings of many publicly traded companies. Several, including Microsoft (MSFT), IBM (IBM), Nike (NKE), Johnson & Johnson (JNJ) and Philip Morris (PM) have recently highlighted the surging dollar as a factor that weighed on revenues in their second quarter results. Goldman Sachs (GS) estimates that a 10% appreciation in the dollar would reduce earnings by companies in the S&P 500 by 2%-3%. Companies in the S&P 500 index generated 29% of sales outside of the US in 2021. Here’s a rundown of stocks that stand to gain or lose due to the dollar’s strength.

The major indexes opened Monday solidly higher amid a round of well-received bank earnings, but chipped away at these gains to eventually end lower.

Garnering the most attention from this morning's earnings calendar was Goldman Sachs (GS, +2.5%), which reported double-digit percentage declines in its top and bottom lines, though both figures beat analysts' consensus estimates. The blue-chip financial firm also said Q2 trading revenue soared 32% year-over-year to $6.5 billion – offsetting a 41% decline in investment banking revenue.

Also in focus today was the National Association of Home Builders (NAHB)/Wells Fargo housing market index – a measure of builder confidence – which fell to 55 in July from 67 in June, its seventh-straight decline and biggest month-over-month drop since April 2020.

"Most concerning, traffic of prospective buyers fell to the lowest since May 2020, suggesting that the housing market has more downside to go as interest rates trek higher and inflation chisels away consumer purchasing power," says Jeffrey Roach, chief economist for independent broker-dealer LPL Financial.

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A continued slowdown in the residential real estate market "hinges on the duration of historic inflationary pressures for homebuilders from high raw material prices and a tight labor market," Roach says.

After being up as much as 1.5% earlier, the Nasdaq Composite ended the day down 0.8% at 11,360. The Dow Jones Industrial Average and S&P 500 Index also erased early leads to close lower (-0.7% at 31,072; -0.8% at 3,830).

Other news in the stock market today:

• The small-cap Russell 2000 fell 0.3% to 1,738.
• U.S. crude futures jumped 5.1% to settle at $102.60 per barrel.
• Gold futures rose 0.4% to finish at $1,710.20 an ounce.
• Bitcoin climbed 2.2% to $21,600.70. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
• Bank of America (BAC, +0.03%) reported a 32% year-over-year decline in earnings to 73 cents per share in its second quarter, due in part to a $523 million credit-loss provision. On an adjusted basis, the bank recorded earnings of 78 cents per share. Revenue rose 5.6% to $22.8 billion, while net interest income jumped 22% to $12.4 billion. "We were positive on the net interest income, which was driven by higher net interest margin," says David Wagner, portfolio manager at investment firm Aptus Capital Advisors. "While trading and investment banking revenues appear a little light relative to peers that have reported already, positive year-over-year operating leverage (even including the regulatory charges) supports our belief that the advantages of scale will differentiate BAC in the medium-term."
• Energy stocks rallied alongside crude oil prices today. Among the big gainers were ConocoPhillips (COP, +2.6%), Devon Energy (DVN, +3.6%) and Marathon Oil (MRO, +3.5%).

What to Watch For This Earnings Season

The second-quarter earnings calendar really gets rolling this week. While financial stocks like Goldman have been the main focus so far, over the next several weeks, we'll begin to see how other sectors fared during a period that included inflation rising at its fastest pace in 40 years and the Federal Reserve initiating its most aggressive rate-hiking cycle in almost three decades.

Megan Horneman, chief investment officer for independent financial firm Verdence Capital Advisors, highlights several things investors should watch for this earnings season, including updates on the supply chain. "The global supply chain has been a hamper to earnings as materials are not available to make products to sell," she says. "What we will be watching closely is sentiment around the global supply chain and any more indication of companies that may have overstocked and face an inventory overhang."

Horneman adds that the impact of the foreign exchange markets on Q2 earnings will also be noteworthy, particularly as the U.S. dollar index climbed 6.5% over the three-month period. "Currency markets are an important factor to consider when analyzing earnings, especially for those multinational corporations," she says. "A strong U.S. dollar not only makes American goods less competitive, but when the foreign currency is converted back into U.S. dollars, it can serve as a drag on earnings."

Indeed, forex headwinds could be the "swing factor" for healthcare giant Johnson & Johnson's (JNJ) Q2 earnings report says BofA Global Research analyst Geoff Meacham. JNJ reports before tomorrow's open and is one of several companies whose quarterly earnings we're previewing, including Twitter (TWTR), which has been at the center of much drama over Elon Musk's aborted takeover attempt.

Karee Venema was long BAC as of this writing.

The first session of the holiday-shortened week was a wild one, as a deep Tuesday morning dip evolved into a severely split market featuring pockets of red and green alike.

On one side, you had big dips in economically sensitive sectors. Energy (-4.0%) fared the worst thanks to a drastic decline in U.S. crude oil futures, which plunged 8.2% to $99.50 – the commodity's lowest finish in more than two months.

"This move came on the back of an ever-increasing number of economic indicators (Goldman Sachs US Financial Conditions Index, Citi US Economic Surprise Index, ISM orders) now pointing to sustained weakening of financial conditions as well as Street expectations," says Michael Reinking, senior market strategist for the New York Stock Exchange.

Also weighing on oil was a strengthening U.S. dollar, which closed the session at a 19-year high. (Remember: Oil is priced in U.S. dollars, so a strong dollar will weigh on oil prices, and vice versa.) The aforementioned worries of weakness hampered other sectors, too, including materials (-2.0%) and industrials (-1.5%).

"Shifting to a more near-term view, with commodity prices coming a bit back down to reality, some investors may view this as a welcome sign that inflation is beginning to cool – the main driver of recent volatility," adds Chris Larkin, managing director of trading for E*Trade.

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However, other parts of the market – namely, those pinned to the ground by rising interest rates – came off the mat as recent weakness in Treasury yields continued.

The 10-year T-note yield fell as low as 2.78% on Tuesday, sending communication services (+2.4%) and consumer discretionary (+2.2%) stocks higher. Facebook parent Meta Platforms (META, +5.1%), Google parent Alphabet (GOOGL, +4.2%) and Amazon.com (AMZN, +3.6%) – all members of the "FAANGs" – were among the session's noteworthy winners.

That resulted in markedly divergent results among the major indexes, which all finished well off their morning lows. The Dow Jones Industrial Average, led lower by Chevron (CVX, -2.6%), dipped 0.4% to 30,967, while the S&P 500 finished with a tame 0.2% uptick to 3,831. The Nasdaq Composite, however, popped 1.8% to 11,322.

Other news in the stock market today:

• The small-cap Russell 2000 gained 0.8% to 1,741.
• Gold futures, also weighed down by a strong dollar, closed off 2.1% to $1,763.90 per ounce, marking their lowest settlement of 2022.
• Bitcoin strengthened as the day went on, recovering by 5.4% to $20,397.00. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)

Buy the Dip in Emerging Markets?

Inflationary pressures (and related stock-market pain) are hardly exclusive to investors in U.S. equities. For instance, the iShares MSCI Emerging Markets ETF (EEM) – one of the most popular funds holding emerging markets stocks – entered bear-market territory this year and is currently off 19% year-to-date.

Like with anything that's down, investors might put EMs on their buy-the-dip list. BofA Securities does warn that a comeback isn't necessarily imminent – but emerging markets won't be down forever.

"We stay bearish into the summer but see emerging long-term value. Don't turn bullish before central banks panic about recession more than inflation," say BofA's David Hauner and Claudio Irigoyen. But they add that "2023 is starting to come into focus: it might get better for EM. The EM-US growth differential is one of the more reliable top-down indicators. For 2023, our mid-year forecast update implies the best such number in a decade."

Thus, investors would do well to at least start building their EM wish lists.

But if you find individual names to be a bit too risky, emerging markets mutual funds allow you to enjoy some of this category's explosive upside while decreasing the chances that a single-stock blow-up will torpedo your portfolio. We look at five top emerging market funds.

The Wall Street roller coaster remains oiled up and operational as summer hits its stride, with stocks dipping down Wednesday amid a few worrisome signals.

U.S. crude oil futures gushed 2.3% higher, to $122.11 per barrel, after the Energy Information Administration said U.S. crude inventories dropped by 2 million barrels, and gasoline stocks dropped by 800,000 barrels, during the week ended June 3. That helped the energy sector finish ahead of its 10 other counterparts Wednesday, albeit with a mere 0.2% advance.

The market's overall weakness Wednesday could be chalked up to any number of things. Goldman Sachs says it believes Q4's year-over-year growth will slow to 1.3% this year, "driven in large part by a substantial fiscal drag and a negative impulse from tighter financial conditions."

Signs of slowing also are cropping up in what has hitherto been a screaming housing market, with the Mortgage Bankers Association reporting that mortgage application volume dropped 6.5% week-over-week to multidecade lows.

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"Weakness in both purchase and refinance applications pushed the market index down to its lowest level in 22 years," says Joel Kan, MBA's associate vice president of economic and industry forecasting.

And it's possible investors' attention is on the upcoming consumer price index (CPI) report, due out Friday morning, which could provide guidance on the Federal Reserve's direction.

"What's perplexing for investors may be the lack of clarity over the upper end of rate expectations so that they could factor in a price," says Kunal Sawhney, CEO of Australian research firm Kalkine Group. "It is presently unclear when the Fed would pause the rate hikes; unless, of course, we see definite evidence on the ground that inflation is easing. In this context, the CPI data for May … would be critical."

The real estate (-2.4%) and materials (-2.1%) sectors led the market lower Wednesday. The S&P 500 was the worst of the major indexes, down 1.1% to 4,115, followed by the Dow Jones Industrial Average (-0.8% to 32,910) and the Nasdaq Composite (-0.7% to 12,086).

Other news in the stock market today:

• The small-cap Russell 2000 retreated 1.5% to 1,891.
• Gold futures edged up 0.2% to settle at $1,856.50 an ounce.
• Bitcoin also took a step back, slipping 2.9% to $30,078.10. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
• Altria (MO) fell 8.4% after Morgan Stanley analyst Pamela Kaufman downgraded the consumer staples stock to Underweight from Equal Weight, the equivalents of Sell and Hold, respectively. The analyst says there are increasing headwinds facing the tobacco industry, namely the sharp rise in gas prices, slowing wage growth and consumer confidence hovering near a three-year low. MO also faces rising competition from Philip Morris's (PM, -2.6%) acquisition of Swiss tobacco maker Swedish Match.
• Wedbush analyst David Chiaverini initiated coverage on Affirm Holdings (AFRM, -4.2%) with an Underperform (Sell) rating and $15 price target, nearly 36% below the buy now, pay later (BNPL) stock's Wednesday's close at $23.33. There are several things to like about AFRM, the analyst says, including its value proposition to both consumers and investors, as well as its solid execution to drive growth and build merchant relationships. However, "we're concerned about Affirm's path to GAAP profitability, increasing competition in the BNPL space, industry forecasts calling for slowing e-commerce sales (which drive Affirm's gross merchandise volume, or GMV), and its ability to cover its cost of capital as funding costs increase," Chiaverini adds.

Thinking Income? Maybe Think Tech.

Do you invest with an eye toward income? If so, think about the makeup of your equity portfolio for a minute. What's carrying the load: real estate investment trusts (REITs), consumer staples, maybe utilities?

It's likely that few investors are thinking "technology stocks" right now, and that's understandable. Todd Rosenbluth, head of research for VettaFi, notes that the average yield on tech stocks in the S&P 500 Index was less than 0.8% in 2021, lagging far behind much richer yields available from the aforementioned sectors.

The flip side? They punch above their weight in dividend growth. Most of the tech dividend payers in the index are relatively new to delivering cash to shareholders – and newer payers often make bigger or more frequent hikes early on. Indeed, virtually all of the S&P 500's tech dividend stocks either raised their payouts or initiated dividend programs in 2021.

There are, however, a few standout dividend payers in the technology space that offer excellent yields at current prices. We examine seven of these tech stocks, which also boast growing earnings and ample free cash flows that will help them afford bigger dividends over time.

The potential for the U.S. to slip into recession was the topic du jour Monday as stocks kicked off the week with a wobbly, uneven session.

Over the weekend, former Goldman Sachs chief Lloyd Blankfein told CBS' Face the Nation that recession was "a very, very high risk factor." That opinion was met by a number of other calls Monday morning.

Wells Fargo Investment Institute, for instance, says "our conviction is that the chances of an outright recession in 2022 remain low" but believes odds are growing that 2023 could see an economic contraction. UBS strategists say the chances are different depending on where you look – their global economists say "hard data" points to a sub-1% chance of recession over the next 12 months, but the yield curve implies 32% odds.

"There's no crystal ball to predict what's next, but historical trends can come into play here. With the [S&P 500] closing 15% below its weekly record, there's only been two times in the past 60-plus years that the market didn't fall into bear territory after a similar drop," adds Chris Larkin, Managing Director of Trading at E*Trade. "This doesn't mean it's bound to happen, but there is room for potential downside."

Larkin says to keep an eye on major retail earnings this week – which will kick off in earnest with Walmart's Tuesday report – to get a pulse check on the American consumer.

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Monday itself was a fairly quiet affair. Exxon Mobil (XOM, +2.4%) and Chevron (CVX, +3.1%) were among a number of plays from the energy sector (+2.7%) that popped after U.S. crude oil futures jumped another 3.4% to $114.20 per barrel.

Twitter (TWTR, -8.2%) shares dropped after Tesla (TSLA, -5.9%) CEO Elon Musk spent the weekend questioning how much of Twitter's traffic comes from bots. Wedbush analyst Daniel Ives said the move feels more like a "'dog ate the homework' excuse to bail on the Twitter deal or talk down a lower price." TWTR stock has now given up all its gains since Musk announced his stake in the social platform.

The major indexes finished an up-and-down session with mostly weak results. The Dow Jones Industrial Average managed to eke out a marginal gain to 32,223, but the S&P 500 declined 0.4% to 4,008, while the Nasdaq Composite retreated 1.2% to 11,662.

Also worth noting: Warren Buffett's Berkshire Hathaway will file its quarterly Form 13F soon. Check back here tonight as we examine what Buffett has been buying and selling.

Other news in the stock market today:

• The small-cap Russell 2000 closed out the session with a 0.5% dip to 1,783.
• Gold futures gained 0.3% to settle at $1,814 an ounce.
• Bitcoin was off 1.6% to $29,551.92 (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
• JetBlue Airways (JBLU, -6.1%) ramped up its hostile takeover attempt of Spirit Airlines (SAVE, +13.5%) on Monday, urging SAVE shareholders to vote against a buyout offer from fellow low-cost air carrier Frontier Group Holdings (ULCC, +5.9%). JBLU last month offered to buy Spirit Airlines for $33 per share – a premium to the $21.50 per share ULCC offered in February – but SAVE's board of directors rejected the bid citing concerns over regulatory approval. JBLU followed up in early May with an "enhanced superior proposal," including paying a $200 million, or $1.80 per SAVE share, reverse break-up fee should regulators block the deal.
• Warby Parker (WRBY) fell 5.3% after the eyeglass maker reported a loss of 30 cents per share in its first quarter. This was much wider than the per-share loss of 3 cents the company reported in the year-ago period and missed the consensus estimate for breakeven on a per-share basis. Revenue of $153.2 million also fell short of analysts' expectations. WRBY did maintain its full-year revenue guidance of $650 million to $660 million. "We remain cautiously optimistic on shares as WRBY continues to show ability to grow the top line, open new stores, and is recession resistant as a lower cost option for non-discretionary spend," says CFRA Research analyst Zachary Warring (Buy). "We see the company leveraging SG&A to become profitable in the second half of 2022."

Check Out Europe's Dividend Royalty

If you're seeking out more stable opportunities amid an uncertain U.S. market … well, the rest of the world is admittedly looking pretty shaky, too. But that doesn't mean there aren't a few morsels worth a nibble.

BCA Research notes that while there's negative news around the globe, "European benchmarks already discount a significant portion of the negative news." And looking ahead, inflation there is expected to peak over the summer "as the commodity impulse is decelerating" – that should help stagflation fears recede and help European shares.

Graham Secker, Morgan Stanley's chief European and U.K. equity strategist, chimes in that his firm remains "overweight [European] stocks offering a high and secure dividend yield."

We've previously highlighted our favorite European dividend stocks, which on the whole tend to produce higher yields than their U.S. counterparts.

But we'd also like to shine the spotlight on Europe's twist on an American income club: the Dividend Aristocrats. The S&P Europe 350 Dividend Aristocrats have somewhat different qualifications than their U.S. brethren, but in general, they've proven their ability to provide stable and growing dividends over time.

Read on as we look at the European Dividend Aristocrats.

Kiplinger frequently talks about the S&P 500 Dividend Aristocrats – America's dividend-paying champions, with long track records of uninterrupted dividend growth. But today, we're going to dedicate some time to a lesser-known but still renowned group of dividend royalty: the European Dividend Aristocrats.

The S&P Europe 350 Dividend Aristocrats, to be specific, are a group of 40 European blue chip stocks that have a proven ability to raise their payouts year after year. And while they're similar to America's Aristocrats in that they reflect a dividend track record, the index has one important difference.

Namely, the S&P Europe 350 Dividend Aristocrats only need 10 years of uninterrupted dividend growth to qualify for inclusion. That's admittedly much less than the S&P 500 Dividend Aristocrats, which require a full quarter-century of unfettered annual payout improvements.

Also noteworthy is that while American dividend payers typically make their cash distributions quarterly, European dividend stocks tend to pay only once or twice a year. And in some cases, those dividends are split unevenly between an interim midyear payment and final end-of-year distribution.

So … why might investors sniff out Europe's dividend royalty when U.S. Aristocrats are required to have a much more impressive track record?

For one, yield. European dividend stocks have for a long time yielded more on average than their U.S. counterparts. According to S&P Dow Jones Indices, the European Dividend Aristocrats' index had an indicated dividend yield of 2.9% – a decent clip higher than the U.S. Aristocrats' 2.5%.

There's also the value proposition.

"It wouldn't surprise [us] if European stocks did a bit better this year," Jason Trennert, chief investment strategist at Strategas, and Ross Mayfield, investment strategy analyst at Baird Private Wealth Management, said earlier this year. "Part of that is just the massive valuation differences between their markets vs ours, but [we would] also note that their indexes tend to be more value-oriented, and we currently have a bias toward value over growth."

Let's take a deeper dive into 10 European Dividend Aristocrats. The companies featured here stand out among European dividend stocks for their rich yields and modest valuations.

Data is as of March 22, unless otherwise indicated. The S&P Europe 350 Dividend Aristocrats listed below are the top 10 constituents of the index as of Jan. 31. Companies are listed by the number of years they've consecutively raised their dividends, from lowest to highest. The index of Dividend Aristocrats is maintained by S&P Dow Jones Indices. Dividend history based on company information and S&P data.

United Utilities Group 

• Dividend yield: 4.2%
• Consecutive annual dividend increases: 10 

United Utilities Group (UUGRY, $25.50) provides water and wastewater services to more than 3 million homes and businesses in England's northwest, which includes Greater Manchester, Merseyside, Cheshire and Cumbria, among other areas.

Utility stocks are pretty much the same world-round: You can rely on them for slow but steady growth over time. Not to mention, they're dependable dividend stocks. United Utilities has been paying its shareholders since 1990, and its current dividend-growth streak sits at a decade. Its most recent payout hike was a 1% year-over-year bump across its interim and final payouts in 2022.

Would-be investors in the European Dividend Aristocrats should know that the company is going through a leadership transition. UUGRY announced last year that CEO Steve Mogford would step down in early 2023, and this year, United Utilities announced his departure would come on March 31. Louise Beardmore, formerly the customer service and people director, has become UUGRY's CEO designate.

Sika 

• Dividend yield: 2.3%
• Consecutive annual dividend increases: 11

Sika AG (SXYAY, $27.93) is a Swiss multinational specialty chemicals company that develops systems and products for the building and motor vehicle industries. So, for example, its automotive-focused products include exterior adhesives, paint shop sealants and body shop structural inserts. And its building products go into the production of windows, doors, flooring, facades and more.

A potential growth opportunity for Sika is the decarbonization of those two industries. For instance, in 2021, the company announced it had developed concrete admixtures using Limestone Calcined Clay Cement (LC3) technology, which lowers CO2 emissions. And its crash-resistant SikaPower structural adhesives help reduce not just car weight, but welding points in auto production, lowering energy input.

CFRA analyst Adrian Ng became more positive on the name in February: "We raise our recommendation on Sika to Buy from Hold with a higher target price of CHF315 (CHF270) … on the group's fast improving margins and better-than-expected activity in the construction industry," he wrote. "With strong results through 2021 and 2022, we turn more positive on Sika given the better-than-expected construction activity around the world going into 2023."

Sika is a member of the S&P Europe 350 Dividend Aristocrats by merit of 11 consecutive annual dividend increases. That includes a nice 10% upgrade to the payout in 2022, to 3.2 Swiss francs per share.

Smurfit Kappa Group 

• Dividend yield: 3.7%
• Consecutive annual dividend increases: 11

Ireland-based Smurfit Kappa Group (SMFKY, $36.48) is one of the world's largest paper packaging companies. Its list of products ranges from basic cardboard boxes and beer bottle carriers to confectionary cushion pads and adhesive and sealant cartridges.

The company enjoyed a banner 2022 that saw revenues jump 27% to 12.8 billion euros and earnings before interest, taxes, depreciation and amortization (EBITDA) soar 38% to 2.35 million euros. This all was despite slightly lower box volumes, which the group somewhat chalked up to "the partial reversal of the unsustainably high demand levels seen throughout the pandemic period."

That allowed Smurfit to approve a 12% YoY increase in the final 2022 dividend, to 107.6 euro cents per share. (Note: The interim dividend of 31.6 euro cents per share was 8% better than 2022's interim payout.) That raise marked 11 straight years of higher cash distributions for shareholders.

DSV

• Dividend yield: 1.0%
• Consecutive annual dividend increases: 12 

Danish transport and logistics company DSV (DSDVY, $92.11) gets things from A to B in just about every conceivable way. The company's solutions include any type of road transport, from local to international; rail freight; sea freight; air freight; and courier services. It even has tailored solutions for "oversized or complex cargo," boasting that it once transported a 35-meter transition piece for the Sheringham Shoal wind farm off the east coast of England.

On top of that, DSV also tackles logistics solutions such as warehousing and fulfillment.

2022 was a big year for DSV, which finalized the integration of Agility's Global Integrated Logistics business (GIL). This helped drive growth in gross profits (35%) and EBIT (47%) for its Solutions division. Overall, EBIT grew by 48% year-over-year in 2022.

As a result, the board approved a big 18% jump in the dividend, to 6.5 Danish krones per share – the firm's 12th consecutive payout increase, keeping up DSV's membership in the European Dividend Aristocrats.

Geberit

• Dividend yield: 2.4%
• Consecutive annual dividend increases: 12 

Sanitary technology group Geberit (GBERY, $54.98) deals in one of the least glamorous rooms in the home.

Geberit develops systems for wall-hung toilets, urinals and bidets, floor-mounted toilets, sink traps, tub fillers, flush plates, remote flush buttons and more. (And even urinals have reached the 21st century – the Geberit Control app allows you to program, monitor and maintain the company's Type 10 and Type 50 urinal plates!)

Unlike a few of the other European Dividend Aristocrats on this list, Geberit didn't enjoy a boffo 2022; profits were off slightly thanks to high raw material and energy prices, and EBITDA was down 15% year-over-year. Still, the company approved its 12th consecutive dividend increase – a modest 1% improvement to 12.6 Swiss francs per share.

Ashtead Group 

• Dividend yield: 1.3%
• Consecutive annual dividend increases: 15

Ashtead Group PLC (ASHTY, $251.05) is another decidedly unglamorous company, renting out construction and industrial equipment in the U.S., U.K. and Canada under the Sunbelt Rentals brand.

Even if you haven't heard of it, it's a massive player. With 1,056 stores in 48 states, it's the second-largest equipment rental company in North America. It also has another 113 stores in Canada, giving it an 8% market share there. And its 184-store U.K. division is the top dog there.

Ashtead's fortunes have turned brighter of late, prompting an upgrade by CFRA. "In the first nine months of FY23, AHT added 120 locations in North America. Management has upgraded FY23 guidance to 21%-23% rental revenue growth (from 18%-21%) and capex guidance to $3.5-$3.7 billion (from $3.3- $3.6 billion) but maintain free cash flow at around $300 million," says analyst Alan Lim Seong Chung. "AHT is now a Buy as we expect strong revenue growth of >20% in FY23 to more than offset the marginal EBITDA margin decline."

ASHTY provided a jumbo-sized dividend increase last year, with its 57.28-pence full-year dividend coming in a whopping 64% better than the prior-year's payout. That also marked 15 consecutive years of uninterrupted distribution growth for the European Dividend Aristocrat.

Fresenius Medical Care

• Dividend yield: 3.5%
• Consecutive annual dividend increases: 25 

Were Fresenius Medical Care (FMS, $20.06) a member of the S&P 500, it would be eligible for U.S. Dividend Aristocracy given its quarter-century of annual dividend growth.

Germany-based Fresenius Medical Care is the world's top provider of products and services for people with renal diseases (read: kidney ailments). The company boasts some 345,000 patients across its 4,100-plus dialysis clinics in roughly 150 countries.

Truist analyst David MacDonald recently weighed in on an improving environment for the stock:

"FMS has a number of strategic initiatives in place to help streamline the business, improve margins and increase returns," he says. He maintains a Hold rating on the stock, but he notes that "while the environment remains difficult and execution is key, we have raised our target to $22 (vs. prior $17) to reflect some improvement in headwinds and announced initiatives, which should aid performance."

The company's 25th consecutive dividend was OK'd in 2022 – an admittedly token increase of less than 1% to 1.35 euros per share. Still, FMS generates plenty of income, doling out a large 3%-plus yield that's roughly two times what the S&P 500 offers.

Novo Nordisk 

• Dividend yield: 1.9%
• Consecutive annual dividend increases: 26 

For Americans, Novo Nordisk (NVO, $147.29) might be among the most recognized of the European Dividend Aristocrats. It boasts numerous diabetes medicines (including more than a dozen different insulins), as well as treatments for hemophilia, growth disorders and obesity. Novo Nordisk also offers several hormone treatment therapies.

One of Novo's most potent drivers is Wegovy – an obesity treatment competing with the likes of Eli Lilly's (LLY) Mounjaro. "While Mounjaro continues to grow slowly, Novo's Wegovy has seen rapid uptake over the past two weeks, increasing 15.1% this week and 7.2% the previous," BMO Capital Markets analyst Evan David Seigerman recently noted. Last year, Novo doubled its 2025 sales target for obesity medicines in part because of strong optimism in Wegovy.

Healthcare stocks like Novo are much like utilities and consumer staples in that their products are always in demand, no matter the economic environment. That helps them pay steady and rising dividends – and Novo is no exception. The company has delivered 26 consecutive annual dividend increases so far. And during its Q4 2022 earnings call, the company said that at its March 23 annual general meeting, it will propose a final dividend of 8.15 kroner for a total 2022 dividend of 12.44 kroner – a 19% year-over-year increase. That would mark NVO's 27th year of higher payouts.

Fresenius SE

• Dividend yield: 3.7%
• Consecutive annual dividend increases: 29

If Fresenius SE (FSNUY, $6.52) sounds a little familiar … well, it should. It bears the same name as its previously mentioned division: Fresenius Medical Care.

Fresenius owns a roughly 32% stake in FMC. And, as of right now, FMC is considered one of Fresenius's subsidiaries – but the company plans to change that within a few months, deconsolidating FMC into a German stock corporation. 

There'll be plenty of company left, though. Fresenius's other divisions includes Fresenius Helios, Germany's largest hospital operator; Fresenius Kabi, which supplies drugs, medical devices and clinical nutrition products; and Fresenius Vamed, a healthcare facility manager.

Like many other European dividend stocks, Fresenius SE tries to link its dividend to its profits, broadly maintaining a payout ratio of 20% to 25%. Last year, the company approved a 5% hike to the payout, to 92 euro cents per share – putting it one year away from three decades' worth of consecutive dividend hikes. It also started offering a scrip dividend, which allows investors to receive dividends in the form of new shares.

SAP 

• Dividend yield: 1.7%
• Consecutive annual dividend increases: 30

Another of the European Dividend Aristocrats with some brand awareness in the states is German multinational software company SAP (SAP, $123.48).

SAP's solutions span financial management, business technology, customer relationship management, enterprise resource planning, supply chain management and more. And SAP is everywhere – the firm notes its customers include 99 of the 100 largest companies in the world and generate 87% of total global commerce ($46 trillion).

The tech stock has a decent bull camp among the analyst crowd, though Argus Research's Joseph Bonner (Hold) offers up a warning.

"As SAP moves past the fallout on its business from the Russia-Ukraine war, it continues to confront a shaky macroeconomic environment leading to hesitant technology customers," he says. "SAP has set ambitious targets over the next few years even as the business environment remains uncertain."

Regardless, SAP is one of the best dividend growth stocks and its payout should continue to grow. Its supervisory and executive boards have recommended a 5% increase to the dividend, to 2.05 euros per share. Shareholders will have their say during the annual meeting on May 11.

Stocks wobbled their way to a second consecutive session of gains Tuesday as investors looked ahead to tomorrow's pivotal Federal Reserve announcement.

Not that Tuesday was entirely without its own developments.

U.S. job openings unexpectedly increased in March, by 205,000 to a record 11.55 million, though 4.5 million U.S. workers quit the labor force to widen the labor gap to 5.6 million workers – also a new high.

"This increased tightness suggests that strong wage growth will persist until improvements in labor supply and normalization of job openings bring the labor market back into balance," says a Goldman Sachs economic research team. Also, March factory orders improved by a better-than-expected 2.2%.

The first-quarter earnings calendar kept on churning, too.

Pfizer (PFE, +2.0%) lowered its full-year earnings forecasts, but Wall Street nonetheless reacted positively to a solid Q1 report. Strong sales of both its COVID-19 vaccine and oral antiviral helped the Big Pharma outfit to solid top- and bottom-line beats.

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Clorox (CLX, +3.0%) also beat Street estimates, though the company also announced it would continue raising prices after profit margins took a sharp hit in its most recent three-month period. It also lowered its full-year earnings forecast for the second consecutive quarter.

All that was enough to help the broader markets to another small up day. The S&P 500 (+0.5% to 4,175) led the way, with the Dow (+0.2% to 33,128) and Nasdaq (+0.2% to 12,563) also producing modest gains.

It's also a peculiar lead-up into tomorrow's Federal Open Market Committee policy announcement, where Kiplinger (and just about everyone else) expects the Fed to declare a 50-basis-point increase to its benchmark interest rate. Much of the market's recent issues have been tied to rate jitters, though it could be that the market has finally priced in the central bank's expected moves.

"We may very well have seen 'peak hawkishness,' meaning that the market's expectations for Fed policy could stabilize or moderate somewhat," says Lauren Goodwin, economist and portfolio strategist at New York Life Investments. Though she adds "it's too early to be sure that 'peak hawkishness' has passed."

Other news in the stock market today:

• The small-cap Russell 2000 jumped 0.9% to 1,898.
• U.S. crude oil futures fell 2.6% to settle at $102.41 per barrel.
• Gold futures gained 0.4% to end at $1,870.60 an ounce.
• Bitcoin didn't partake in Tuesday's recovery, dropping 2.2% to $37,701.91. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
• Carvana (CVNA) slid 5.2% after Wells Fargo analyst Zachary Fadem downgraded the used car retailer to Equalweight from Overweight, the equivalents of Hold and Buy, respectively. "Recent evidence suggests that macro headwinds are building, access to capital is dwindling, and appetite for high-growth, free cash flow-negative companies is becoming increasingly scarce," Fadem says. The analyst also downgraded Vroom (VRM, -4.3%) and Shift Technologies (SFT, -5.0%).
• Nutrien (NTR) climbed 6.5% after the fertilizer firm reported higher-than-expected adjusted first-quarter earnings of $2.70 per share. The company also said it raised its full-year forecast as prices for key crops like corn, soybean and wheat are up 50% to 90% above their 10-year average. "We think NTR's retail segment will continue to experience strong top-line growth across most of its products, given solid demand and price increases," says CFRA Research analyst Richard Wolfe (Hold). "NTR's Q1 results and guidance capture the benefits of being a crop input provider amid strong agriculture fundamentals and investors may view this as a safe haven in the inflationary environment." Other materials stocks like Mosaic (MOS, +8.7%) and CF Industries (CF, +4.4%) posted solid gains today, too.

Let's Go, IPOs! Let's Go!

A return to market stability, even if for a short while, would be welcome news to two Wall Street groups: investment bankers, and retail investors needing to scratch an itch for "something new."

A downturn in equities and high volatility have put the pinch on initial public offerings (IPOs), in which privately held companies list on the public markets. According to IPO-focused registered investment adviser Renaissance Capital, just 26 U.S. initial public offerings have priced so far in 2022 – down a little more than 80% from the same date last year.

But it's possible this week could help kick-start some IPO activity. In just a couple of days, consumer eye care name Bausch + Lomb will hit the public markets in a spinoff from Bausch Health Companies (BHC). A warm reception to this offering – and no nasty surprises from the Fed – could help coax a few more anticipated offerings on the market, such as Steinway, which recently announced its plans to list on the New York Stock Exchange.

Investors curious about which new stocks could be hitting the markets this year need look no farther than our list of highly anticipated potential offerings.

Stocks fell across the board at the holiday-shortened trading week's conclusion as mixed bank earnings and cloudy economic data dampened bulls' enthusiasm.

The Commerce Department on Thursday reported that while retail sales did indeed grow for the third consecutive month, inflation clearly took a bite. March's retail sales were up 0.5% month-over-month, a slowdown from February's upwardly revised 0.8% growth and lower than expectations for 0.6% expansion.

"There's no doubt rising energy and gas prices are starting to take a toll on household budgets," says Peter Essele, head of portfolio management for Commonwealth Financial Network. "March's report could be an early sign that consumers are starting to put away their wallets as prices for many goods soar across the board."

Also Thursday, the Labor Department said initial jobless claims for the week ending April 9 climbed a bit from the prior week, to 185,000 from 167,000 (revised), which was well more than the 170,000 expected.

Meanwhile, the first-quarter earnings season continued its debut with a mixed slate of reports from the nation's largest financial-sector firms.

Wells Fargo (WFC, -4.5%) stumbled hard as a decline in mortgage lending caused its Q1 revenues to come up short of Wall Street's mark; profits were better than expected but still were off 21% year-over-year.

Morgan Stanley's (MS, +0.8%) earnings were off 8%, but the stock was slightly in the green as a blowout quarter for its trading desks fueled easy top- and bottom-line beats. Similar success in Goldman Sachs (GS, -0.1%) and Citigroup's (C, +1.6%) trading divisions helped them easily hurdle earnings expectations, though both suffered 40%-plus declines in profits.

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And super-regional bank U.S. Bancorp (USB, +4.2%) was one of the sector's top performers after besting Q1 estimates, though here too, earnings were off from year-ago levels.

"This looks like a case where the banks underpromised and overdelivered as a way of putting lipstick on a very unattractive quarter," says Anthony Denier, CEO of trading platform Webull. "Overall earnings were terrible, but because they led analysts to believe their earnings would be worse, investors were happy."

Even Twitter (TWTR, -1.7%) managed to fall despite explosive M&A news. Just more than a week after it was reported that Tesla (TSLA, -3.7%) CEO Elon Musk had built up a 9%-plus stake in the social media platform, a new filing revealed that Musk is trying to buy Twitter outright for $54.20 per share.

The Nasdaq Composite took the worst brunt, off 2.1% to 13,351, good for a 2.6% weekly decline. The S&P 500 (-1.2% to 4,392) was down 2.2% for the week, and the Dow Jones Industrial Average's modest 0.3% dip to 34,451 cemented a 0.8% weekly loss.

And a quick reminder: Tomorrow (Good Friday) is a stock market holiday.

Other news in the stock market today:

• The small-cap Russell 2000 shed another 1% to 2,004, putting the index ahead by 0.5% for the week.
• U.S. crude oil futures jumped 2.6% to finish at $106.95 per barrel.
• Gold futures snapped their five-day winning streak, slipping 0.5% to settle at $1,974.90 an ounce.
• Bitcoin dropped back below the $40,000 mark, declining 3.1% to $39,782.41. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.
• Susquehanna Financial Group analyst Mehdi Hosseini downgraded Seagate Technology (STX, -3.2%) to Negative (Sell), saying quarterly cloud spending may peak in the second half of this year. This will likely be followed by relatively weaker spend trends into 2023, the analyst adds. While some of this is already priced, Hosseini argues "the extent of deceleration in cloud capex spend by year-end 2022 and into 2023, and its impact, is still not dialed into expectations and certainly not in the current consensus.. The analyst also downgraded fellow tech stock Western Digital (WDC, -3.2%), to Neutral (Hold).
• Nike (NKE) was the best Dow Jones stock today, gaining 4.7% after UBS Global Research analyst Jay Sole (Buy) said he was "very bullish" on the blue chip. "Nike will be a long-term outperformer, in our view," Sole says. "The company's investments in product innovation, supply chain speed, and digital are unlocking what is likely a multiyear period of above average growth. We forecast a 16% four-year earnings per share compound annual growth rate."

How Do You Fight Off Rising Prices? With Pricing Power!

Earlier this week, consumer and producer price reports alike showed that U.S. inflation is still in a full-blown sprint. That has Wall Street strategists continuing to look for stocks that can stave off inflation.

UBS's analyst team has just taken a look into pricing power, a company's ability to raise prices without significantly reducing demand.

"With inflation pressures surging, pricing power relative to cost exposures will be a key theme and source of alpha for global equity markets," says UBS's team. "Historically, when the U.S. two-year inflation breakeven has been above 2.5%, companies with strong pricing power have outperformed their weak counterparts by nearly 14% on average over the next 12 months."

UBS goes on to highlight a number of U.S. and international stocks that boast strong pricing power – as well as some names that come up short and could struggle as long as inflation remains hot. Read on as we explain more about this tactic for tackling inflation and look at UBS's winners and losers.

Stocks festooned themselves in green for St. Patrick's Day after a slew of economic data releases backed up Federal Reserve Chair Jerome Powell's recent observation that "this is a strong economy."

Initial unemployment filings for the week ended March 12 dipped to 214,000 – well below estimates for 220,000 and the lowest number of claims since the start of the year. Industrial production slowed in February but still improved 0.5% month-over-month, in line with expectations, while last month's housing starts exceeded economists' estimates by expanding at a brisk 6.8% month-over-month.

Oil, which recently fell into bear-market status, also got up off the floor, with U.S. crude oil futures up 8.4% to $102.98 per barrel – a rebound "consistent with our view that the selloff back to pre-Ukraine levels had overshot fundamentals," say Goldman Sachs commodity research analysts.

That helped energy stocks (+3.4%) – led by the likes of Devon Energy (DVN, +9.7%) and Occidental Petroleum (OXY, +9.5%) – spearhead Thursday's broad-market gains, though all 11 S&P 500 sectors closed higher. The major indexes largely traded in lockstep; the Dow Jones Industrial Average finished up 1.2% to 34,480, the S&P 500 improved 1.2% to 4,411, and the Nasdaq Composite climbed 1.3% to 13,614.

The green finish was par for the course.

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"We'd never suggest investing in this, but St. Patrick's Day is one of the 'most green' days of the year for stocks," says Ryan Detrick, chief market strategist for LPL Financial. "The S&P 500 is up 0.37% on average, making it one of the best days of the year."

Other news in the stock market today:

• The small-cap Russell 2000 jumped 1.7% to 2,065.
• Gold futures gained 1.8% to settle at $1,943.20 an ounce.
• Bitcoin edged 0.1% higher to $40,905.66. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
• Dollar General (DG) jumped 4.5% after the discount retailer reported earnings. While DG brought in lower-than-expected revenue of $8.65 billion in its fourth quarter, adjusted earnings of $2.57 per share matched the consensus estimate and the company hiked its quartelry dividend by 31%. Dollar General also said it expects a "challenging first quarter," but is optimistic about its full-year results. "We think DG is well positioned heading into next year due to rising inflation concerns among consumers (about 20% of DG's product assortment is $1 or less)," says CFRA Research analyst Arun Sundaram (Hold). "DG is also accelerating its higher-margin pOpshelf concept, expecting to triple its count next year and have 1,000 locations by FY 25. These new locations will be incremental with its annual Dollar General store openings. We think wage growth, particularly among low-income consumers, will help improve store traffic trends next year and help offset the impact of waning Covid-19 relief."
• Signet Jewelers (SIG) was another post-earnings winner, ending the day up 7.0%. The jewelry retailer reported fourth-quarter earnings of $5.01 per share on $2.8 billion in revenue, more than analysts were expecting. "SIG continues to leverage fixed costs as it continues to grow through acquisitions, as the recently closed acquisition of Diamonds Direct," writes CFRA Research analyst Zachary Warring (Hold). "We do not see this trend changing anytime soon as management continues to look for opportunistic acquisitions."

AI Weighs In on Stocks

Investors have an understandable fascination with skilled stock pickers.

Whether it's Warren Buffett or other billionaires such as Ray Dalio or Daniel Loeb, people want to see what successful investors are buying and selling so they can try to replicate some of their success. (And even when they're not doling out stock picks, these gurus can still provide valuable nuggets of investing wisdom.)

Robot stock pickers are a harder sell – their track records don't go back nearly as far, and they're not exactly relatable – but a few still merit our attention. The analytics platform from Daneflin, which harnesses the power of big data technology and machine learning, is one of them.

This artificial intelligence (AI) system analyzes 900 fundamental, technical and sentiment data points per day for 1,000 U.S.-listed shares and 600 Europe-listed stocks, then generates several stock picks that it views as highly likely to outperform the market over the next 30 to 90 sessions.

In the year-plus that Kiplinger has observed Danelfin's system, its performance has justified continued watch, and that's still the case in 2022 – while the market has dropped nearly 10% between mid-January and mid-March, its top 10 AI-powered selections were off just a fraction of a percent.

So, what does this robot brain say investors should be buying now? Read on as we outline Danelfin's latest high-scoring stocks to watch.

A lot of money continues to flow into hedge funds and other billionaire money managers – even as those hedge funds underperform and sprint to shrink their positions.

Consider this: The Goldman Sachs Hedge Industry VIP ETF (GVIP, $73.98) – which tracks the performance of an index composed of roughly 50 U.S.-listed stocks that appear in the top 10 holdings of prominent hedge funds – is in a bear market for 2022, off 23% year-to-date. Actual hedge-fund performance has been more mixed, with the Eurekahedge Hedge Fund Index outperforming the market in January and February but falling behind in March.

Investors, however, are happy to keep throwing money at billionaire investors. According to data provider HFR, hedge funds enjoyed $19.8 billion in net inflows during the first quarter of 2022. That’s the highest amount since Q2 2015.

However, hedge funds largely sat on that money during the first quarter of 2022. According to WhaleWisdom.com, first-quarter Form 13F filings (required quarterly reports of holdings by large institutional investors) showed that investors sold almost three times as many shares as they bought – an indication that investor conviction was heading lower.

Consider this from Bloomberg:

"'A plummeting equity market and the even worse performance of the most popular long positions have led to the worst start of a year on record for hedge fund returns,' [Goldman Sachs] strategists led by Ben Snider wrote in a note on Friday. 'As a result of these struggles, in recent months hedge funds have accelerated the reduction in leverage and rotation away from growth stocks they began several quarters ago,'" Bloomberg reported on May 23.

Studying which stocks asset managers are taking their capital out of is an interesting exercise for many retail investors. That's largely because of the "why." In some cases, these billionaire investors are selling to take profits. In other situations, they could be rotating assets into more appropriate investments based on the current economic environment.

Here are 20 stocks the billionaire set sold off over the past few months. Every quarter, we look at 13F filings from institutional investors to discover not only some of the billionaire set's favorite stock picks – but also which investments they're souring on.

Data is as of June 6. Stake values and portfolio weights are as of March 31. Data is courtesy of S&P Global Market Intelligence, YCharts, WhaleWisdom.com, Forbes and regulatory filings made with the Securities and Exchange Commission, unless otherwise noted.

• Market value: $468.1 billion
• Billionaire investor: Jennison Associates
• Shares sold: 7,037,626 (25%)

New York-based hedge fund Jennison Associates sold 25% of its stake in Nvidia (NVDA, $187.86) in the first quarter, reducing its weight from 5.14% to 4.12%. However, Jennison still finished the quarter owning 20.5 million shares of NVDA, which makes it the fifth largest position in its portfolio.

Jennison first acquired Nvidia shares in Q1 2016. According to WhaleWisdom.com, it has paid an average of $40.09 a share over the years. Nvidia shares were priced at $272.86 as of the March 31 close.

Of the big institutional investors holding Nvidia, Jennison was the third-largest seller of the stock in the first quarter, behind only FMR (11.3 million shares sold) and Norges Bank (21.3 million shares sold). Norges Bank manages the Norwegian government's global pension fund.

While Nvidia shares are down 36% year-to-date, they are up roughly 400% over the past five years. As such, it's probable that Jennison sold the semiconductor stock to lock in some of its profits.

Should NVDA's share price continue to fall in 2022, the hedge fund will likely add to its position at some point. Nvidia's too good a company not to be invested for the long haul.

• Market value: $3.1 billion
• Billionaire investor: Apollo Global Management
• Shares sold: 2,935,220 (27%)

Apollo Global Management's 13F reported that it had $21.1 billion invested at the end of March in 362 stocks. The investment advisory arm of the alternative asset manager sold out of 96 stocks during the quarter and reduced its position in 98 others. One of those that it pared its stake in was Jackson Financial (JXN, $35.50), a Michigan-based provider of annuities and other retirement products.

Jackson was Apollo's ninth-largest holding at the end of Q1 2022, despite reducing its position by 27% over the three-month period. Apollo first acquired JXN shares in the fourth quarter of 2021, paying an average price of $41.83 per share. JXN stock traded between $35 and $47 throughout the first quarter, so if Apollo made money on its share sale, it didn't make much.

As far as billionaire investors selling JXN shares during the first quarter, Apollo sold the second-largest amount, behind only Sessa Capital, which unloaded 3.9 million shares. While Apollo reduced its weighting in JXN to 1.58% from 1.91% in Q1, Seesa slashed its Jackson weighting to 1.91% from 9.84%.

In September 2021, Jackson Financial was spun out of Prudential Financial (PRU). Shareholders of the parent company received one JXN share for every 40 PRU shares they owned. Prudential retained a 19.7% economic interest. As of Dec. 31, 2021, it still owned 18.4% of the financial firm.

• Market value: $11.8 billion
• Billionaire investor: Theleme Partners
• Shares sold: 1,585,000 (32%)

Of all the hedge funds and investment firms covered in this article, Theleme Partners is by far the most focused. At the end of December, the London-based firm had almost $6 billion invested in just 11 positions. One of those was Alcoa (AA, $64.02).

Interestingly, Theleme had almost half its assets invested in put options – a bet the share price will go down – on the iShares Russell 2000 ETF (IWM), which tracks the performance of 2,000 small-cap U.S. stocks. Its next largest holding was Moderna (MRNA) at almost $1.3 billion. AA was the hedge fund's fourth-largest holding at the end of December, accounting for 4.9% of the portfolio.

By the end of March, Theleme's 13F was down to $3.1 billion. It appears the hedge fund went heavily to cash. The entire iShares put position was sold out in the first quarter.

As for Alcoa, Theleme first initiated a position in the aluminum giant in Q3 2021, paying an average price of $48.94 a share. At the end of March, AA closed at $90.03 (though it's down a third in the two months since). We chalk up Theleme's 32% reduction to profit-taking.

• Market value: $50.9 billion
• Billionaire investor: Permian Investment Partners
• Shares sold: 1,762,856 (44%)

There's been a lot of profit-taking so far in 2022. Devon Energy (DVN, $77.05) is no exception. In the first quarter, Permian Investment Partners reduced its position in the Oklahoma City oil & gas producer by 44%. Devon's weighting in Permian's $834-million portfolio fell to 15.44% at the end of March from 18.05% at the end of December. Still, it remains the hedge fund's second-largest position, behind utility stock NRG Energy (NRG).

Interestingly, despite the name Permian, the New York-based hedge fund owns just two other energy stocks – Cameco (CCJ) and Golar LNG (GLNG). Permian first initiated a stake in Devon in Q1 2021, paying an average price of $23.18 a share. One year later, the stock is up more than 200%.

That's quite the timing.

Permian's portfolio was made up of 18 positions at the end of March. Its top five holdings accounted for 77.15% of its portfolio. The five holdings were from five different sectors: utilities, energy, industrials, transportation and healthcare.

Devon reported first-quarter earnings on May 2. It beat on both the top and bottom line. In the quarter, the oil and gas company generated a record $1.3 billion in free cash flow – the money left over after a company has paid its expenses, interest on debt, taxes and long-term investments needed to grow its business.

It doesn't appear there's anything to get in the way of more record-setting results for Devon, either, except a possible recession in 2023. In the meantime, Permian will most likely hang on to most of its DVN shares.

• Market value: $450.6 billion
• Billionaire investor: GQG Partners
• Shares sold: 6,967,149 (61%)

GQG Partners finished the first quarter with $43.1 billion invested in 72 managed 13F securities. This was after the investment advisor reduced its holdings in 17 stocks over the three-month period, including its stake in Visa (V, $212.94). With the sale of almost 7 million shares, Visa's weighting in the Ft. Lauderdale advisory firm's large portfolio was reduced from 6.07% as of Dec. 31, 2021, to 2.22% at the end of March.

The billionaire investment firm first acquired a position in the Dow Jones stock in Q4 2016. It's estimated to have paid an average price of $199.65 per V share. The investment advisor sold 61% of its Visa shares in the first quarter, most likely to preserve profits. It also could be over concerns of a potential economic slowdown.

At the end of April, Piper Sandler analyst Chris Donat downgraded both Visa and Mastercard (MA) to Neutral from Overweight (the equivalents of Hold and Buy, respectively) on concerns that inflation could result in slowing discretionary spending and less cross-border activity in the future, Visa's bread and butter.

"While we think that MA and V have beautiful business models, these models operate in the broader global economy," Donat wrote in a note. He adds that both credit card companies have wide exposure to Europe, which could put pressure on transactions, profits and valuation multiples should the region enter a recession next year.

• Market value: $68.0 billion
• Billionaire investor: Chase Coleman III (Tiger Global Management)
• Shares sold: 10,012,324 (63%)

Tiger Global Management, the hedge fund run by Chase Coleman III, sold out of 83 stocks in the first quarter and reduced its position in 46 others. In contrast, it bought just two new stocks and added to 21 others.

Among those that Tiger Global Management reduced its position in during the first quarter were a number of Chinese stocks listed on U.S. exchanges. One of those was Shanghai-based e-commerce platform Pinduoduo (PDD, $53.75). The billionaire investor's hedge fund cut its position in PDD by 63%, dropping its weighting from 2.0% at the end of 2021 to 0.87% at the end of March. It finished the first quarter owning 5.8 million shares of PDD.

Investors remain concerned that many of these firms will be delisted due to the Chinese government standing in the way of U.S. regulators for more than a decade. U.S. regulators are required by law to inspect the auditors of Chinese companies in order to be listed on domestic exchanges. In order to avoid a massive delisting of Chinese stocks in the U.S., Beijing will likely need to reach a settlement with Washington at some point in the near future.

Tiger made other large sales of Chinese stocks during the quarter including New Oriental Education & Tech Group (EDU), JD.com (JD) and Alibaba Group (BABA).

• Market value: $2.4 trillion
• Billionaire investor: Winslow Capital Management
• Shares sold: 4,587,508 (99%)

Winslow Capital Management had $23.1 billion in managed securities in its first-quarter 13F. Apple (AAPL, $146.14) was its largest reduction in terms of the number of shares sold without completely closing out of the position. Interestingly, the Minneapolis-based hedge fund retained 2,386 shares of Apple that were worth $417,000 at the end of March. Perhaps that's to lay the groundwork for building a position in the iPhone maker in the future.

Apple was one of Winslow's largest positions heading into the quarter. However, after unloading nearly 4.6 million shares over the three-month period, AAPL is now the hedge fund's smallest stock holding. Only the iShares S&P 500 Growth ETF (IVW) has less of a weighting in Winslow's portfolio.

Winslow first acquired Apple shares in the third quarter of 2019, paying an average price of $55.99 a share. The sale was likely another case of profit-taking. AAPL shares finished the quarter at $174.61. They've fallen 16% in the second quarter.

The hedge fund also wasn't close to being the largest institutional seller of Apple stock in Q1 2022. That distinction belongs to Norges Bank, which sold 142.1 million AAPL shares to close out of its position entirely. State Street, meanwhile, came in second, selling 19.3 million shares during the quarter. Despite the sale, Apple remains State Street's largest equity position, with a 5.3% weighting.

AAPL was just one of 21 stocks Winslow reduced its stake in during the first quarter, while the hedge fund completely sold out of 16 positions. Its top 10 holdings accounted for 46.0% of its portfolio at the end of March.

• Market value: $215.2 billion
• Billionaire investor: Warren Buffett (Berkshire Hathaway)
• Shares sold: 157,444,464 (99%)

Verizon (VZ, $51.24) was easily Warren Buffett's biggest stock sale in the first quarter. Berkshire Hathaway sold 99% of its stake in America's second-largest wireless carrier. Despite unloading all but 1.38 million shares of VZ stock, its current stake is still worth $70.7 million. That's how big the Berkshire Hathaway equity portfolio is.

Berkshire first bought Verizon shares in the last quarter of 2020. It's estimated the holding company paid an average of $58.70 a share, or $9.3 billion, for its stake. VZ was Berkshire's seventh-largest position at the end of December, good enough to get a mention in the company's 2021 shareholder letter. It owned 3.8% of the company at the end of 2021, but that has fallen to a 0.03% ownership stake following the most recent share sale.

Verizon's share price traded in a tight range between $50 and $55 during the first quarter. Even if Buffett got $55 from Q1 2022's big sale, it likely lost money on the stock it sold. How it ultimately does on the remaining 1.3 million VZ shares has yet to be written.

Needless to say, it was not a good bet by Buffett & Co.

• Market value: $196.4 billion
• Billionaire investor: Ruane Cuniff & Goldfarb
• Shares sold: 2,804,442 (99%)

In the first quarter, Ruane Cuniff & Goldfarb sold out of just one stock and reduced its stakes in 19 others. The one stock it sold out entirely was Primerica (PRI). However, PRI was not a big holding for the investment firm best known for its Sequoia Fund. It owned 1,400 shares of the insurance and wealth management company.

Ruane's biggest sale in the first quarter was its disposition of 99% of its shares in Walt Disney (DIS, $107.83). Ruane first acquired Disney stock in Q2 2020. It paid an average price per share of $114.52. Following an 11.4% swoon in Q1 2022, Disney's share price was $137.16 at the end of March – and it has fallen even farther in the second quarter to now trade below cost.

So, it appears that Ruane sold out at the right time.

Still, at the end of March, Ruane owned 1,988 shares of the entertainment conglomerate. Just as Winslow Capital Management hung on to a little piece of Apple, the New York-based investment firm hung on to a little sliver of the blue-chip stock. One has to wonder why?

• Market value: $204.1 billion
• Billionaire investor: Steadfast Capital Management
• Shares sold: 1,672,054 (100%)

The New York-based hedge fund finished the first quarter with assets of $5.8 billion and 45 positions. One of them wasn't Abbott Laboratories (ABT, $116.42).

The hedge fund sold its entire position in the first quarter – a massive turnaround from the end of December, when ABT was one of Steadfast’s largest positions at 3.93% of the portfolio.

It was a quick turnaround, too. Steadfast first acquired shares in Abbott during the first quarter of 2021, paying an average price of $118.41 per share. The fund then added to its stake in Q2 – another 761,858 shares, for about 57% growth in the position. But over Q3 and Q4, Steadfast turned tail, unloading 149,705 and 263,979 shares, respectively. It was most certainly profit taking, as the stock hit a 52-week high of $142.60 on Dec. 27, 2021.

Meanwhile, during the first quarter, ABT shares traded between about $114 and $141. It wouldn’t be surprising if Steadfast executed most if not all of its exit during the first quarter.

• Market value: $27.9 billion
• Billionaire investor: John Paulson (Paulson & Co.)
• Shares sold: 474,010 (100%)

Cerner (CERN, $94.97) was one of six companies Paulson & Co. – the hedge fund founded by billionaire investor John Paulson – completely exited in the first quarter. Paulson first acquired CERN shares in the fourth quarter of 2021, so the bet was a quick one.

Paulson is estimated to have paid an average price of $92.87 a share for the healthcare technology stock. CERN's price at the end of March was $93.56 and it's barely budged from there.

There's a reason for the lack of movement.

In December, Cerner agreed to be acquired by Oracle (ORCL) for $28.3 billion, or $95 per share, in cash. Paulson might have held on to see if a better offer surfaced. When it was clear that wasn't going to happen, it's likely the hedge fund sold its shares. On June 1, ORCL said it has received all antitrust approvals for the buyout.

Two Sigma Advisers is one of the largest institutions still holding CERN. The hedge fund actually added 592,400 shares during the first quarter, bringing its total position to 4.4 million shares, or 1.1% of its portfolio.

• Market value: $24.2 billion
• Billionaire investor: Dan Loeb (Third Point)
• Shares sold: 5,687,819 (100%)

Third Point – the hedge fund founded by billionaire investor Dan Loeb – sold out of 26 stocks in the first quarter and reduced its position in 22 others. One of the largest positions it completely sold out of in Q1 was CoStar Group (CSGP, $61.13). At the end of December, the hedge fund's stake was worth $449.5 million, and accounted for 3.1% of its portfolio.

According to WhaleWisdom.com, Third Point first bought the commercial real estate data analytics firm's stock in Q1 2021. The average price paid is a shockingly high $154.30 a share. While that seems improbable, there is an explanation.

On June 28, 2021, CoStar split its stock on a 10-for-1 basis. So, Dan Loeb's 5.69 million shares were 568,782 before the stock split. Third Point's 13F from Q1 2021 confirms that the hedge fund owned 550,000 shares as of March 31, 2021.

At the end of Q2 2021, it owned 5,671,000 shares, which means it picked up an additional 17,100 shares before the 10-for-1 split. It picked up its final 16,819 in Q3 2021 after the split.

The 550,000 shares bought in Q1 2021 were worth $452.0 million at the end of March 2021. That's $82.19 a share post-split.

No matter which way you splice it, it's unlikely Loeb made money on this trade.

• Market value: $55.2 billion
• Billionaire investor: David Tepper (Appaloosa Management)
• Shares sold: 2,250,000 (100%)

Of the 12 stocks Appaloosa Management – the hedge fund co-founded by billionaire investor David Tepper – closed out in Q1 2022, General Motors (GM, $37.83) was the second-largest position behind T-Mobile (TMUS). Heading into the quarter, GM accounted for 3.39% of the hedge fund's portfolio.

Appaloosa's purchase of GM appears to be nothing more than poor timing. It acquired its shares in Q4 2021 at an average price of $58.63 a share. GM stock is currently trading more than 35% below that price.

For the sake of Appaloosa's limited partners, hopefully, David Tepper's money managers were able to unload GM by mid-January when shares were still trading in the mid-$50s.

Capital Research Global Investors was another investment firm to sell GM stock in Q1, with the 13.9 million shares sold the most of any institution. However, despite the large share sale, it still owned 81.2 million shares at the end of March, making it the investment management firm's 24th largest position.

While Appaloosa exited its GM position, Berenberg analyst Adrian Yanoshik is big on the Detroit auto manufacturer. On May 10, Yanoshik initiated coverage of GM with a Buy rating and a $55 price target.

"Despite fears, our work suggests that [auto maker] price-mix strength and deep order books can help generate free cash flow, funding transformations of legacy businesses into the electrified arena," Yanoshik wrote in a note to clients, as reported by Barron's.

We'll know who's right in a year from now.

• Market value: $1.5 billion
• Billionaire investor: David Einhorn (Greenlight Capital)
• Shares sold: 211,024 (100%)

Out of the 12 stocks David Einhorn's Greenlight Capital closed out in the first quarter, Jack in the Box (JACK, $69.48), a California-based burger chain, was his largest holding at the end of December, with a 1.06% weighting. Einhorn first acquired JACK shares in Q2 2020, paying an estimated $86.89 a share.

Between January and March, Jack in the Box's shares traded between $79 and $97, so it's possible the hedge fund made some money on its bet. Not a huge amount, mind you, but a profit is always better than a loss.

The consumer discretionary stock ended the first quarter at $93.41. Year-to-date, the stock is down 21%, so it appears Einhorn got out in the nick of time.

Last December, Jack in the Box announced that it would acquire Del Taco, the country's second-largest Mexican QSR (quick-service restaurant) chain by the number of locations. JACK paid roughly $585 million, including the assumption of debt, for Del Taco. It closed the deal on March 8.

• Market value: $78.7 billion
• Billionaire investor: Jim Simons (Renaissance Technologies)
• Shares sold: 4,066,036 (100%)

Figuring out which stocks to highlight with Jim Simons' hedge fund is not an easy task.

At the end of the first quarter, Renaissance Technologies had $85.2 billion invested among 4,032 companies. That's an average of $21.1 million per company. While most hedge funds' top 10 holdings account for more than 50% of their 13F portfolios, Renaissance's top 10 represent just 12% of its massive portfolio.

It was a busy first quarter for Simons. Over the three month period, the billionaire investor sold out of 656 stocks, reduced positions in 1,631, bought 828 new stocks and added to 1,564 existing positions.

Of the 656 stocks it exited in the first quarter, Micron Technology (MU, $70.45) was the second-largest position in terms of percentage of the hedge fund's portfolio at the end of December, with a 0.47% weighting, behind only Microsoft at 0.98%. Renaissance first acquired Micron shares in Q4 2018.

The hedge fund became legendary on Wall Street for using machine learning to bet on the markets. In a January 2020 article in Towards Data Science, the author points out that the firm's Medallion Fund achieved an average annual return of 66.1% between 1988 and 2019.

Renaissance Technologies is estimated to have paid an average of $89.87 a share for its position in Micron. On a few occasions in the first quarter, Micron's share price reached above $95. The hedge fund likely used its first-rate machine learning capabilities to get out with a profit in hand.

• Market value: $14.3 billion
• Billionaire investor: Seth Klarman (Baupost Group)
• Shares sold: 5,780,000 (100%)

Baupost Group, the hedge fund founded by billionaire investor Seth Klarman, sold out of just two stocks in the first quarter. One was NortonLifeLock (NLOK, $24.65). The other was Pershing Square Tontine Holdings (PSTH), Bill Ackman's failed special purpose acquisition company (SPAC). Baupost also reduced its positions in 29 stocks during the first three months of 2022.

The hedge fund is said to have first initiated a position in NLOK in Q4 2021, paying an average of $25.98 a share for the cybersecurity software company. NortonLifeLock accounted for 1.48% of Baupost's $10.1 billion in assets listed in its fourth-quarter 13F.

Last August, NortonLifeLock announced that it was buying Czech consumer cybersecurity firm Avast for between $8.1 billion and $8.6 billion in a cash-and-stock transaction. The acquisition is expected to close sometime in the second half of 2022, pending regulatory review.

The combined business is expected to have annual revenue of $3.5 billion. Norton CEO Vincent Pilette will head the merged firm, while Avast CEO Ondrej Vlcek will serve as president. Norton shareholders will own between 74% and 86% of the combined entity.

The tech stock is down 5.1% for the year-to-date.

• Market value: $65.2 billion
• Billionaire investor: Carl Icahn
• Shares sold: 45,000,346 (100%)

A funny thing happened to Occidental Petroleum (OXY, $69.61) in the first quarter. Two billionaire investors were buying and selling the oil and gas producer's stock. Carl Icahn was the one doing the selling, while Warren Buffett was buying.

In early March, Icahn sold off the last of his 45 million shares of OXY stock, according to The Wall Street Journal. At one time, Icahn owned 10% of Occidental. He took the energy producer to task in 2019 for its $38 billion acquisition of Anadarko Petroleum.

Buffett was instrumental in Occidental's Anadarko purchase.

In the first quarter, Buffett's Berkshire Hathaway bought 136.4 million OXY shares. Berkshire also owns preferred stock on OXY and has warrants to buy an additional 84 million shares that it received for helping Occidental acquire Anadarko.

As for Icahn, investors need not feel sorry for the billionaire. He first acquired shares of the company in the second quarter of 2019. He's estimated to have paid an average price of $21.44 a share, so the 86-year-old easily doubled his money over less than three years.

• Market value: $298.8 billion
• Billionaire investor: Philippe Laffont (Coatue Management)
• Shares sold: 10,311,917 (100%)

Coatue Management sold out of 35 stocks in the first quarter, while reducing its stake in another 18 companies. Pfizer (PFE, $53.26) was the most notable position the New York-based hedge fund closed out of. During the first quarter, Pfizer stock traded as high as $58.55 and as low as $45.40.

The hedge fund first acquired shares of PFE in Q4 2021, so the position wasn't held for very long. Coatue is estimated to have paid an average of $59.05 per share during the final three months of 2021, so the fund most likely lost money on its Pfizer position.

Coatue still counts healthcare stock Moderna (MRNA) among its top positions – the 6.9 million shares held makeup 8.7% of its portfolio. This puts it in third place, just behind electric vehicle stocks Tesla (TSLA) and Rivian Automotive (RIVN) that take up the top two spots.

Among other institutions selling 100% of their Pfizer stock during the quarter was Sanders Capital. The Florida-based hedge fund unloaded its 12.2 million PFE shares in Q1. Unlike Coatue, Sanders Capital first acquired Pfizer shares in Q4 2015, paying an average price of $33.24 per share.

While PFE stock is down nearly 10% for the year-to-date, it could have a potential COVID-related catalyst coming down the pike. The Food and Drug Administration recently announced that 5- to 11-year-olds are now able to get a Pfizer/BioNTech (BNTX) booster shot. In addition, Paxlovid, the company's antiviral pill to treat COVID-19, is expected to generate $22 billion in sales in 2022.

• Market value: $172.0 billion
• Billionaire investor: David Tepper (Appaloosa Management)
• Shares sold: 1,275,992 (100%)

In the first quarter of 2022, Appaloosa Management closed out 12 positions. America's third-largest wireless carrier, T-Mobile US (TMUS, $137.17), was one of them. And TMUS was the hedge fund's largest position at the end of December – accounting for 3.8% of the $3.9 billion in assets listed on its fourth-quarter 13F – that it closed out in the first quarter.

Appaloosa first acquired TMUS shares in Q4 2017. It paid an average of $99.35 a share. At the end of the first quarter, T-Mobile shares traded at $128.35. For the year-to-date, they're up 18.3% – not too bad considering the S&P 500 is down more than 13% so far in 2022.

T-Mobile stock's return is also better than its two biggest competitors: AT&T (T) and Verizon (VZ) that are up 12.7% and down 1.4% for the year-to-date, respectively. When it comes to wireless, T-Mobile is winning the shareholder return game so far in 2022.

Of the other institutions that sold TMUS in Q1 2022, King Street Capital had the largest weighting for TMUS at the end of December, with its stake accounting for 7.78% of its $1.07 billion in assets. No other company came close to being nearly as consequential a closeout.

For whatever reason, known only to David Tepper and Appaloosa Management, the hedge fund didn't sell TMUS in July 2021 when it hit an all-time high of $150.20. Clearly, the 2022 rebound has given the hedge fund a chance to bow out gracefully.

• Market value: $23.2 billion
• Billionaire investor: Larry Robbins (Glenview Capital Management)
• Shares sold: 362,996 (100%)

Glenview Capital Management sold out of six stocks in the first quarter and reduced its holdings in 20 others. One of the six it sold in its entirety was Willis Towers Watson (WTW, $208.27). The hedge fund first acquired shares in the insurance brokerage in Q3 2021. It paid an average price per share of $232.46. Prior to the sale, WTW accounted for 1.84% of Glenview's $4.7 billion in managed 13F securities at the end of December.

While Glenview's sale of Willis Towers Watson is notable, the biggest seller in terms of the number of WTW shares sold in the first quarter was Eagle Capital Management. It sold 2.0 million shares over the three-month period, nearly its entire stake. The New York-based investment firm first acquired shares in Q1 2021, paying an average price per share of $228.96.

At the end of April, Willis reported first-quarter earnings that included an 11% year-over-year increase in adjusted net income to $315 million, or $2.66 per share. Analysts, on average, were expecting $2.28 a share. Its revenue during the first quarter was down 3% versus the year prior to $2.2 billion.

The major market benchmarks opened lower and losses accelerated amid reports that Russia is targeting civilian areas in Ukraine, including Kharkiv, the country's second-largest city. Additionally, after warning of "high-precision strikes," Russian forces on Tuesday hit a TV tower in Kyiv.

"The crisis in Ukraine is evolving rapidly, and with it so are investor expectations for international relations, commodity prices, inflations, the corporate operating environment and company margins," says Lauren Goodwin, economist and portfolio strategist at New York Life Investments.

"As the crisis unfolds, equities could bounce if developments point to contained conflict and lighter sanctions, while equities could deteriorate in moments of escalation."

Today, stocks crumbled as the attacks intensified, with financials (-3.7%) the worst-performing sector amid notable losses in blue chips American Express (AXP, -8.5%), Goldman Sachs (GS, -3.2%) and JPMorgan Chase (JPM, -3.8%).

Not surprisingly, the Dow Jones Industrial Average (-1.8% at 33,294) was the biggest decliner, followed by the S&P 500 Index (-1.6% at 4,306) and the Nasdaq Composite (-1.6% at 13,532).

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One bit of encouraging news today was this morning's Institute for Supply Management's (ISM) manufacturing purchasing manager's index (PMI), which rose to a higher-than-expected 58.6 in February.

"Manufacturing growth was solid in February, the inflation-sensitive prices component dipped on the month, and the index component reflecting supplier delivery performance noted better supply chain conditions than in January and December," says Bill Adams, chief economist for Comerica Bank.

"Falling coronavirus cases should help the domestic side of the economy improve further in the spring months, but spillover from higher energy and food prices and international shipping disruptions related to the Russia-Ukraine war are a downside risk to manufacturing near-term," he adds.

Other news in the stock market today:

• The small-cap Russell 2000 gave back 1.9% to end at 2,008.
• Gold futures spiked 2.3% to settle at $1,943.80 an ounce.
• Bitcoin rallied 5.5% to $44,252.28. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
• Target (TGT) jumped 9.8% after the big-box retailer reported adjusted earnings of $3.19 per share and revenue of $31 billion in its fourth quarter, beating analysts' estimates for earnings of $2.86 per share and sales of $31.4 billion. TGT also offered up higher-than-expected guidance for the upcoming fiscal year. "TGT continues to find ways to keep traffic and sales momentum strong, which is allowing the retailer to continue making investments in price, labor, etc. while also growing the bottom line," says CFRA Research analyst Arun Sundaram (Buy). "Fiscal 2023 results will be choppy quarter-over-quarter, but should generally get better as the year progresses."
• Foot Locker (FL) fell 7.6% after B. Riley analyst Susan Anderson downgraded the athletic apparel retailer to Neutral (Hold) from Buy and slashed her price target by $30 to $34 (FL closed today at $29.23). "We believe FL will be in a transition phase for at least a year as their exposure to Nike (NKE) is lowered, which creates limited visibility on future sales/margins," Anderson writes. "This transition could open up ~$900M in shelf space annually which we expect will benefit other footwear and apparel manufacturers including Crocs (CROX), New Balance and Adidas, but will create a void for FL until that space can be filled."

Why We're Still Watching Inflation

Oil prices, on the other hand, swung notably higher in today's trading, even after the International Energy Agency (IEA) agreed to release 60 million in emergency crude reserves.

U.S. crude futures were up more than 11% at their session peak before finishing up 8% at $103.41 per barrel – their highest settlement since July 2014. And these rising energy prices could keep the fire burning under already sizzling inflation.

"The Russia/Ukraine conflict is driving oil and other commodity prices higher, which does present the possibility of inflation remaining higher for longer," says Lindsey Bell, chief investment strategist for Ally Invest. "Medium-term inflation will be important to keep an eye on. Consumer confidence has already taken a hit and a survey by Ally shows that 77% of Americans believe inflation will increase over the next 12 months."

There are several options for investors looking to mitigate the effects of red-hot inflation on their portfolio, including seeking out high-quality stocks from sectors that are considered more "inflation-proof" than others: consumer staples, utilities and healthcare, for instance. You can also play the hot hand with energy stocks or increase exposure to rising commodity prices with these exchange-traded funds (ETFs). Each of the funds featured here provide investors access to a wide variety of commodities futures and hard assets that can often work as a hedge against inflation.

The S&P 500 Index is still down by double digits across 2022 despite a recent relief rally, so it's not difficult to find S&P 500 stocks that look like they're in trouble right now.

But just because some of the top U.S. corporations are in the red year-to-date doesn't mean you should avoid them altogether – in fact, in many cases, they're among the best stocks on the market.

Today, we're going to look at the 10 best S&P 500 stocks you can buy right now, according to consensus recommendations from analysts surveyed by S&P Global Market Intelligence. Each one of these stocks is sitting on negative returns since Jan. 1 … but each also boasts strong fundamentals and have consensus price targets that are anywhere between 20% and 110% from current levels. And a few of these stock picks don't have a single Sell rating against them.

There's always risk on Wall Street. And it can indeed be dangerous to "catch a falling knife" as the old saying goes. However, there is also something to be said for staking out a position in quality stocks regardless of the day-to-day movement on Wall Street.

If you're not afraid of taking on a new position in an environment where most other investors are selling, consider one or more of the market's best S&P 500 stocks.

Data is as of May 30. Analysts' consensus recommendations courtesy of S&P Global Market Intelligence. Stocks are listed in reverse order of analysts' consensus rating (the lower the score, the stronger the Buy recommendation).

• Market value: $81.9 billion
• Dividend yield: 0.6%
• Analysts' consensus recommendation: 1.39 (Strong Buy)
• Analysts' average 12-month price target: $110.00 (50% upside potential)

Semiconductor giant Micron Technology (MU, $73.32) is one of several beaten-down technology stocks that the analyst community remains very bullish on in 2022.

First, some history: MU stock has shot up well more than 800% over the past decade – more than four times the returns of the S&P 500 – thanks to consistent expansion in both the top and the bottom line. Micron is now the world's third-largest DRAM chipmaker and its fifth-largest flash memory chipmaker.

And it's not slowing down. Revenue is set to grow by more than 20% both this fiscal year and next, with even larger expectations for earnings-per-share expansion (58% this year, 31% in FY2023). Those are impressive figures in any environment, but are simply jaw-dropping numbers considering the lingering supply chain disruption issues that the global chip industry continues to face.

What's more, Micron is a U.S. chipmaker headquartered in Boise, Idaho, with major facilities in Texas, Utah and California. This has proven to be a powerful value proposition to policymakers who are increasingly interested in "strategic autonomy" amid uncertainty around supply chains caused by the pandemic and the invasion of Russia. Micron recently unveiled a $150 billion global expansion plan, which is sure to give it an even more attractive geographic base that will give U.S. and European customers confidence they can avoid future disruptions.

With a strong history of outperformance and a bright future for sales and profits, many analysts remain bullish on this stock despite challenges in the semiconductor space recently. MU remains one of the S&P 500's best stocks, in the analysts' eyes, as a result.

• Market value: $41.7 billion
• Dividend yield: N/A
• Analysts' consensus recommendation: 1.37 (Strong Buy)
• Analysts' average 12-month price target: $265.59 (20% upside potential)

Iqvia Holdings (IQV, $220.50) is the sole healthcare company among the top-rated stocks in the S&P 500 Index. However, it is equal parts a technology company, as it provides advanced analytics and clinical research services to the life sciences industry worldwide, including monitoring of clinical drug trials and central laboratory services.

This is a tremendous area to be involved in because it has all the upside that comes with high-growth biotechnology research … but much less risk as Iqvia itself isn't trying to develop new and unproven drugs for rare diseases. It's also fairly low risk in the current environment as the pharmaceuticals industry continues to invest heavily in R&D. As a result, IQV stock is predicting 5% revenue growth and 13% earnings growth this year that accelerates to 10% sales growth and 15% profit growth in fiscal 2023.

Digging deeper, there's a lot to like about the outlook of this stock based on recent earnings commentary. For instance, in its Q1 report at the end of April, Iqvia noted record quarterly R&D Solutions services bookings that tallied more than $1.9 billion, as well as a record R&D Solutions contracted backlog in excess of $25 billion – up more than 9% year-over-year (YoY).

Sure, the stock is in its own bear market and off more than 20% in 2022 alone. But the numbers above should encourage investors looking beyond Wall Street's short-term disruptions.

The analyst community apparently likes what it sees, based on recent moves; Guggenheim initiated coverage at a Buy rating at the end of May, and Piper Sandler upgraded IQV stock to Overweight, from Neutral, shortly after its earnings report. William Blair (Outperform, equivalent of Buy) is downright stunned at the stock's performance this year and believes it will bounce back.

"IQV is down 25% year-to-date despite seemingly strong fundamentals, and the stock's forward earnings multiple of 22 times is equal to the five-year average despite accelerating organic growth trends over the last few years," a William Blair analyst team said in late April. "We would assume a company with a business model such as IQVIA's, given its exposure to large pharma's durable spending patterns and strong balance sheets, would be experiencing a relative expansion in valuation, and thus are surprised to see the stock's recent weakness."

• Market value: $6.1 billion
• Dividend yield: N/A
• Analysts' consensus recommendation: 1.36 (Strong Buy)
• Analysts' average 12-month price target: $77.07 (59% upside potential)

You might think it odd to find a mid-cap stock in the airline industry on a list that's full of blue-chip stocks. But don't underestimate Alaska Air Group (ALK, $48.43). This carrier regularly gets high marks for customer satisfaction, and is among one of the most efficient regional players in the U.S.

And it's not just muddling through with its existing footprint, either. ALK has expanded its Boeing 737 MAX order book several times since late 2020 – most recently, upping it to 93 MAX models, with options to purchase another 52 more.

This is as clear of a sign as you'll find that Alaska Air's management is laser-focused on growth as the pandemic fades away, shifting to larger airplane models to increase capacity and serve new routes. The carrier has already grown to become the No. 5 North American airline by fleet size, and it's looking to move up the food chain.

The airline industry is prone to plenty of financial troubles, with several high-profile bankruptcies over the years. However, Alaska Air is soundly profitable and is plotting a more than 50% YoY surge in revenue as it rebounds from the disruptions of the pandemic and looks to the future.

• Market value: $1.2 trillion
• Dividend yield: N/A
• Analysts' consensus recommendation: 1.36 (Strong Buy)
• Analysts' average 12-month price target: $3,643.56 (58% upside potential)

Another Big Tech stock that's a favorite among analysts despite underperformance in 2022 is e-commerce titan Amazon.com (AMZN, $2,302.93). And one of the reasons that there is still optimism around this consumer discretionary company lately is the simple fact that for all the market disruption and talk of hyperinflation, consumers are stills spending briskly.

We saw this lately via a broad swath of earnings reports from retailers, including brick-and-mortar players like Macy's (M) that have posted solid sales and customer traffic. And specifically for Amazon, we saw the e-tailer post a net sales increase of 7% in Q1 – up to a mammoth $116.4 billion in the first quarter.

By now, investors know Amazon isn't just about e-commerce, either. Its Q1 report in April showed its all-important Amazon Web Services cloud computing biz has grown 34% annually over the last two years, and 37% year-over-year in the first quarter. That's what's really going to power this stock in the future.

Loop, MKM and Truist analysts all reiterated their Buy ratings on the stock in the last month or two. Argus Research's Jim Kelleher says "We believe that this lagging performance provides an opportunity to establish or dollar-average into positions in AMZN stock, which remains the undisputed category leader."

Looking forward, with projections of about 12% revenue growth this full fiscal year and another 17% growth in FY2023, there is indeed a lot of reason to consider the recent rollback in shares as a buying opportunity in what much of Wall Street currently considers one of the best S&P 500 stocks to buy.

• Market value: $2.0 trillion
• Dividend yield: 0.9%
• Analysts' consensus recommendation: 1.33 (Strong Buy)
• Analysts' average 12-month price target: $361.47 (32% upside potential)

Second only to Apple in terms of market value, Microsoft (MSFT, $273.24) is one of the largest corporations on the planet by any measure. Last year, the software provider reported cash and investments worth $130 billion, on top of net operating cash flow of $77 billion.

This scale hasn't done much for MSFT shares in 2022, however. as the company has seen a slump of about 20% since New Year's Day, significantly worse than the broader S&P 500 Index. But the good news is that beyond these stock price challenges, it's clear like the core business of Microsoft has a lot going for it.

In January, the tech titan posted great earnings that featured 20% YoY revenue growth and a 22% jump in EPS. What's more, it is increasingly important that Microsoft's cloud segment surpassed $22 billion to see an even faster growth rate of 32%.

Then in May, its fiscal Q3 report showed an 18% improvement in revenue, as well as operating income expansion of 19%, led by another 32% year-over-year jump in cloud revenue.

Wall Street clearly likes what it sees here, with Jeffries and Wedbush analysts both reiterating their Outperform ratings this spring. A consensus price target of $361.47 is more than 30% above MSFT's current levels.

• Market value: $19.5 billion
• Dividend yield: N/A
• Analysts' consensus recommendation: 1.33 (Strong Buy)
• Analysts' average 12-month price target: $416.77 (22% upside potential)

Among these 10 top S&P 500 stocks, global software engineering services company EPAM Systems (EPAM, $340.35) is the one you likely haven't heard of. And considering shares are down about 50% year-to-date in 2022, you might think the company is imminently forgettable.

But it's important to understand the unique challenges that led to the recent declines – and why the future outlook of EPAM is still bright.

EPAM is an IT consultant business that has 14,000 employees based in Ukraine, and more in neighboring Belarus. That's in part because founder Arkadiy Dobkin is Belarusian. Perhaps unsurprisingly, the stock went from $600 to start the year to a low of $200 in March after news of the Russian invasion of Ukraine. That was in large part because of all the uncertainty, including the fact that EPAM pulled its full-year guidance altogether.

However, the strong analyst support for this stock proves that analysts who are in the know still have faith in its global operations despite the humanitarian crisis in Ukraine that is disrupting EPAM's workforce. What's more, the company is still posting breakneck growth, with Q1 numbers out in may showing an amazing 50% surge in revenue.

There is obviously a lot of risk here, and it's hard to overstate the terrible devastation in Ukraine that has crippled the local economy and could weigh on the workforce for years to come. But Wall Street insiders still like what they see in this stock. Needham analysts, for instance, say they "remain positive on the shares given the strong demand backdrop, track record of impressive execution from management, and EPAM's long growth runway with both new clients and existing clients."

Based on the continuous positive coverage, it's possible the negative impact is fully price into shares, and that there's future upside for this tech consultant.

• Market value: $1.5 trillion
• Dividend yield: N/A
• Analysts' consensus recommendation: 1.29 (Strong Buy)
• Analysts' average 12-month price target: $3,248.37 (45% upside potential)

Google parent Alphabet (GOOGL, $2,246.33), off more than 20% year-to-date, is among the mega-cap tech stocks that have suffered in 2022. But don't be fooled into thinking that this company is somehow on the brink.

Alphabet is projecting a 15% increase in its top line this fiscal year and another 15% rise in fiscal 2023. Part of this improvement is because Google's ad network remains the go-to platform for digital marketing, and we continue to see brisk growth in this category. According to Insider Intelligence data, U.S. digital ad spending is expected to hit $239.89 billion in 2022 – up 14% from 2021 – and total U.S. digital ad spend will top $300 billion by 2025 to make up more than three-quarters of all media spending.

What's more, from a structural perspective, it may be a great time to consider buying GOOGL stock. The firm has announced it will execute a 20-for-1 stock split in July, taking its share price down from about $2,000 per share to $100, which should allow for even greater trading liquidity and more accessibility for mom-and-pop investors.

Investors might not want to wait until that split, because in many ways, GOOGL stock could already be "cheap" – it trades for a forward P/E of about 19 right now, which is below both its historical norms and other fast-growing tech stocks.

Also, Alphabet is one of the top S&P 500 stocks on this list that boasts zero Sell or even Hold calls of any kind. That adds up to a consensus that this stock is worth holding regardless of short-term market volatility.

• Market value: $27.5 billion
• Dividend yield: 2.8%
• Analysts' consensus recommendation: 1.27 (Strong Buy)
• Analysts' average 12-month price target: $226.82 (35% upside potential)

Structured as a real estate investment trust, or REIT, Alexandria Real Estate Equities (ARE, $168.59) is one of the oldest operators and developers of dedicated life science, technology and ag-tech campuses in the U.S. It publicly talks about its "innovative cluster" model, which is a belief that innovative companies are most successful when they are near each other and near top-tier academic institutions. All told, it has roughly 50 million square feet of space in top markets including San Francisco, Boston, New York and Seattle.

"Strong demand for ARE's development pipeline and the sheer size of its contribution to come remain key drivers of our positive outlook," say Baird analysts, who rate the stock at Outperform. "As new supply could be somewhat limited in the near term and as construction costs continue to rise, we expect ARE's large embedded base of cluster-centric assets to appreciate further.

There's a lot to like about this model. But what really has investors interested is the fact that revenue is set to surge 16% this year, driving a 75% surge in earnings to a projected $3.82 per share. On top of that, the top line should jump another 12% in fiscal 2023.

Risk-off sectors such as real estate have come into focus lately, both because of the hedge that physical property provides against inflationary pressures as well as the reliable nature of REITs like Alexandria that typically do business via long-term contracts that provide consistent cash flow. What's more, income investors well be encouraged by the fact that ARE's dividends have grown from just 86 cents a share in 2017 to $1.15 currently – a surge of 34% in just five short years.

RBC and JMP Securities join Baird and other analysts who have reiterated Buy-equivalent calls of late, making ARE the top-rated REIT in the S&P 500 Index at present.

• Market value: $20.4 billion
• Dividend yield: 0.75%
• Analysts' consensus recommendation: 1.23 (Strong Buy)
• Analysts' average 12-month price target: $559.80 (23% upside potential)

Shares of Monolithic Power Systems (MPWR, $455.85) have fared a bit better than the market at large this year, posting an 8% loss year-to-date vs. about 13% for the S&P 500.

However, what's interesting to many investors is the potential for this stock to deliver big-time gains over short periods of time.

Consider a massive surge of nearly 15% in a single session back in February, or more recently its double-digit gains across the month of May even as the rest of Wall Street continued to struggle.

These sprints higher tend to be driven by impressive facts that prove MPWR is doing better than many other companies lately. For instance, back in February, the run was sparked by stellar Q4 results that included a 44% surge in revenue, generous margins and a 25% boost to its dividend payment. And in May, Q1 numbers showed margins expanding yet again on a 12% jump in revenue, illustrating that this semiconductor company is not being limited by supply chain challenges that have disrupted other peers in the sector.

Monolithic Power Systems has a diversified operation, designing and selling semiconductor-based power solutions to a wide range of industries including computer companies, automotive manufacturers, industrial firms, communications providers and many others. This wide footprint is helping the company weather some of the volatility we've seen elsewhere – and based on a unanimously bullish Wall Street (10 Strong Buys, three Buys and no Holds or Sells), the pros expect this to be one of the best S&P 500 stocks to buy going forward.

• Market value: $11.1 billion
• Dividend yield: N/A
• Analysts' consensus recommendation: 1.20 (Strong Buy)
• Analysts' average 12-month price target: $108.40 (110% upside potential)

Caesars Entertainment (CZR, $51.60) is the parent company of the iconic Caesars Palace in Las Vegas, as well as other newer resorts and digital gaming offerings. And while it's one of the smaller stocks on this list, it also enjoys the rosiest outlook by Wall Street analysts, who not only view the stock as a Strong Buy, but believe on average that it will more than double over the coming year.

That's because while Caesars was hit hard by the pandemic, it is plotting double-digit revenue growth this fiscal year and another double-digit surge in FY2023 as well. And after some massive short-term investments to build out its digital division, it is forecasting a return to profitability next year thanks to a massive surge in "iGaming" services.

Of particular note is how these digital offerings include a potentially lucrative sportsbook now that sports betting is legal in more than two dozen states across the United States. Considering the upcoming college football and NFL seasons, the time could be perfect for this arm to start delivering big-time results.

Throw in pent-up wanderlust that is lifting results at 52 domestic properties in 16 states, and it's easy to understand the optimism.

Yes, CZR has been battered in 2022. However, many analysts think that Caesars has not only found the bottom – but that it's also going to be one of the best S&P 500 stocks over the next year or so.

"We believe this quarter represents the trough in terms of digital profitability and that losses will be less severe going forward, with the goal of digital profitability before football season of 2023," says CFRA analyst Arun Sundaram (Buy).

The first day of February trading was a relative yawner as the three major indexes finished Tuesday with modest gains. But given that investors just suffered the worst month for stocks since the COVID bear market, they were likely grateful for a quiet, positive session.

If not, they received something a little more exciting in the form of an Alphabet (GOOGL, +1.7%) stock split.

Earlier Tuesday, the Institute for Supply Management announced that its January manufacturing index declined by 1.1 points to 57.6. (Readings over 50.0 indicate expansion.) That was in line with expectations and showed continuing growth in the manufacturing sector, albeit at a slower pace than in December.

"The composition of the report was soft, with a small increase in the employment component, but larger declines in the production and new orders components," says Goldman Sachs Economics Research.

The earnings calendar had a few events of note, too.

United Parcel Service (UPS, +14.1%) popped to an all-time high after easily topping the Street's quarterly earnings and revenue forecasts. The better-than-expected results reflected the ongoing surge in online shopping and CEO Carol Tome's efforts to increase profitability.

Meanwhile, Exxon Mobil (XOM, +6.4%) stock hit a level last seen in 2019. The energy major eclipsed fourth-quarter profit and sales expectations and said it would resume stock buybacks this quarter.

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The Dow Jones Industrial Average climbed 0.8% to 35,405, the Nasdaq Composite gained 0.8% to 14,346 and the S&P 500 was 0.7% better to 4,546.

After the bell, Google parent Alphabet surged another 7% or so after announcing a massive Q4 beat and an equally sizable stock split. GOOGL reported 32% year-over-year revenue growth to a record $75.3 billion to easily beat estimates of $72.3 billion. Meanwhile, earnings of $30.69 per share easily cleared consensus expectations for $27.34.

The company also said its board of directors had approved a 20-for-1 stock split on each share of Class A, Class B and Class C stock. Shareholders still must approve the measure. If passed, shareholders of record as of the July 1, 2022, close, would receive on July 15, 2022, a dividend of 19 additional shares of the same class of stock for each share they held.

Other news in the stock market today:

• The small-cap Russell 2000 enjoyed a 1.1% improvement to 2,050.
• U.S. crude oil futures eked out a marginal gain to settle at $88.20 per barrel.
• Gold futures rose 0.3% to finish at $1,801.50 an ounce.
• Bitcoin waffled back and forth for most of the day and finished up just 0.1% higher, to $38,527.63. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
• AT&T (T) stock fell 4.2% today after the telecommunications firm said it will divest its WarnerMedia properties, which include HBO, CNN, TNT, TBS and Warner Bros. Studios, as part of its planned merger with Discovery (DISCA). The spinoff will give T shareholders 0.24 share for each share they currently own. AT&T also said it will slash its annual dividend, to $1.11 per share from $2.08 per share – a move that was widely expected and caused T to end its reign as an S&P 500 Dividend Aristocrat.
• Pitney Bowes (PBI) shares slumped 15.4% after the logistics company reported earnings. In its fourth quarter, PBI reported adjusted earnings of 6 cents per share, missing the consensus estimate for earnings of 11 cents per share. The firm also reported an 8.7% year-over-year decline in global e-commerce revenue, though total revenue of $983.7 million in revenue came in above analysts' average estimate for $691.6 million in sales.
• Cruise stocks were a bright spot on Wall Street today. Among the day's big winners were Carnival (CCL, +5.7%), Norwegian Cruise Line Holdings (NCLH, +3.7%) and Royal Caribbean Cruises (RCL, +4.4%).

The 'January Barometer' Bodes Poorly for Equities, But ...

January performance isn't the market indicator it used to be.

Ryan Detrick, chief market strategist for LPL Financial, recently examined the "January Barometer," first discussed in 1972 by Yale Hirsh of the Stock Trader's Almanac.

Traders sum it up like this: "As January goes, so goes the year."

Specifically, when the S&P 500 has closed January in the green, the index has finished up an average of 11.9% over the final 11 months, and higher 86% of the time. But when the S&P 500 finished January in the red, stocks rose just 2.7% on average in the final 11 months and were higher only 62% of the time.

The good news? "It is worth noting that the January Barometer has been broken lately," Detrick says. "In fact, nine of the past 10 times stocks were lower in January, the final 11 months were higher, with some huge gains in there."

The takeaway? Although hoary market sayings and historical indicators can be entertaining and occasionally useful, past performance – as always – is not indicative of future returns.

The wisest move most investors can make is to build a strong portfolio core tailored to their risk tolerances and goals. Vanguard is among a few fund providers that can help you prepare for just about any eventuality, for a song.

To that end, we've focused on handling 2022's specific challenges – inflation, rising interest rates – in our list of 2022's best Vanguard funds. These stock- and bond-funds are constructed to both benefit from and defend against many of this year's trends.

More commotion in the bond markets sent equities off to a rocky start for the week – though what was shaping up to be a significant gashing turned out to be just a scrape.

The yield on the 10-year Treasury jumped yet again Monday, to as high as 1.808% after starting 2021 at 1.510%.

"While rates have been volatile throughout 2021, the 10-year has not reached this level since prior to the pandemic," says Lindsey Bell, chief money and markets strategist for Ally Invest. "Information received since the start of the new year is making the case for Mister Market that the Fed is going to raise rates and remove liquidity from the market at a faster pace than what was thought just over a week ago."

Remember: The Federal Reserve's members have signaled expectations for at least three hikes to the central bank's benchmark interest rate in 2022. Kiplinger forecasts the Fed will raise rates four times, and over the weekend, Goldman Sachs predicted the same. JPMorgan Chase (JPM) CEO Jamie Dimon upped the ante Monday, saying "I'd personally be surprised if it was just four."

However, heavy selling pressure Monday morning mercifully relaxed into the afternoon as 10-year rates backed off their highs.

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Fresh off its worst week in 11 months, the Nasdaq Composite dropped by as much as 2.7% at its nadir, to 14,530 – just about 80 points from official correction territory (a drop of 10% or more from a peak) – but managed to finish with a marginal gain to 14,942. The Dow Jones Industrial Average (-0.5% to 36,068) and S&P 500 (-0.1% to 4,670) closed down but well off their intraday lows.

Other news in the stock market today:

• The small-cap Russell 2000 slipped by 0.4% to 2,171.
• Gold futures posted a marginal gain, settling at $1,798.80 an ounce.
• U.S. crude oil futures slipped 0.9% to end at $78.23 per barrel.
• Bitcoin, which sat at $41,912.19 on Friday afternoon, dropped below $40,000 earlier in Monday's session but recovered to $41,714.45, a 0.5% decline. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
• Take-Two Interactive (TTWO) is upping its stake in the mobile video game world, announcing today that it is buying Farmville creator Zynga (ZNGA) for $12.7 billion in cash and stock. This works out to $9.68 per ZNGA share – a 61.3% premium to last Friday's close. "This strategic combination brings together our best-in-class console and PC franchises, with a market-leading, diversified mobile publishing platform that has a rich history of innovation and creativity," said Strauss Zelnick, CEO of Take-Two Interactive. "We believe that we will deliver significant value to both sets of stockholders, including $100 million of annual cost synergies within the first two years post-closing and at least $500 million of annual net bookings opportunities over time." The deal is expected to close by the end of the second quarter as long as it gets the green light from regulators and shareholders. ZNGA shares soared 40.7% on the news, while TTWO fell 13.1% – potentially creating an attractive entry point for investors looking to pick up one of the best communication services stocks for 2022 at a discount.
• Moderna (MRNA) was a rare splash of bright green today, jumping 9.3% after the biotech's CEO Stephane Bancel told CNBC's "Squawk Box" on Monday that the company is working on a COVID-19 booster that will target the omicron variant. Bancel said MRNA believes this will be the "best strategy for a potential booster for the fall of 2022" after discussions with various public health officials. This comes as the Centers for Disease Control and Prevention (CDC) said immunocompromised individuals are now eligible for a fourth vaccine dose, as detailed Monday in our free A Step Ahead newsletter.

Will Earnings Jolt the Market?

Interest rates might be dominating headlines now, but a new potential market mover kicks off later this week.

It's the unofficial start of the fourth-quarter earnings season – and while you can check out a schedule of major reports here, big names to watch include Delta Air Lines (DAL), Wells Fargo (WFC) and BlackRock (BLK), which we've previewed here.

According to FactSet, analysts' estimated earnings growth rate for S&P 500 companies in Q4 2021 is 21.7% – if achieved, that would be the fourth consecutive quarter that earnings growth has topped 20%, which should give investors something to look forward to.

"While there are real risks, expectations for continued hiring and spending will support growth in expected earnings," says Jeff Buchbinder, chief equity strategist for LPL Financial, who adds that despite the risks of continued volatility "higher rates have usually been associated with strong market performance" too.

Investors looking for ways to potentially buy on the dip during short-term volatility could consider Kiplinger picks for the year ahead – such as our top stocks for 2022 or our best exchange-traded funds (ETFs).

That said, if you have a greater thirst for risk, and a speculative portfolio allocation you can afford to lose, you might consider swinging for the fences – with the pros' help, anyway.

While Wall Street analysts typically don't make bombastic calls, they have identified a few stocks that they see, ahem, "going to the moon" over the next year or so. These 30 names in particular have consensus buy targets implying at least 100% returns – and in many cases, much more. But watch out: This is a volatile bunch.

Since their debut in financial markets, the vast majority of exchange-traded funds (ETFs) have been passively managed, either tracking an index or tweaking an index in some way to achieve their investment goals.

That has changed in recent years. In 2021 through the third quarter, ETF providers launched 332 products – with 197 of them, or 59%, managed by real, live humans, according to ETF.com. Seven of the top 10 ETF launches in 2021 (ranked by assets under management) are actively managed, gobbling up $10.2 billion in assets amongst them.

One of the more intriguing launches of 2021 sits not far outside the top 10: Goldman Sachs Future Tech Leaders Equity ETF (GTEK) amassed an impressive $260 million in less than three months of existence.

Goldman’s managers and a horde of more than 80 fundamental equity analysts are on a mission to identify innovative companies aligned with durable, long-term growth themes – and ones that trade for reasonable valuations to boot.

You might assume that GTEK is chock-full o’ tech – and you’d be right: Nearly 75% of assets are invested in technology firms; the tech-adjacent communication services sector claims 13%.

Some 62% of the portfolio is invested in U.S. companies, including Marvell Technology (MRVL, semiconductors) and Workday (WDAY, cloud software). But the sizable remainder of assets is spread across another dozen or so countries. Top GTEK holdings MediaTek and Silergy are a pair of Taiwanese silicon firms.

Investing

Find bargain-priced stocks in a pricey market

Since the bottom of last year’s pandemic-led bear market, the S&P 500 index has nearly doubled, posting record after record along the way. The S&P 500 trades at roughly 22 times projected earnings for the next four quarters, according to earnings tracker Refinitiv—a richer valuation than the long-term average. But you can still find high-quality stocks trading at single-digit price-earnings ratios with room to run. Here are some established companies that S&P says are trading at less than 10 times next year’s earnings. (Prices are as of May 7.)

Goldman Sachs (symbol GS, $371), the power­house Wall Street firm, is starting to flex its muscles again. It posted blowout revenues and earnings for the first quarter and has topped profit forecasts for four straight quarters. The company is “executing on all cylinders,” says Ken Leon, analyst at research firm CFRA. If markets stay buoyant and interest rates stay low, the investment bank will benefit from merger and trading activity.

For a turnaround play, consider Invesco (IVZ, $28). The mutual fund company is Deutsche Bank’s “top pick” among asset managers. Investor cash has again been flowing into its funds following eight straight quarters of net cash outflows, from the third quarter of 2018 through the second quarter of 2020. Invesco’s earnings could jump 40% this year, Deutsche Bank says.

National homebuilder PulteGroup (PHM, $62) is well positioned to profit from the post-pandemic housing boom. Demand for new homes is strong, and Pulte has been able to pass along rising material costs to buyers. Pulte reported an $8.8 billion order backlog in the first quarter, up 58% from the same quarter a year ago. According to CFRA, Pulte sees the average selling price for one of its homes climbing to as high as $455,000 for the full year, up from $430,000 in the first quarter. Adam Shell

Build a zero-cost portfolio

Two new ETFs—BNY Mellon US Large Cap Core Equity (BKLC, $79) and BNY Mellon Core Bond ETF (BKAG, $49)—make it possible to build a simple portfolio for free.

There are caveats. For starters, free means no management fee, but that doesn’t include fees incurred by most funds in the ordinary course of business, including transaction costs when the fund buys and sells securities, among other charges. That goes some way to explain why the 47.2% gain in US Large Cap Core Equity over the past 12 month lagged its benchmark, the Morningstar US Large Cap index, by 0.2 percentage point; Core Bond, up 0.2% over the same period, trailed its benchmark, the Bloomberg Barclays US Aggregate Bond index, by 0.01 percentage point.

Also, the ETFs are just over a year old, which gives us pause—but they are index-based, which gives us comfort. Neither ETF offers international exposure.

Play around with the proportions between the two funds, depending on your time frame and tolerance for risk. Young savers with decades-long investment time frames could put 90% of their savings in US Large Cap Core Equity and 10% in Core Bond. Investors with medium time horizons might stash 60% in the US equity ETF and the rest in Core Bond.

Buy the dip during the tech-stock breather

Lately, amid ripping gains in the S&P 500 index, information technology shares have been on the sidelines. They’re not screaming bargains now, but they are marked down. We think these four merit a closer look because long-term-growth drivers are still intact.

Industrywide supply constraints and intense competition from rival Intel have hobbled shares in computer chip maker Advanced Micro Devices (AMD, $79), which are down 14% since the start of 2021—behind the 10% average gain for other semicon­ductor stocks. But business is good. The firm is gaining “more share than expected” in the cloud server market, says Raymond James analyst Chris Caro. Plus, AMD revenues are on track to climb 50% this year compared with a year ago. On average, analysts expect average earnings growth of better than 31% a year over the next three years, according to Zacks Investment Research.

Shares in smartphone chip maker Qualcomm (QCOM, $138) have fallen 9% since the start of the year and now trade at 18 times expected earnings for the year ahead. Supply worries and regulatory scrutiny of the royalties Qualcomm earns on smartphone sales have weighed on the stock. But supply issues should be resolved by late 2021, and Morningstar analyst Abhinav Davuluri believes the company will withstand regulatory investigations and continue collecting licensing revenue. Meanwhile, analysts expect 22% average annual earnings growth over the next three years.

ServiceNow (NOW, $484) shares suffered in April despite a “solid but not exceptional” quarter, says Cannacord Genuity analyst David Hynes. The company’s cloud-based applications help automate business processes and workflow. When stock prices in a “best-in-class asset” fall, says Hynes, “that’s when we’re buyers.” Growth in revenue is slowing, but analysts still expect average annual increases of more than 25% in revenues and 28% in earnings over the next two years.

Companies subscribe to Splunk (SPLK, $118) for its software to gather and analyze piles of data in real time. But shares are down 48% from their 52-week high, in part because of slowing sales growth in recent years. Even so, Splunk is a top pick of BofA Global Research analyst Brad Sills. He says its platform has a competitive edge, and the company has tapped just 4% of a $57 billion market. Sills expects average annual revenue growth of 30% over the next three to five years. —Nellie S. Huang

Shopping

Score rebates and coupons

Add these extensions to your web browser to save money as you shop at online retailers.

Capital One Shopping (for the Chrome, Edge, Firefox and Safari browsers) automatically searches for coupons when you check out at eligible retailers, compares prices against those at other merchants (if it finds a better deal, it provides a link to the other retailer) and offers credits when you make purchases at certain sites. You can exchange credits for gift cards at retailers such as Walmart and eBay. You don’t have to be a Capital One bank or credit card customer to use the extension.

Honey (for Chrome, Edge, Firefox, Opera and Safari) searches for coupon codes on the checkout page at popular sites. When you view an item at Amazon.com, Honey compares prices from other Amazon sellers and alerts you if a different seller is offering a lower price.

Rakuten (for Chrome, Edge, Firefox and Safari) provides cash back when you make purchases at the websites of participating retailers. Receive your cash back as a check or through PayPal.

Save on your spectacles

ZenniOptical.com offers frames and basic prescription lenses starting at $7. Frames from EyeBuyDirect.com start at $6, and standard prescription lenses are an extra $7. Use your web camera to virtually try on frames. You’ll need to know your glasses prescription as well as pupillary distance. If you aren’t happy with your selection, EyeBuyDirect lets you return glasses within two weeks of receiving them for a refund or a one-time replacement. Within 30 days of receiving glasses from Zenni, you can return them for a one-time-use 100% store credit or a 50% cash refund. —Lisa Gerstner

Amazon Prime Day: Two days of deals

The warehouse giant is famously secretive about when it plans to launch its annual sale, but this year’s sale will be on June 21 and 22. Expect the usual discounts on Apple tech, including the third and SE generations and possibly the newest, sixth generation of the Apple Watch, along with the latest Airpods. Home cleaning and fitness gear are also expected to go on sale. You’ll likely see deals on Roomba and Shark vacuums and name-brand athletic wear. If you had something more personal in mind, look for DNA testing kits to hit the sale shelf.

Also be on the lookout for an Amazon gift card bonus, says Casey Runyan, vice president and managing editor of Brad’s Deals, a deals roundup website. “Last year, the offer was for a free $10 Amazon credit when you purchased or reloaded at least $40 on an Amazon gift card, and Amazon has been pretty reliable about having this offer,” she says. To take advantage, use any cash you had planned on spending to reload an old gift card or buy a new one. From there you can use your loaded gift card to make your purchase while also getting a bonus amount. If you don’t see anything you like, buy a gift card now and save it for later. And remember, shop around. To siphon off some of Amazon’s business, competitors such as Walmart and Target are likely to offer deep discounts during Prime Days. So you may be able to find a better deal somewhere else. —Rivan Stinson

Entertainment

While many concert halls, comedy clubs and other live entertainment venues have reopened, we’re always looking for fun, affordable ways to spend time while relaxing at home. These deals are the answer.

Cut the cost to stream movies and TV shows. A Roku Streaming Stick+ ($50) is a cheaper option than the souped-up Roku Ultra ($100), yet it provides the same excellent picture quality (HD and 4K) to stream your favorite movies and TV shows. In addition, the Roku Channel offers Roku users a glut of free TV shows and films, including classics like Reservoir Dogs.

Want to watch new releases at home? Get an HBO Max subscription ($15 per month)—the network has an exclusive partnership with Warner Bros. that allows it to stream 17 of Warner’s major 2021 films while they’re playing in theaters. The list includes Dune, The Suicide Squad and The Matrix 4. You’ll get access to HBO Max’s original content, including such hit shows as The Flight Attendant.

Another way to save on streaming is by purchasing a Disney Bundle. You get a subscription to Disney+, ESPN+ and an ad-supported version of Hulu for $14 a month.

Some streaming networks offer free trials, such as Hulu (30 days, ad-supported) and Apple TV+ (7 days). You can get Apple TV+ free for one year when you buy a new Apple device. And if you’re looking to stream live TV, you can create a free Sling account.

Stream live concerts. For $10 a month, a Bandsintown Plus membership gives you access to more than 25 exclusive live performances every month, plus live Q&A sessions with artists such as Charli XCX, Phoebe Bridgers and other indie musicians.

Let games be your escape. An escape room is a challenge in which a team of players discover clues and solve puzzles to accomplish a task within a limited amount of time. Play an at-home version like Exit: The Sunken Treasure ($13), a one-time puzzle game in which you embark on an undersea journey to secure a treasure before your oxygen or clues run out. It’s a lot cheaper than an in-person escape room, which typically costs $25 to $30 per person.

Prefer to play something more active? Buy a 10-in-one table game ($150 at Wayfair) with stackable surfaces for billiards, foosball, shuffleboard and other family favorites.

Buy discounted e-books. Like to read books on your Kindle, smartphone, tablet or another e-reader? Get free and low-cost e-books through BookBub. You’ll receive a daily e-mail with a selection of discounted titles that match your reading tastes. It’s a great way to monitor flash sales of digital books from your favorite authors while also discovering new writers in your favorite genres.

Pick up a hobby. Tons of free videos on YouTube can teach you new skills, such as cooking, gardening or guitar. Or, if you want to learn how to do things from a celebrity, there’s MasterClass ($180 per year). The site has a wide range of celebrity-led classes, including Steve Martin on comedy, Christina Aguilera on singing and Gordon Ramsay on cooking.

Enjoy virtual alcohol tastings. At-home beer, wine and liquor tasting kits and classes are a great way to try new libations from the comfort of your home (without having to tap a designated driver). Budget-conscious vino lovers can purchase Martha Stewart Wine Co., which offers $7.49 bottles and free shipping for 12 wines every 12 weeks. Whiskey drinkers will enjoy a virtual single-malt whiskey tasting with six friends from Wanderback Whiskey, a family-owned distillery in Hood River, Ore., for $25 per person (including shipping). Or treat your taste buds to a themed cocktail kit from Sourced Craft Cocktails, such as a 12-drink birthday cocktail kit with Ketel One vodka or Singleton Scotch Whiskey ($71.39).

Tech

Pride yourself on keeping up with the latest tech? These gadgets and devices are among the best values. (Prices are list prices unless noted otherwise.)

TVs. 4K TVs offer the sharpest picture but many cost thousands of dollars. One set that rises to the top, at an affordable price, is the 55-inch Hisense 55H9G ($700), says Will Greenwald, senior consumer electronics analyst at PCMag. “It offers a bright, colorful picture and hands-free Google Assistant voice control.” Louis Ramirez, deals editor at products review site Tom’s Guide, suggests the Insignia 55-inch 4K Fire TV ($390); often on sale, this set is “one of the least-expensive big-screen TVs around,” Ramirez says.

Soundbar. TVs are slimmer than ever, but that also means they have less room to fit a high-quality speaker system. The best way to turn up the volume is to purchase a sound bar. Both Greenwald and Ramirez like the Roku Smart Soundbar ($150)—it “packs both a solid sound system and a 4K Roku media streamer into a single package,” Greenwald says. It can easily be paired with Roku’s inexpensive subwoofer ($170) or wireless speakers for even more power, he adds.

Smartwatches. Smartwatches can monitor your health in ways that used to require trained professionals, says Jason Hiner of CNET. The most advanced option is the Apple Watch Series 6 ($299), which can detect falls, track your sleeping, activity and blood oxygen levels, and check how well you’re breathing. For a cheaper smartwatch, Louis Ramirez of Tom’s Guide suggests the Apple Watch Series 3 ($199).

Tablet. Jason Hiner, editorial director of technology news at product-review website CNET, recommends Apple’s 10.2-inch eighth generation iPad ($330), which lets you surf the web and stream videos with ease, he says. “Most of the time,” he adds, “you can also find one on sale for under $300.”

Smartphone. The Google Pixel 4a ($341) is “the best cheap phone you can buy,” Ramirez says. It features a top-notch camera, vibrant display and strong battery life, and it boasts a slim design.

Fitness tracker. Ramirez and Hiner recommend the Fitbit Charge 4 ($99). The device has a built-in GPS to see your pace and distance during runs, a seven-day battery, a swim workout mode, and sleep-quality monitor. Plus, it’s compatible with both Android and iPhone smartphones.

Laptop. With a convertible laptop, you can flip the screen into tablet or stand mode, making it a convenient way to watch movies. “Convertible laptops are a tough crowd to compete in, with excellent entries all around from Dell, Lenovo, Microsoft and others,” says John Burek, executive hardware editor at PCMag. Burek’s favorite for budget-minded shoppers is the 13-inch Envy from HP ($838). This model “punches above its price class,” he says, by offering fast performance, full HD resolution and stereo speakers.

Home security camera. The Wyze Cam v3 ($30) “is hard to beat if you’re on a budget,” according to Ramirez. The weather-resistant device records at 1080p HD resolution and features a color night vision mode that Ramirez says is “impressive for a sub-$50 security camera.” Bonus: The Wyze Cam comes with 14 days of free cloud storage.—Daniel Bortz

Living

Get paid to relocate

To help bring new people to rural desti­nations that need an infusion of fresh blood, cities and states across the U.S. are paying people to relocate. And with remote work looking like it’s mostly here to stay, being in the same city as your employer may no longer be a necessity. The incentives vary, from cash to help buy a home or pay for relocation expenses to student-loan reimbursement to a monthly stipend. Plus, some programs are tossing in extra perks, such as free access to a coworking space for a year and social networking to help you acclimate to your new city.

Ascend West Virginia, for example, recently offered $10,000 during your first year of residency and another $2,000 at the end of your second year to workers who relocate to Morgantown, W.V. You’ll also score free skiing and white-water rafting adventures, a coworking space and access to social programs to help you meet new people and adjust to your new home. And though the application deadline just passed, more spots will be available in 2022, along with an addition of two cities to the program: Lewisburg and Shepherdstown. Tulsa Remote gives remote workers willing to relocate $10,000 to move to Tulsa, Okla., with some of the cash given up front to help with moving and the rest spread out in monthly payments. Tulsa Remote participants also gain access to a coworking space. And for those willing to live on the farm like comics hero Superman, Kansas offers student-loan reimbursement to those willing to live in designated rural zip codes. The Rural Opportunity Zone program will pay $15,000 toward student loans for up to five years. Participants also receive state income tax waivers for up to five years.

But before you pack your bags, read each program’s guidelines, along with the deadline to apply; a program may prefer an applicant with a particular degree or family connection. You also may have to show that you are currently employed and can transition to remote work. The Hamilton, Ohio, Talent Attraction Program Scholarship, for example, gives preference to those with a STEAM (science, technology, engineering, arts and math) degree within the past seven years who plan to become involved with the Hamilton community. The Come Home Award, from St. Clair County, Mich., prefers STEAM degree holders and those with family ties.

Remember that these programs are funded through community grants, so spaces are limited. Plus, if you move before you’ve spent the time you agreed to, you may forfeit some of the cash. —Rivan Stinson

Imagine you walked into a Las Vegas casino and you brought all the money you had, let’s say $1 million, and the casino gave you $154 million to gamble with. How smart do you think that would be for that casino? Well, right now Goldman Sachs Bank USA has 154 times their assets in total gross derivatives!

A number of other giant financial banks are also leveraging up using credit default swaps and similar derivative contracts:

Credit default swaps were at the heart of the financial crisis in 2008 that brought down AIG. The insurance giant AIG had been selling credit default swaps for years, collecting tiny premiums, confident that the mortgage market wouldn’t collapse, and that they’d never have to pay out a claim.

In 2008, the unthinkable happened: Mortgage markets collapsed — and mortgage lenders went to AIG expecting them to make good on their contracts. AIG didn’t have the cash and couldn’t raise it.

In 2021, non-regulated Archegos caused over $10 billion in losses. Archegos was set up as a family office, away from the oversight of the SEC. As such they were allowed to take tremendous bets by using a derivative called a swap, which were bets on stocks using high leverage. Unfortunately, when those stocks went down, massive losses ensued. It is believed that Archegos had $10 billion in assets, yet was allowed to bet on $50 billion to $100 billion of stocks! 5 to 10 times leverage spread out among a number of banks that took losses during March of 2021.

Even Goldman Sachs, which originally wouldn’t do business with Archegos because the founder pleaded guilty to insider trading in 2012, changed their mind and thus was one of the banks that sold stocks in March 2021 to get out of those swap positions with Archegos. It’s estimated that Archegos caused over $10 billion in losses at those banks, not to mention the tremendous drop certain stocks took when the stock selling occurred.

Derivatives Caused the Bankruptcy of Orange County, Calif., in 1994

This bankruptcy happened the way they always do: Slowly at first … and then all at once. In 1994, Orange County, Calif., suddenly went bankrupt. It was the biggest municipal bankruptcy in history at the time, and for almost two decades after that.

How did it happen? The county was struggling to fund basic services and was desperate to find ways to increase returns on its portfolio. Treasurer Robert Citron turned to derivatives — and massive amounts of leverage — for help to increase their returns.

The county got caught short when interest rates turned against them in 1994. When Wall Street refused to roll their short-term loans over, they were forced to realize the losses. The county lost over $1.6 billion much of it as a direct result of its ill-advised speculation in derivatives.

Without access to credit markets, cities and local agencies might have trouble making their own obligations.

In 1998, just a few years later, we saw the spectacular collapse of Long-Term Capital Management — another massively leveraged project that speculated in derivatives.

Fast forward to today.

Germany’s financial giant Deutsche Bank is once again ramping up its exposure to a specific type of derivative called credit default swaps. As of the summer of 2019, the total notional gross exposure of these contracts on Deutsche’s books amounted to $53.5 trillion, though the bank is currently looking to slowly unwind its exposure. These contracts provide a ready way for lenders to insure themselves against the risk of default. But unless managed carefully, issuing or buying too many of these swaps can leave financial institutions dangerously overexposed to a sudden deterioration in the credit markets.

What’s a Derivative?

A derivative is a financial instrument that derives its value from something else. There’s no underlying asset — it’s simply a contractual agreement for one party to pay another in case something specific happens in the market.

In the case of a credit default swap, or CDS, lender A contracts with insurer B to pay money in the event their borrower C defaults.

CDS contracts basically function as insurance on bonds. A big lender might buy some CDSs to hedge its exposure, or to buy time for it to raise cash to cover the risk of a default. And a big insurance company or bank might sell CDS contracts to collect premium to goose its income and cash flow.

As long as the borrower C doesn’t default, all is well.

Well, black swans (crazy events) occasionally happen. As discussed above, that’s what happened to AIG. In 2008, AIG didn’t have the cash and couldn’t raise it.

That left banks and other mortgage lenders high and dry: If AIG couldn’t honor their credit default swap contracts, they didn’t have the cash to keep operating. And everyone who relied on these banks was in trouble, too.

Berkshire Hathaway Chairman Warren Buffett said that “Every company in the United States was a domino, and those dominos were placed right next to each other. And when they started toppling, everything was in line.” Warren Buffett wisely declined to lend money to Lehman Brothers and AIG to keep them afloat during the crisis.

Money markets froze, as sellers of short-term commercial paper couldn’t find buyers. Contagion threatened to cause a chain reaction that could bring down the economy as we knew it. It was only through concerted Fed and Treasury action that the U.S. was able to contain the damage.

Deutsche Bank pulled out of the derivatives business in 2014 after regulators drove up trading costs. But recent clearing technology innovations have substantially cut the cost of trading these contracts, making the business much more viable. As long as defaults are low, that is.

How Widespread Is Derivatives Exposure?

Deutsche Bank isn’t alone, as shown on the above chart, many banks have large derivative exposure.

The risk is that the failure of one large buyer or seller of these contracts could cause contagion: A rapid, cascading effect that could take down one financial giant after another in quick succession. In some worst-case scenarios, the chain reaction of failures could overwhelm central banks and their ability to hold back the damage.

Now, the good news is that these massive notional exposures are just that: Notional. You have to net out assets against liabilities: If you have $100,000 in the bank, and you owe a $100,000 loan, you don’t have a notional exposure of $200,000. You have a net zero exposure.

Likewise with credit default swaps and other kinds of derivatives, you have to net the long positions against the short positions. According to the U.S. government, the fact is that the overall “net current credit exposure” is only $507 billion when they net out all of the derivatives among all of the U.S. institutions. Not exactly chump change, but in theory, it’s within the capacity of the capital markets to absorb.

That said, theory and reality are two different things. The danger of a general derivative-fueled crisis isn’t so much because of the raw value of the exposure. The real danger is counterparty risk: Where one seller that didn’t sufficiently balance its long and short positions gets caught in a cash crunch … and cannot cover its promises to others.

Most institutions that get involved in derivatives look to balance out their exposure. They are both buyers and sellers of CDSs, looking for opportunities for price arbitrage, and finding ways to hedge their exposure by getting collateral from their counterparties.

AIG collapsed in 2008 because it didn’t do this. It made the same mistakes in the 2000s that Orange County made in the 1990s. Instead of using CDSs as a risk-reduction tool as they were intended, it used them as a speculative one. In AIG’s case, they always sold coverage, and never bought it. After all, like any insurance contract, in order to earn the premium, all they had to do was provide a promise. It was free money —until the music stopped.

And when it stopped, AIG was caught with a pile of naked CDS promises it had sold that was worth half a trillion dollars: $300 billion to CDS buyers in the U.S. and $200 billion in Europe.

Goldman Sachs Bank USA will probably tell you not to worry because their “total credit exposure from all contracts” is only $116 billion when you net out the derivatives they hold with other banks.

And they are correct that the danger isn’t in the gross value — or even in the overall net exposure. Net exposures are not that high. The real dangers are as follows:

1. Greed. The temptation to speculate in these highly leveraged positions, rather than use them as risk management devices. AIG got addicted to the small but steady stream of premiums that they mistook as profits, ignoring the danger of the massive liability accumulating on their books for years. And at Lehman Brothers, senior management started overruling risk management professionals.
2. Incompetence. The people running Orange County didn’t mean to go bankrupt. They just didn’t understand what they were getting into. And they dragged a number of cities and local pension funds with them.
3. The lure of false accounting. Derivatives are complex — sometimes too complex for regulators and the investment community to understand, outside of a few specialists. To crooks, that’s a feature, not a bug.
4. Counterparty risk. See, it doesn’t matter if you think your derivative position is totally balanced and nets out to zero. Because when you have a major bond issuer in your portfolio go belly up and you reach out to the next AIG, expecting them to wire the cash they promised, and they can’t do it, you really weren’t balanced at all. And when you fail, two of your own CDS buyers may be counting on you to meet your obligations the next day. And when you fail, they fail. But they have customers, too. And so on.
   For example, Deutsche Bank was having substantial financial problems in 2020. Their stock has plummeted 90% from its 2007 price and they posted a huge loss for 2019. Yet they have $53.5 trillion in gross derivate exposure.

And then it might get worse. When every bank has a significant portfolio of derivatives without much transparency, and every bank has counterparty risk, no bank can risk doing business with any other. Which means the next time we have a major financial challenge, even a healthy bank might not want to buy the commercial paper from another bank, and this commercial paper market is what makes the entire financial world move. This nearly happened after Lehman Brothers went bankrupt, causing a run on money markets as even institutions got spooked.

When a crisis hits, things get very ugly very fast. Like Orange County’s bankruptcy, the crisis on Wall Street happened slowly at first — and then all at once. This is what Ben Bernanke and the Federal Reserve, Hank Paulson and the Treasury Department and President George Bush were facing over that fateful weekend in September of 2008 when they had to bail out the financial system.

So it’s true on the surface theoretical level that it’s not the gross exposure to credit default swaps that matters. It’s the net exposure. But it’s also true that if just one weak link in the chain happens to get caught short, like AIG, it doesn’t matter. The rapid-fire chain reaction that can occur is unpredictable but could still be devastating — even if almost everybody thinks they did a good job netting out CDS sales and purchases.

The Bottom Line

No, you don’t have to panic about the total notional value of the derivatives market. We aren’t going to lose 10 times the total global economy.

But we could still see massive disruption, so diversification matters. And it’s important to help protect yourself. At this time, if you are in or near retirement you might want to get a second opinion on your current retirement plan with a financial advisor that follows the fiduciary standard. Make sure you have the right investment mix for a diversified portfolio that has the right amount of risk for you.

Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Stuart Estate Planning Wealth Advisors are not affiliated companies. Stuart Estate Planning Wealth Advisors is an independent financial services firm that creates retirement strategies using a variety of investment and insurance products. Neither the firm nor its representatives may give tax or legal advice. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Any references to protection benefits or lifetime income generally refer to fixed insurance products, never securities or investment products. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Any media logos and/or trademarks contained herein are the property of their respective owners and no endorsement by those owners of Craig Kirsner or Stuart Estate Planning Wealth Advisors is stated or implied. Our firm is not affiliated with or endorsed by the U.S. government or any governmental agency. The information and opinions contained herein provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by Stuart Estate Planning Wealth Advisors. 874208 – 4/21

The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Stocks finished the week in mixed fashion as the Dow Jones Industrial Average was weighed down by financial stocks, but the tech-heavy Nasdaq Composite rebounded following yesterday's heavy selloff.

Big banks turned lower after the Federal Reserve declined to extend a pandemic-era exemption that allowed them to hold less loss-absorbing capital on their books. Because banks use money to make money, the market typically boos any increase in capital requirements, which lowers banks' revenue potential. JPMorgan Chase (JPM, -2.3%) and Goldman Sachs (GS, -1.0%) were among the Dow's top laggards as a result.

Tech stocks, meanwhile, returned to their winning ways after a Thursday spike in bond yields stoked inflation fears that sent traders scrambling out of the highest-flying names. Facebook (FB, +4.1%) popped on news that it is working on a version of its Instagram site suitable for children under the age of 13.

"Treasury yields pulled back slightly overnight following yesterday’s scary-looking spike, and that helped the bounce in the tech sector even as global risk assets remained under pressure in the wake of yesterday's dip on Wall Street," wrote Ken Berman, founder and CEO of GorillaTrades. "The fact that the Fed didn't extend an emergency rule that allowed banks to keep less reserves caused some turmoil among financials in early trading, but volatility remained relatively low in the other sectors."

At Friday's closing bell, the blue-chip Dow lost 0.7% to close at 32,628, while the Nasdaq gained 0.8% to 13,215. The broader S&P 500 split the difference, dipping 0.1% to finish at 3,913.

Other action in the stock market today:

• Visa (V) plunged 6.2% on a report that the Justice Department is opening an antitrust probe.
• FedEx (FDX) jumped 6.1% after beating analysts' earnings estimates.
• The small-cap benchmark Russell 2000 added 0.9% to 2,287.
• Gold futures managed a 0.5% improvement to $1,741.90 per ounce.

There's something to be said for sticking to what's working.

Despite a couple of days of underwhelming performance, the Dow is outpacing the Nasdaq by a wide margin so far this year.

Partly that's because investors in priced-to-perfection tech stocks have been quick to sell after years of big gains. And partly that's because the Dow contains some of the largest and most liquid ways to play promising contemporary trends.

After all, if you're investing in stocks set to benefit from the return of travel, leisure and hospitality, you're surely checking out Dow stock Walt Disney (DIS). If you're looking for stocks that offer exposure to a wider reopening of the economy, you'll recognize longtime Dow component Coca-Cola (KO) as a smart play. And there's no way you can add bets on big-time infrastructure spending to your portfolio without including Dow stalwart Caterpillar (CAT).

Indeed, whether you're looking to bet on a rotation into more value-oriented names or the potential outperformance of the most cyclical stocks, the Dow's 30 stocks contain multitudes. To get an idea of what the blue-chip average can do for you, have a look at how analysts' rate all 30 Dow stocks at this point in the economic cycle.

Many of us have followed the dramatic rises and precipitous falls of bitcoin, and cryptocurrencies in general, over the past few years. Some may have written them off entirely after 80% declines in 2018, only to see them roar back into investors’ collective consciousness in 2020. Certainly sentiment has shifted over a short two years — more institutional investors are taking a hard look at crypto, and previous naysayers have softened their views.

This all leads to one question: How much cryptocurrency should I own?

Math to the rescue

It goes without saying that this is a hard question to answer. But we can borrow a page from modern quantitative finance to help us arrive at a potential answer. For years, Wall Street “quants” have used a mathematical framework to manage their portfolios called the Black-Litterman model. Yes, the “Black” here is the same one from the famous Black-Scholes options pricing formula, Fischer Black. And “Litterman” is Robert Litterman, a longtime Goldman Sachs quant.

Without getting into too much detail, the model starts with a neutral, “equilibrium” portfolio and provides a mathematical formula for increasing your holdings based on your view of the world. What’s amazing is that it incorporates not just your estimate about how an investment might grow, but also your confidence in that estimate, and translates those inputs into a specific portfolio allocation.

Your starting point: 0.50%

The Black-Litterman model uses the global market portfolio, meaning all the asset holdings in the world, as its starting point for building a portfolio. This means that, if you don’t have any other views on what investments might perform better or worse, this is the portfolio you should consider holding.

In early 2021, the global market for stocks totaled $95 trillion and the global bonds market reached $105 trillion. The cryptocurrency market as a whole was valued at roughly $1 trillion. This means that cryptocurrency represents 0.5% of the global market portfolio.

Just as there are plenty of arguments to hold more cryptocurrency, there are also many arguments to hold less. However, from the model’s standpoint 0.5% should be your starting allocation.

Now add your views

This is where the mathematical magic comes into play. For any given growth rate in cryptocurrency (or any investment for that matter), the Black-Litterman model will return the amount you should hold in your portfolio. What’s more, you can specify your level of conviction in that assumed growth rate and the model will adjust accordingly.

In the below chart are the portfolio allocations to bitcoin derived from the Black-Litterman model. This chart can serve as a useful guideline when thinking about how much cryptocurrency you might want to hold.

How to use it: Select how much you think bitcoin will overperform stocks, from +5% to +40%. Each return expectation corresponds to a line on the chart. For example, if you think that bitcoin will outperform stocks by 20%, this corresponds to the purple line. Now, follow the line left or right based on how confident you are. If you’re at least 75% confident (a solid “probably”), the purple lines up with a 4% allocation to bitcoin.

One of the most interesting things to note is how high your return estimate needs to be and how confident you need to be in order to take a sizable position in bitcoin. For example, for the model to tell you to hold a 10% allocation you need to be highly confident that bitcoin will outperform stocks by 40% each year.

Also of note, it does not take much to drive the model’s allocation to 0% allocation, i.e., no crypto holdings. If you don’t think that there’s a 50/50 chance that bitcoin will at least slightly outperform, the model says to avoid it entirely.

How we got here

The inputs to the Black-Litterman model tell an interesting story in and of themselves. The main inputs into the model are global market caps, asset volatility and the correlation between assets.

It goes without saying that cryptocurrencies are risky. Over the last five years, bitcoin’s volatility was six times that of stocks and 30 times that of bonds. At its worst, the digital coin saw an 80% drop in value, while stocks were down 20%. Other cryptocurrencies fared even worse.

If an asset is volatile, and one is not able to diversify that volatility away, then investors will require a higher rate of return on that investment, otherwise they will choose not to invest. The fact that bitcoin is so volatile, but has such a small number of investors (relative to stocks or bonds) suggests that many investors still do not see the potential returns worth the risks. On the other hand, cryptocurrencies are at their core a new technology, and new technologies always have an adoption curve. The story here may be less about expected return versus risk and more about early adoption versus mass appeal.

The final ingredient in the model is bitcoin’s correlation with stocks and bonds. Below you can see that bitcoin has some correlation with both stocks and bonds, meaning that when stocks go up (or down), bitcoin may do so as well. The lower the correlation, the greater the diversification an asset provides to your portfolio. Bonds have a low correlation with stocks (1.5%), which makes them a good ballast against turbulent markets. Bitcoin’s correlation is higher (23.7%), meaning that it can provide some diversification benefit to a portfolio, but not to the same degree as bonds.

Correlation heatmap

While we aren’t able to tell you if bitcoin will be the next digital gold, this mathematical model can help you think about what kind of allocation to crypto might be appropriate for you and what assumptions about risk and return might be underlying it.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

As a financial planner and retirement podcast host, I regularly engage with a lot of money experts. I’ve interviewed hedge fund managers, award-winning financial authors and CEOs of giant investment firms, and have gained incredible insights from those conversations.

But a recent interview on the Stay Wealthy Retirement Show taught me that all the financial education in the world doesn’t matter if your actions don’t align. The conversation I’m referencing is with Morgan Housel, partner at the Collaborative Fund and a winner of a New York Times Sidney Award.

Housel recently came out with a new book, The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness, which aims to explain why how we act matters more than what we know. Listening to his words, I came to the realization that what he says about the psychology of money is absolutely true, but the same philosophy also applies to other aspects of our lives, like our health and our habits.

The Psychology of Money

There are people out there in the world who have no financial training, no financial education and no experience with money, says Housel, yet they manage to do quite well. Many, in fact, manage to morph into the “millionaire next door” type many of us strive to become. They live below their means, save and invest money like it’s their job, and build real wealth that lasts a lifetime without a lot of fanfare or ups and downs.

But Housel says the opposite is also true. There are Harvard MBAs and partners at Goldman Sachs who fail during the best financial markets and go bankrupt all the time.

Why is that?

Housel insists that this is where the psychology of money comes into play.

“What matters with finances and investing is how you behave,” he says. “It’s not what you know.”

For example, can you control your relationship with greed and fear? If not, then it doesn’t really matter how many hours you spent studying finance at Yale.

Without a handle on your emotions, you might be the type of person who sells all their investments on March 16, 2020, when the Dow Jones Industrial Average fell a record 2,997 points.

Can you plan for the long-term and stay the course? If not, then you could have made any number of tragic mistakes in a year like 2020, and you may have no idea what steps to take next.

In the meantime, a long-term disciplined investor who has a handle on their emotions (and a long-term investing plan) may have done nothing during the beginning of the stock market tumble in March of this year. Some with the most discipline may have even invested more during the market’s darkest days.

“These things cannot be taught in an academic setting,” says Housel. This is the “soft behavioral side of investing” that has little to do with numbers or math and much more to do with someone’s temperament and ability to just stay the course.

You can be the best stock picker in the world, says Housel. “But if you lose your head, none of it matters.”

Why Having a Plan Matters More Than Ever

This lesson may be even more crucial right now, considering the uncertainty the pandemic has created. When this subject comes up, I find that so many knowledgeable and informed investors are rightfully perplexed by how the stock market has behaved.

Housel admits there is no other similar period in our history where the stock market has rebounded so quickly in the midst of an economic disaster. After all, during some of the worst of the Great Depression from 1929 to 1932, the Dow Jones fell by 89%.

But we are not living in the 1920s, and the world is dramatically different than it was 100 years ago. Housel points out that a handful of huge tech companies make up a disproportionate share of the S&P 500, and many of them were unknowingly set up to thrive in a pandemic.

And, he’s right. As of right now, some of the biggest players in the S&P 500 include the likes of Microsoft (MSFT), Apple (AAPL), Amazon (AMZN), Alphabet Class C (GOOG), Facebook (FB) and Johnson & Johnson (JNJ).

This is where you have to realize that “the stock market is not the economy,” says Housel. The growth of technology has made the disconnect between small business and major tech companies wider than ever. So yes, thousands of restaurants may have been closed or operating at limited capacity for months. And some industries, such as travel, have been hit harder than most.

“But in July of last year, Amazon.com shipped 490 million packages in the United States,” he says.

Back in March when everything began falling apart, Housel says nearly everyone was in absolute shock. But now it’s almost as if someone snapped their fingers and we’re nearly back to all-time highs.

This is why you must have a financial plan you can stick to. What’s going on right now may have been impossible to predict, but those who had a plan to follow are doing well.

Housel says it’s impossible to not be emotional about your kids or your money, and being in touch with your emotions is OK. But your financial plan, and your ability to follow it, are what will keep you on track while helping you avoid emotional investing decisions based on fear or greed.

The Difference Between Getting Wealthy and Staying Wealthy

Housel also points out that there’s a difference between knowing how to get wealthy and knowing how to stay that way.

The author loves to tell the story of Jesse Livermore, who is known as the greatest short-term investor of all time. Livermore made a name for himself as one of the most successful stock traders of the 1910s and 1920s, and up until shortly after the Great Depression began in 1929.

When the worst day of the Great Depression hit, Livermore revealed he had shorted the stock market and made the equivalent today of $3 billion in a single day.

Unfortunately, Livermore didn’t know how to set boundaries or plan for the worst of times. He kept investing more and taking on more risk, and he eventually went broke and committed suicide.

Livermore’s story is tragic, but Housel says it goes to show that getting rich and staying rich are two entirely different skill sets. He knew how to pick stocks and anticipate big market swings, but Livermore had no idea how to hold on to what he had earned.

According to Housel, people who want to build long-term wealth need to learn how to nurture those skills separately. Getting rich requires some optimism and some skill, he says, but staying rich requires pessimism.

And that’s why you need to “save like a pessimist and invest like an optimist,” says Housel.

Ultimately, that’s why Housel himself sometimes goes against the grain when it comes to traditional financial advice. The award-winning financial writer paid off his mortgage recently even though it made no mathematical sense.

You can get a 30-year home loan with a fixed rate of 2.9% right now, and Housel says he feels confident the stock market will return a lot more than that.

But he says he’s not just trying to score the best investment returns. “I’m also trying to sleep well at night.”

In the crazy economy we’re in right now, most would agree that freedom and security are worth their weight in gold.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Green stocks are white hot. Stocks poised to profit from an expected multi-decade transition to clean energy, renewable power, electric-powered transportation and zero pollution emissions have skyrocketed in popularity—and in price. That means environmentally minded investors who want to grow their wealth by investing in the planet should tread carefully.

Many green stocks are up two-, three-, four-fold and more over the past year. Shares of electric car maker Tesla have risen 480%, for example, and the stock of solar-energy company Enphase Energy has surged 423%. From the start of 2020 through late January, a basket of U.S. renewable-energy stocks has outgained the broad S&P 500 index by more than 200 percentage points, with the median price-earnings ratio of the renewable names, based on projected profits, 40% higher than the S&P 500’s, according to Goldman Sachs. Analysts at investment bank Raymond James call this a “breakout moment” for green investing but advise investors “not to throw caution to the wind.”

That means brace for a pullback in the short term, but don’t let passing clouds eclipse an overall bullish outlook. “A shakeout is inevitable,” says Chris Marangi, co-chief investment officer of value investing at Gabelli Funds and comanager of its new Love Our Planet & People exchange-traded fund. Interest in stocks with an environmental focus, he says, has reached a level reminiscent of past manias. Given the lofty P/Es, a price decline of “30%, 40% or even 50%” is possible for green stocks that have doubled, tripled or quadrupled in value, says Lucas White, manager of GMO Climate Change Fund.

Multi-decade megatrend. But long-term investors have little call to avoid green stocks altogether. A stock that looks expensive today, White says, might turn out to be a bargain in the future, as profit and revenue growth catch up to share prices. Given the world’s heightened focus on climate change, the green investing trend has “barely reached adolescence,” Marangi says. Wealth manager Credit Suisse dubs it a “multi-decade megatrend.”

Wall Street and, increasingly, cor­porate America are on board in a big way in the fight against climate change. In a letter to CEOs in January, Larry Fink, CEO of BlackRock, which manages nearly $9 trillion and is the world’s largest asset manager, used his clout to call on the nation’s top executives to confront the global threat. “There is no company,” Fink wrote, “whose business model won’t be profoundly affected by the transition to a net zero economy,” which he defines as net zero greenhouse emissions by 2050. Firms that don’t act, he warned, “will see their businesses and valuations suffer.”

Many of America’s top companies are pledging to do more. General Motors, the nation’s biggest automaker, for example, recently said it will phase out vehicles that run on gas by 2035. And investors are voting green with their investment dollars. Buying stock in companies that in some way protect the environment is becoming as common as buying shares of smartphone makers, vaccine developers and banks. Flows of money into U.S. stock funds with a focus on environmental, social and governance factors—ESG funds—are hitting record highs, and the E in ESG is the top focus of investors in the fast-growing ESG movement, according to a BlackRock survey.

Sustainable investing will certainly be in the spotlight during 2021, given the Democratic sweep of the White House and Congress. President Biden’s planet-friendly agenda favors renewable energy, electric cars and green buildings, and addressing climate change is now a focus in virtually every corner of his cabinet. Expect more public spending on green initiatives amid Biden’s push to make the U.S. a 100% clean-energy economy by 2050. E stocks are also benefiting from social activism and public policy support abroad, such as mandated zero-emission targets in Europe and China.

To honor Earth Day this month, we’ve highlighted seven leading stocks on the environmental front. Due to the big rally, it’s tricky to gain green exposure while also managing risk. It makes sense to wait for a dip in price before buying first-in-class green stocks that now carry nosebleed valuations, such as solar-tech firm Enphase Energy, whose shares sport a triple-digit P/E. Other candidates for a watch list include solar-energy-system designer and installer Sunrun, with a P/E of 84, and TPI Composites, which makes blades used in wind turbines and trades at 47 times earnings.

But so-called “green chips,” including water-tech company Xylem and NextEra Energy, a powerhouse utility with a renewable-energy portfolio, are good buy-and-hold candidates now and likely to reward long-term investors; the two are included in our list below. We also looked beyond the expensive pure plays in the electric vehicle sector—think Tesla—to consider less obvious beneficiaries, such as companies that make EV components. Finally, we trolled for shares that, if not exactly overlooked, are trading at relatively cheaper valuations than more-vaunted green peers. Prices are as of February 5.

Aptiv

Auto parts makers are an indirect but prudent route to the growing EV market. Sophisticated electrical components from Aptiv (symbol APTV, $147) help power EVs and distribute data throughout a vehicle, essentially acting as the car’s brain and nervous system. “You are paying nowhere near the nosebleed valuations of Tesla, and Aptiv’s technology is on the cutting edge,” says Andy Braun, manager of the Pax Large Cap fund.

Aptiv, which counts 23 of the 25 biggest automotive-related firms as customers, is a beneficiary of the long-term EV growth trajectory. Although electric passenger cars now account for just 3% of total global auto sales, that’s expected to more than double, to 7%, by 2023 and swell to 31% by 2040, ac­cording to energy research company BloombergNEF. Following two years of global automotive and EV sales declines, pressuring sales at Aptiv, research firm CFRA is expecting a post-pandemic pickup in auto sales overall of 9% this year. That will spur a 2021 revenue rebound of 19% for Aptiv compared with 2020, and an earnings-per-share increase from $1.84 last year to $3.75 this year. “We’re a big believer in rocket-like penetration of EVs globally,” says Will Riley, manager of Guinness Atkinson Alternative Energy. “Aptiv has a big part to play.”

Ardagh Group

Investing in a company that makes aluminum cans (and glass containers) that you put out for recycling might not seem as exciting as investing in a state-of-the-art wind farm. But recycling-focused Ardagh (ARD, $19) is a rare green stock trading at about half the valuation of the broad market. The Luxembourg-based firm supplies leading brands, including Heineken, Coca-Cola and Del Monte, with sustainable packaging for beer, soda and canned foods. Ardagh’s claim to green fame? Aluminum is “infinitely” recyclable, which means it can be recycled over and over again. Cans are the most recycled container in the world, according to Metal Packaging Europe, an industry association.

That makes Ardagh an anti-plastic play. Plastic (8 million tons of which winds up in oceans every year, says the International Union for Conservation of Nature) can only be recycled one time, into new plastic, according to Earth911, a recycling proponent. The higher recycling rate for aluminum lowers Ardagh’s carbon footprint and boosts demand for its cans, says Marangi, at Gabelli Funds.

The company’s earnings are estimated to rise nearly 17% this year and 16% in 2022, according to earnings tracker Refinitiv. Growth is being driven by strong long-term demand for earth-friendly packaging and the expected reopening of bars, restaurants and hotels where beer and other canned beverages are sold. Business is forecast to pick up as COVID-19 vaccines roll out and the global economy continues to reopen. But given that Ardagh shares have gone nowhere in the past 12 months and the stock carries a low P/E of 12, Ardagh is likely to be less volatile than the highfliers.

Avangrid

Avangrid (AGR, $48) is a stock that could energize your portfolio. This gas-and-electric utility, trading at a below-market P/E of 21, has been overlooked by investors during the recent renewable-energy boom, despite its growing wind-energy portfolio. Its business profile is similar to NextEra Energy, a Wall Street favorite whose shares have nearly doubled since last year’s market low. “Avangrid has the potential to replicate” Next­Era’s success, says Tim Winter, a portfolio manager specializing in utilities at Gabelli Funds. We think there’s room for both in your portfolio (see more on NextEra, below).

Two big renewable-energy projects should help Avangrid bolster its revenue stream, including its Vineyard Wind project off the coast of Martha’s Vineyard that will generate electricity for 400,000-plus homes. Under new CEO Dennis Arriola, who took over in July, Avangrid is expected to nearly double its current 7.6-gigawatt renewables portfolio, to 13.2 gigawatts, by 2025 and boost its 2021 earnings by 21% over 2020 levels, to $2.35 a share, according to Gabelli Funds.

General Motors

If you want to hitch a ride on the electric vehicle stock market journey, put your thumb out for General Motors (GM, $54), which is electrifying its product line aggressively. Choosing GM, helmed by CEO Mary Barra, over Elon Musk’s Tesla juggernaut is all about share valuation. GM stock recently traded at just nine times earnings—vastly cheaper than Tesla, which is sporting a P/E of 200-plus and priced as if nothing can go wrong. GM shares trade as if the company’s only focus is gas-guzzling vehicles. Conventionally powered vehicles still account for all of the company’s profits, but GM is speeding up its EV transformation and expects profits to follow in coming years. “We are all-in on electrification,” Barra said in January.

GM plans to launch 30 new all-electric models globally by 2025 and expects that four out of 10 cars it sells in the U.S. by then will be battery-powered EVs. The carmaker also has a big footprint in China, the world’s largest EV market, and is a leader in battery technology. GM’s battery can power a car for an estimated 400 miles on a full charge, a range competitive with that of Tesla’s Model S. “Don’t ignore transformations at companies like GM, as they may be lower-risk situations,” says Gabelli’s Marangi.

In the meantime, GM’s old-school business of selling gas-powered SUVs and pickup trucks should boost sales this year as the economy moves toward more normal activity, analysts say. GM’s revenues are estimated to increase more than 16% in 2021, to nearly $141 billion, and earnings per share should rise 24%, to $6.20, forecasts CFRA. This isn’t your dad’s GM, but its stock hasn’t yet been caught up in the momentum lifting other EV stocks to unsustainable levels. “GM is one stock that will survive the EV mania,” say analysts at stock research firm Zacks, which rates it a strong buy. “It has the scale to make a big splash.”

NextEra Energy

The Florida-based electric utility, which has a market capitalization of $164 billion, is the largest U.S. utility measured by both stock market value and retail electricity produced and sold. But its inclusion on our list of top green stocks stems from its sizable and growing portfolio of wind, solar and battery storage projects. It has “a competitive advantage over the other players,” says Gabelli’s Winter.

NextEra (NEE, $84) is part stodgy electric utility, with a secure dividend (the shares yield 1.7%), and part green growth engine. It “gives investors the best of both worlds,” says Andrew Bischof, senior stock analyst at Morningstar. The utility’s unregulated clean-energy arm, NextEra Energy Resources, is the main ESG attraction for investors.

NextEra’s business is heading in the right direction as renewable energy gains a bigger foothold, tax credits for wind projects are extended through year-end, and a new White House administration takes steps to reduce the nation’s use of fossil fuels. In 2020, more than 40% of NextEra’s $4.6 billion in earnings came from its Energy Resources unit, and there is a huge pipeline of new renewables business. The company believes it can construct 23 to 30 gigawatts of new renewable-energy projects through 2024, one and a half times the size of its entire portfolio at the end of 2019. Another big plus for the utility is that substantially all of NextEra’s customers are locked into long-term power contracts.

Given its strong growth prospects, NextEra expects to post profits at the top end of its projections through 2023. The company is forecasting earnings growth of as much as 10% this year and 6% to 8% in 2022 and 2023. But Morningstar analysts are betting the utility will top that.

Renewable Energy Group

Renewable Energy Group (REGI, $99) is a clean-fuel company that produces biodiesel made from animal fats, inedible corn oil, recycled cooking oil and vegetable oils. Similar to how ethanol is blended with gasoline, biodiesel is blended with petroleum diesel. Biodiesel fuel reduces greenhouse emissions and fossil fuel use, and it is increasingly being adopted by trucking firms and governments to further their ESG goals.

Sure, EVs grab most of the attention, but they’re not yet viable for most trucking runs. Trucks, which transport roughly 70% of all U.S. goods, will require cleaner-burning biodiesel and renewable biodiesel blends for years to come, making Renewable Energy Group an “exciting, high-potential investment,” says GMO’s White.

The small-capitalization stock, with a market value of $4 billion, trades at 18 times estimated 2021 earnings, which is “not crazy expensive,” White says, and should appeal to investors looking for fairly valued ESG plays. In five-plus years, the current price might look like a bargain, White says.

This year could be a bounce-back year for earnings as the economy recovers. Analysts expect profits to jump a whopping 66% over 2020 levels and sales to rise 15%, according to Refinitiv. The stock will get a lift again this year from the government’s $1-per-gallon biodiesel-mixture tax credit for trade and business users, which has been extended through 2022.

Xylem

Water is vital for life. But less than 1% of the water on earth is usable by people, and one in three humans lack access to safe water, per research from Fidelity Investments. Xylem (XYL, $98), a water-technology firm, is focused on combating a water scarcity crisis that experts blame on population growth, climate change and aging infrastructure.

Xylem uses innovative methods to upgrade infrastructure and to deliver clean water to people in 150 countries. Xylem’s digital, data-driven approach to water usage (think smart meters and sensors that detect pipe leaks, for example) helps industrial firms, utilities, municipalities and homeowners conserve and manage water. The company’s technology also helps reduce the amount of “non-revenue water,” a term for the 30% to 40% of water worldwide that’s lost due to pipe leaks, unauthorized use and inefficiencies. Xylem’s treatment technologies remove harmful pollutants from water and wastewater.

Growth catalysts for Xylem include a more climate-minded regime in the U.S. and continued expansion in emerging markets, including China, India and Brazil, as well as strategic acquisition opportunities. And Xylem’s backlog of projects to be delivered this year is “up by more than 30%,” according to Morningstar analysts. Those pluses should help boost revenue growth by 5% to 6% in 2021, according to CFRA, following a sales drop of about 9% last year due to COVID-related project delays and a decline in commercial infrastructure spending as the economy slowed. Rebounding from two years of shrinking profits, Xylem could see earnings increase by a hefty 34% in 2021, says CFRA, which recommends the stock.

Investors may have seen a large run-up in their technology stocks. Stocks like Apple, Facebook, Google and Amazon all have had a great run. However, there is a reason for the saying “Don’t put all your eggs in one basket.” It may have something to do with the risk of owning too much of one stock.

According to a recent Goldman Sachs Asset Management study, 23% of the stocks in the Russell 3000 Index (a broad measure of the U.S. stock market) lost more than a fifth of their value in an average calendar year from 1986-2019. The study found the average stock was more than three times as volatile as the Russell 3000 index itself (Source: FactSet, GSAM).

Source: Goldman Sachs Asset Management

Given the research from Goldman Sachs, investors with a large concentration in one stock may be on a wild and risky ride in the years ahead.

Volatility is a measure of risk, or how much the stock price fluctuates. If a single stock is more than three times as volatile as the index, brace yourself for a wild ride. Volatility on the upside is a good thing. Negative volatility, or price decreases — as in case of Boeing, which is down 38% in the past year — can lead to steep losses (Source: Morningstar). That is why investment advisers preach diversification. Spreading the risk around different stocks can mitigate the effects any one stock has on the whole portfolio.

How Much Is Too Much of One Stock?

Despite research to the contrary, some investors are overweighted to one stock. When one stock is more than 10% of the portfolio, we call this a concentrated stock position, and a red flag goes up. There may be several reasons for the concentrated stock position. Some can't sell their company stock due to employer restrictions. Others don't want to pay the income tax on the gain. Some think the stock may go higher.

Investors should not underestimate the risk of owning too much of one stock – see Lehman Brothers, WorldCom, Enron, Pier One, Frontier Communications and Hertz to name a few examples.

What to Do about an Overweighted Portfolio

If you are concerned about the risk one large stock position has on your retirement nest egg (as you should be), here are four solutions to consider:

Gift Shares to Charity

Gifting stock to a qualified charity is one idea. Donating appreciated shares allows you to get rid of the stock and not incur the tax from selling. You want to gift the shares with the lowest cost-basis or the largest taxable gain.

Sell with Tax-Loss Harvesting in Mind

Before you sell the stock, see if you can use losses in other parts of the portfolio to offset the taxable gain. We call this tax-loss harvesting. This can only be done in non-retirement accounts. We manage several portfolios that actively harvest losses throughout the year when they come up. We try to match the harvested losses to the gain incurred from selling the concentrated stock position. This helps reduce the net taxable gain at the end of the year. The smaller the taxable gain, the less tax owed, which is a good thing.

Taxpayers can also deduct $3,000 of losses from their federal taxable income each year. Unused losses are carried forward to future years on your federal tax return, and some states may allow you to carry forward unused losses on your state tax return as well.

Exchange Fund

For more sophisticated and wealthy investors, an Exchange Fund swaps your stock for a pool of diversified stocks. Since it is a swap, and not a sale, there is no immediate income tax due. The benefit is the new pool of stocks provides greater diversification. Exchange Funds are relatively new, available only to Qualified Purchasers (defined as those with investable assets greater than $5 million) and illiquid — generally a seven-year lock-up.

Zero-Cost Collar

Investors can also use options to mitigate the downside of a stock's loss. One strategy is a "zero-cost collar." A zero cost-collar involves writing a call option — selling a call — and using the income to buy a put option on the underlying stock. Buying the put option gives you the right to sell the stock at a predetermined price. That comes in handy if the stock price drops. Writing the call option provides income to buy the put option, hence the "zero-cost."

It doesn’t always work out to a zero-cost, but it is usually close. The figure above illustrates a collar strategy with Chubb Stock (ticker symbol CB). Remember: Options involve risk, are complicated, and can reduce your upside. It's best to consult with an experienced professional before implementing.

The Biggest Risk

The biggest risk, in my opinion, is not having a plan to deal with a concentrated stock position. Letting the years go by without doing anything only complicates the problem. The stock position may get larger and the tax bill higher. In my opinion, a diversified portfolio should not have more than 10% of the assets in any one stock.

Luckily, as described above, there are several ways to manage a large stock position in a tax-efficient and smart way. It all starts with a plan.

The views and opinions expressed in this article are solely those of the author and should not be attributed to Summit Financial LLC. Investment advisory and financial planning services are offered through Summit Financial, LLC, an SEC Registered Investment Adviser, 4 Campus Drive, Parsippany, NJ 07054. Tel. 973-285-3600 Fax. 973-285-3666. This material is for your information and guidance and is not intended as legal or tax advice. Legal and/or tax counsel should be consulted before any action is taken.

Investment advisory and financial planning services are offered through Summit Financial LLC, an SEC Registered Investment Adviser, 4 Campus Drive, Parsippany, NJ 07054. Tel. 973-285-3600 Fax. 973-285-3666. This material is for your information and guidance and is not intended as legal or tax advice. Clients should make all decisions regarding the tax and legal implications of their investments and plans after consulting with their independent tax or legal advisers. Individual investor portfolios must be constructed based on the individual’s financial resources, investment goals, risk tolerance, investment time horizon, tax situation and other relevant factors. Past performance is not a guarantee of future results. The views and opinions expressed in this article are solely those of the author and should not be attributed to Summit Financial LLC. Links to third-party websites are provided for your convenience and informational purposes only. Summit is not responsible for the information contained on third-party websites. The Summit financial planning design team admitted attorneys and/or CPAs, who act exclusively in a non-representative capacity with respect to Summit’s clients. Neither they nor Summit provide tax or legal advice to clients. Any tax statements contained herein were not intended or written to be used, and cannot be used, for the purpose of avoiding U.S. federal, state or local taxes.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

In the past, banks and credit unions were required by the Federal Reserve to limit withdrawals and transfers out of savings accounts and money market deposit accounts to six per month. Partly in response to the coronavirus crisis, the Federal Reserve recently revoked the rule. The Fed says that it does not plan to re­impose transaction limits.

Banks are not required to lift the transaction limits or stop charging fees for excessive transactions, which may run from about $3 to $15. In fact, “the vast majority of banks and credit unions haven’t changed their rules,” says Ken Tumin, of DepositAccounts.com.

Marcus by Goldman Sachs is removing transaction limits on its savings account, which recently yielded 0.6%. Ally Bank is refunding excessive-transaction fees on its savings account (0.8% yield) and money market account (0.5% yield) for now but is waiting for clarification on the Fed’s rule change to determine the bank’s long-term approach. Synchrony is raising the monthly withdrawal limit on its savings account (0.75%) and money market account (0.5%) to 15 per month.

If your bank is enforcing transaction limits, keep in mind that the Fed’s previous rule applied to check writing, debit card purchases, automatic bill payments and other outgoing transfers, such as overdraft transfers, but withdrawals and transfers at an ATM or with a bank teller did not fall under the rule. If you request by phone that the bank mail you a check from your savings account, that’s exempt from the Fed’s former rule, too. But some banks still levy fees for such transactions.

Another idea is to open two savings accounts, allowing an extra six withdrawals per month, says Tumin. You could, for example, link your checking account to one of the savings accounts in case you overdraw checking and use the second savings account for other withdrawals.

If you are charged an excessive-transaction fee, your bank may be willing to refund it, especially if you have never incurred the fee before.

A day after the market's worst loss since March's volatility-riddled dips, investors were subjected to a nauseating few hours of trading that saw stocks flip between gains and losses before finally settling higher.

Wall Street appears to be weighing just how much of the rally off the March lows has been justified by slowly improving economic data, especially amid growing COVID-19 case figures in states such as Texas and Arizona.

Among the day's more notable moves? Adobe (ADBE, +4.9%) shot higher after reporting record quarterly revenue on the back of a work-from-home surge in subscription demand. Tesla (TSLA, -3.9%) continued its retreat from a peak above $1,000 per share after Goldman Sachs and Morgan Stanley both downgraded the stock on valuation concerns, among other worries.

The Dow closed Friday with a 1.9% gain, led by Boeing (BA, +11.5%). The S&P 500 closed 1.3% higher to 3,041, the Nasdaq finished with a 1.0% improvement to 9,588, and the small-cap Russell 2000 improved by 2.0% to 1,383.

"The market was set up for a period of consolidation, and this economic recovery has a long and choppy road ahead," Canaccord Genuity equity strategist Tony Dwyer told clients in a recent note.

Indeed, the U.S. is fighting a pandemic, and it's uncear who's winning. Trade relations with China are shaky again. The 2020 presidential election is just months away. And in the very short term, a light earnings calendar will give investors limited insight into corporate America's direction.

Still, Dwyer points out that "when the market is getting hit, it is important to remember the macro factors that have caused the move off the low remain in place. The Fed is literally printing money for the foreseeable future, a vaccine that could allow a more aggressive economic reopening may be nearby, and the economy should continue to inflect off the low."

Investors looking to smooth out turbulence for now can remain long via low-volatility funds or use dips to buy high-quality retirement stocks at discount prices.

But positioning your portfolio for success also means steering clear of traps and weeding out weaker holdings. We've recently highlighted five stocks that remain highly vulnerable – especially in the event that the broader market takes another short-term spill. Investors should check their portfolios for each of these stocks, and learn more about their growing bear cases.

NHL Hall of Famer Wayne Gretzky used to say, "I skate to where the puck is going to be, not to where it has been." During these trying times, these are wise words.

As it applies to growth stocks, you'll want to consider where these companies are going to be in six, 12 and 18 months. Easier said than done. It's impossible to know exactly where companies are going to be once the coronavirus finally dissipates. And that's what makes growth exchange-traded funds (ETFs) so appealing right now.

The economy is reeling. Economists are using data to help predict when the economy will bottom, and how low that bottom will be. Some, such as Goldman Sachs, have created custom economy trackers that pull various data points together to understand where the economy is headed – and more importantly, when it will bounce back. GS believes unemployment will peak at 15%, then the economy will experience a robust recovery by the end of the year.

Investors want to look ahead, not behind. But betting on individual growth stocks expected to benefit from this rapid rebound might be too risky a practice for many retail investors. Funds, however, can help you invest for growth without fearing that one company's unexpected collapse will cause you outsized portfolio pain.

These seven growth ETFs provide a variety of ways to ride an eventual economic recovery. Funds like these are extremely cheap, efficient vehicles that allow you to invest in dozens, if not hundreds, of growth stocks without having to trade them all individually in your account. They also allow you to be tactical, investing in sectors and industries you think are best positioned to rise out of this bear market.

Data is as of April 7. Yields represent the trailing 12-month yield, which is a standard measure for equity funds.

• Assets under management: $86.5 billion
• Dividend yield: 0.9%
• Expenses: 0.20%, or $20 annually on a $10,000 investment

Buying the Invesco QQQ ETF (QQQ, $196.40) is a focused bet on 100 of the most innovative companies trading on the Nasdaq stock exchange. While many of the best growth ETFs are heavy in technology stocks, QQQ is really loaded up at 45% of the portfolio. It also has large positions in communications (20%) and consumer discretionary companies (15%), as well as smatterings of a few other sectors.

Tech stocks generally tend to be more volatile than the broader markets. But as the country starts to come out of the coronavirus-induced bear turn we've been in, many of these innovative companies could lead the markets out of their doldrums.

"Nasdaq-100 companies (are) nimble and at the forefront of numerous long-term investment themes that are still in their infancy, such as big data, cloud computing, machine learning and automation," Invesco states. And it's right. Holdings include the likes of cloud leader Amazon.com (AMZN), chipmaker Nvidia (NVDA), whose semiconductors are playing a pivotal role in machine learning; and Texas Instruments (TXN), whose products contribute to the factory automation industry.

The QQQ, while positioned to do well as the economy bounces back into growth mode, also has sustained less damage so far than the S&P 500. That's because the Nasdaq-100 boasts little exposure to beaten-up sectors such as energy and financials, which also might take more time to bounce back.

Learn more about QQQ at the Invesco provider site.

• Assets under management: $44.1 billion
• Dividend yield: 1.2%
• Expenses: 0.19%

While the QQQ ties its wagon to a fairly tech-heavy list of names, the iShares Russell 1000 Growth ETF (IWF, $154.81) applies one of the broadest brushes to growth investing. With IWF, you gain access to the 500-plus growth stocks in the Russell 1000 Index.

It's not quite as popular as the QQQ, with only about half the assets. But it does give you ownership in a much larger group of mid- and large-cap companies that are expected to deliver above-average growth in the future. And as we come out of the coronavirus pandemic, some might argue that it is better to cast a wider net.

You'll still be well-exposed to technology, at roughly 40% of the fund. But healthcare (15%) has much more representation, and you also get double-digit exposure to consumer discretionary (14%) and communications (11.5%).

Because IWF's components are weighted based on their market values, top holdings – including Microsoft (MSFT), Apple (AAPL) and Amazon – look similar to the QQQ's. The difference is they make up less of IWF's overall weight.

Another big difference is that IWF gives you more exposure to mid-cap stocks, at about 9% of the fund versus 1% for QQQ. Mid-cap stocks are thought to be the sweet spot between large caps and small caps, offering an ideal combination of growth potential and financial stability.

Learn more about IWF at the iShares provider site.

• Assets under management: $10.2 billion
• Dividend yield: 1.7%
• Expenses: 0.13%

The S&P 500 bottomed on March 9, 2009, thus beginning an 11-year bull market – one that ended on Feb. 19, as the market began its descent into bear-market territory.

Consumer discretionary stocks were one of the best performing S&P sectors during the bull market. The Consumer Discretionary Select Sector SPDR (XLY, $101.59) gained 685% over this period as a result, and it's likely to be a winner yet again once a new bull market establishes itself.

During the Great Recession, consumers came out of the economic downturn less eager about spending money on premium-priced products, opting instead for private-label store brands. As we got further away from 2008, consumers resumed their spending but were putting their hard-earned cash into experiential products and services rather than their wardrobes.

Once we emerge from a coronavirus-led recession, consumer spending will return, but it's hard to know who the winners and losers will be. That makes XLY one of the best growth ETFs to own. This fund invests in S&P 500 companies engaged in retail, hotels, restaurants and other consumer-facing businesses – many of which have been severely hurt by COVID-19.

Rather than attempting to pick the winning companies from a resumption of consumer spending, you can invest in XLY's diversified bundle of names for just 0.13% annually. Just understand that the fund will continue to face significant headwinds at least until unemployment peaks and consumer confidence bottoms out.

"Consumer spending is 70 percent of GDP," Torsten Slok, chief international economist at Deutsche Bank Securities, told Politico. "An important part of what drives your and my consumer spending is your wealth and whether you have a job."

Thus, XLY is an ideal place to practice dollar-cost averaging.

Learn more about XLY at the SPDR provider site.

• Assets under management: $2.0 billion
• Dividend yield: 0.00%
• Expenses: 0.75%

Catherine Wood is the CEO and chief investment officer for New York-based ARK Investment Management. If you haven't heard of ARK Investment, you still might have heard about her suggestion that Tesla (TSLA) stock could go to $7,000 by 2024.

Wood's ARK Innovation ETF (ARKK, $44.22) – a rarity among growth ETFs in that it's actively managed –outperformed every ETF with assets greater than $1 billion over the past three years through mid-February, Bloomberg writes. That's a total return of 165%, if you're counting.

Wood's focus is innovative companies.

"We have not set up our research by sector and specialization, we've set it up by innovation platform, each of which cuts across sectors," Wood told MarketWatch in a December interview. "All of them include technology."

Tesla is the ETF's largest holding with a weighting of 10.9%, followed by gene sequencer Illumina (ILMN, 7.3%), payments service Square (SQ, 7.1%) and genetic testing specialist Invitae (NVTA, 6.5%).

On the ARK Invest website, Wood points out that innovation traditionally doesn't fare well during a bear market. However, she's confident that coming out of the coronavirus pandemic, the 35 to 55 stocks ARKK typically holds will perform better than expected.

"As is typical during periods of turbulence and fear, consumers and businesses are willing to think differently and change their behavior," Wood wrote on March 17. "As both look for cheaper, more productive, or more creative ways to satisfy their needs, we believe that disruptive innovation will take root and gain significant market share."

And with market share gains should come superior results.

Learn more about ARKK at the ARK Invest provider site.

• Assets under management: $21.2 billion
• Dividend yield: 2.0%
• Expenses: 0.05%

During a bear market like the one we're currently in, the temptation is to put all of our equity investments in one large-cap basket. The rationale? If the biggest American companies are having troubles, smaller companies can't possibly do well during such uncertainty.

There's no question small-cap stocks are getting crushed by the coronavirus panic. The Russell 2000 performed nearly 7 percentage points worse than the S&P 500 between the Feb. 19 market peak and the March 23 lows. But it also has been slower to rebound, up just 14% to the S&P 500's 19% since then.

That said …

"During every financial crisis, there's a fair amount of fear, panic, and overreaction," Sebastian Page, T. Rowe Price's head of global multi-assets, said in March. "Investors who stay the course, or even better, take advantage of opportunities, will come out better on the other side."

One of those opportunities lies in beaten-down small caps, which now trade at less than 11 times forward-looking earnings estimates. That's well below their long-term average of 14, and their cheapest valuation since 2008. The Russell 2000 also is trading at its largest discount to the S&P 500 since 2001.

The Vanguard Small-Cap ETF (VB, $115.63) tracks the CRSP US Small Cap Index, and not the Russell 2000, but it nonetheless provides a super-cheap way to play a huge basket of small-cap stocks. For just 5 cents for every $100 invested, you get access to more than 1,300 companies.

Just note that the median market cap of these stocks is $4.2 billion, which means hundreds of these companies are really mid-caps (market cap between $2 billion and $10 billion), making it more of a "smid-cap" fund than a pure-play small-cap ETF. Nonetheless, you're buying into a potential bounceback driven not just by growth, but relative value.

Learn more about VB at the Vanguard provider site.

• Assets under management: $835.3 million
• Dividend yield: 2.6%
• Expenses: 0.32%*

While the U.S. is currently in the middle of its battle with the coronavirus, the Chinese are getting back to work, fuel consumption is almost back to normal levels, and factories are open for business.

The world is watching to see if it can walk a fine line between reopening its economy and maintaining mass testing for COVID-19. If it can do that, emerging markets – of which China is the biggest – might just take flight.

Among international growth ETFs, the WisdomTree Emerging Markets ex-State-Owned Enterprises Fund (XSOE. $25.20) is an excellent way to ride a rebound in China and other EMs rebound. Why do you want to avoid getting involved state-owned firms? Well, WisdomTree argues they're not run as efficiently and reduce the maximum long-term return for shareholders.

XSOE tracks the performance of the WisdomTree Emerging Markets ex-State-Owned Enterprises Index, which invests in emerging-markets stocks that aren't state-owned enterprises (SOE). A note that WisdomTree defines any company as an SOE if it's more than 20% state-owned.

In terms of country weightings, China is the largest holding at 39% of the fund, followed by Taiwan (12.7%) and South Korea (12.5%). Seventeen other countries split the rest of the fund's assets. A few of the top-10 holdings, which make up more than a third of the portfolio's weight, are well-known here to U.S. investors and consumers: Samsung, Tencent Holdings (TCEHY) and Alibaba Group (BABA) among them. The rest of XSOE's weight is piled into roughly 535 other stocks.

* Includes 26-basis-point fee waiver.

Learn more about XSOE at the WisdomTree provider site.

• Assets under management: $83.2 million
• Dividend yield: 0.3%
• Expenses: 0.40%

Last among our best growth ETFs is a fund that mixes a couple of investing themes. For one, mid-cap stocks have proven to be long-term winners. And now, with the coronavirus pandemic expected to have significant ramifications on the global economic outlook, ESG investing is expected to take off over the next year.

"Since the COVID-19 public health emergency up-ended the world, the latest broad analysis shows that ESG funds have typically continued to outperform others," Nigel Green, the head of deVere Group, an international financial consultancy, told International Investment.

"Demographic shifts will support the trend. Millennials – those who were born in the time period ranging from the early 1980s to the mid-1990s and early 2000s – cite ESG investing as their top priority when considering investment opportunities."

The Nuveen ESG Mid-Cap Growth ETF (NUMG, $30.32) gives investors the best of both worlds: mid-cap stocks and ESG investing.

NUMG tracks the performance of the TIAA ESG USA Mid-Cap Growth Index, which selects mid-cap stocks based on five growth criteria including forward-looking, current and historical rates. It will not invest in companies that are involved in alcohol, tobacco, nuclear power, gambling, and firearms and other weapons. In addition, companies eligible for inclusion are excluded if they exceed certain carbon-based ownership and emissions thresholds.

No surprise that information technology is tops at 25% of the fund. But there's also a wide swath of health care stocks (21%) and industrials (18%).

NUMG holds more than 70 companies, with top 10 holdings – including Verisk Analytics (VRSK), DexCom (DXCM) and Domino's Pizza (DPZ) – accounting for about 23% of the portfolio's assets.

Learn more about NUMG at the Nuveen provider site.

A wide investor search is on for safe-haven stocks to buy.

We've plunged into a stock market correction that's nearing bear-market territory amid escalating coronavirus fears and a potential oil-price war. Some of the headline numbers have been eye-popping. The S&P 500 Index dropped roughly 18% in the course of two weeks – something it took nearly two months to do during the near-bear market in the fourth quarter of 2018. And oh, the volatility. The index has endured eight moves of 3% or more (in either direction) since Feb. 20, 2020. The last one before that came on Jan. 4 … of 2019.

Goldman Sachs analysts are calling for the end of the current bull market: "We believe the S&P 500 bull market will soon end," they write, projecting another 15% decline in stocks from here. However, Merrill Lynch strategists, led by Savita Subramanian, believe investors shouldn't panic-sell all of their holdings, arguing that while stocks will feel the effects, a bear market isn't imminent. "Negative headlines and panic selling are not good reasons to sell, but the coronavirus outbreak is now meaningfully impacting fundamentals," the firm writes.

This brutal market environment has investors seeking out "safe havens" – investments that are relatively more insulated if economic conditions worsen. Many safe-haven stocks boast products that people need regardless of the economic landscape (think health care, utilities and consumer staples). However, as the broader market finds itself further mired in the downturn, pinpointing the tickers that can hold up strong in the long run isn't easy. That's where TipRanks comes in.

Here are five save-haven stocks to buy on the current weakness. Using TipRanks' Stock Screener tool, we were able to zero in on five stocks the analyst community widely believes can maintain their bearings amid heightened levels of volatility. No stock is perfectly safe, but these companies are widely expected to come out on the other side better off than their peers.

Data is as of March 10. Stocks listed in order of analysts' expectations for upside potential.

• Market value: $78.7 billion
• TipRanks consensus price target: $64.18 (17% upside potential)
• TipRanks consensus rating: Strong Buy

For Mondelez International (MDLZ, $54.91), sweets are the name of the game. The company is the force beyond iconic snack brands such as Oreo, Cadbury, Sour Patch Kids and Toblerone. And companies that produce pre-packaged goods that can be consumed at home are among the most coveted safe-haven stocks out there right now.

Mondelez, one of analysts' top dividend stocks heading into 2020, is sitting on a less-than-1% loss year-to-date. That sounds bad … until you consider the stock is outperforming the S&P 500 by more than 10 percentage points.

MDLZ isn't completely out of the woods, of course. Investors have expressed concern that given the company's China exposure, its first-quarter results could take a hit. Jefferies' Robert Dickerson acknowledges that Mondelez's four facilities in the country aren't operating at normal capacity, which in turn has led to store shelves being less stocked than usual. However, he points out that its team in China believes that with respect to operating environment, the situation is on the mend.

Overall, Dickerson is bullish on MDLZ's long-term growth prospects, rating the company at Buy and giving it a $68 price target, implying 24% upside over the next 12 months.

Bank of America's Bryan Spillane (Buy, $65 price target) sees another possibility for upside potential: The ability to tap its equity holdings in Keurig Dr. Pepper (KDP) for funds it could use to make mergers and acquisitions (M&A).

A Strong Buy consensus rating breaks down into 15 Buys and 3 Holds, illustrating that most of Wall Street's pros view MDLZ among stocks to buy right now. See what other analysts have to say about Mondelez.

• Market value: $374.2 billion
• TipRanks consensus price target: $166.38 (17% upside potential)
• TipRanks consensus rating: Strong Buy
• Johnson & Johnson (JNJ, $141.64), at the ripe old age of 134, is one of the largest health care companies in the world, boasting numerous lines: pharmaceuticals, medical devices and consumer products such as Band-Aid and Tylenol. And like Mondelez, JNJ's defensive nature of delivering treatments and products that most people need no matter what, has it sitting on much smaller losses (3%) than the broader market.

Turning to the analyst community, Citigroup's Joanne Wuensch says that J&J's diverse product lineup makes the stock somewhat safer than the broader market. "Johnson & Johnson is an $82 billion revenue global behemoth that has slowly recreated itself through M&A, divestitures, internal R&D and partnerships," the analyst writes.

While Wuensch admits it might take some time before Johnson & Johnson enjoys the full fruits of some of these efforts, she believes JNJ has taken steps in the right direction. "While the results may not be instantaneous, there has been significant change. For example, five years ago the major drivers included diabetes management, Remicade, Zytiga, and Invokana, yet today they have been replaced by surgical and orthopaedic robotics, electrophysiology, Tremfya, Darzalex, and Erleada," she writes.

Johnson & Johnson’s status as a longtime Dividend Aristocrat, and a decent 2.8%, are other reasons to like the stock in a downturn.

Citigroup's analyst is optimistic about JNJ's long-term growth prospects, and cites it among her stocks to buy. She has a $163 price target on the stock, implying another 15% upside from here within the next year or so. And her take is largely in line with the rest of the analyst community; eight out of eight pros that have sounded off on the stock call it a Buy. Check out who else is behind Johnson & Johnson's Strong Buy rating at TipRanks.

• Market value: $81.6 billion
• TipRanks consensus price target: $89.30 (43% upside potential)
• TipRanks consensus rating: Strong Buy

Pharmacy chain CVS Health (CVS, $62.60) also belongs among safe-haven stocks to buy now, just given its diversified and interconnected collection of health-care assets: health insurance plans, pharmacy benefits, retail and specialty pharmacy, retail clinics, telemedicine and home care. Deutsche Bank analyst George Hill says this de-risks CVS should it encounter headwinds that are facing the rest of the industry.

When it comes to vertical integration, CVS leads the pack. The managed care organization owns not only self-managed pharmacies, but also PBMs (pharmacy benefit managers). Hill believes this integrated care delivery stands to not only cut costs but also enhance beneficiary access. "Benefit design and beneficiary steerage should help bend the cost curve," he writes.

Hill also cites an attractive risk-reward profile and "highly compelling" valuation relative to its peers. He rates the stock Buy with a $109 price target, which would be a massive 74% gain from current levels.

The rest of the Street is a little more conservative about their price targets, but still heavily in the bull camp. Of 11 analysts sounding off in recent months, nine say Buy while the other two say Hold. That puts CVS among safe-haven stocks with a Strong Buy consensus rating. You can learn more about the analyst community's views on CVS via TipRanks' consensus breakdown.

• Market value: $322.0 million
• TipRanks consensus price target: $14.33 (45% upside potential)
• TipRanks consensus rating: Strong Buy
• Avadel Pharmaceuticals (AVDL, $8.57) isn't what you'd call a typical safe-haven stock. This is a small-cap specialty pharmaceutical company with a handful of approved products, including muscle strengthener Bloxiverz and nervous system stimulant Akovaz.

Avadel's relatively small size means it's still going to move strongly on headlines related to its clinical trials. However, given that nature, AVDL's trading is fairly disconnected from the broader market – not a bad trait to have right now. Indeed, shares are up 14% year-to-date, and their future looks bright amid a "REST-ON" Phase 3 study examining FT218, which treats excessive daytime sleepiness (EDS) as well as cataplexy in narcolepsy patients.

"We believe that the majority of the value of AVDL is the FT218 program which has completed enrollment and on track to read out in 2Q20," writes Ladenburg Thalmann analyst Matthew Kaplan, who has a Buy rating and increased his price target from $8 per share to $14. "Our price target increase is driven by progress with the FT-218 program with the completion of REST-ON study enrollment in December 2019."

"Given the FT218 pharmacokinetic profile … combined with the known efficacy profile of sodium oxybate, we believe there is a high probability of success for the REST-ON pivotal study," he continues.

There's only a small cohort of analysts covering this stock, which is to be expected of a small cap. But three pros have written opinions on the stock over the past month, and each of them has Avadel among their stocks to buy. Discover how other analysts rated AVDL.

• Market value: $293.3 million
• TipRanks consensus price target: $7.75 (56% upside potential)
• TipRanks consensus rating: Strong Buy

Chances are you haven't heard of iClick Interactive Asia Group (ICLK, $4.96), a Hong Kong-based marketing technology platform. But it's quickly turning into one of the best stocks of 2020.

ICLK helps marketers from all over the world reach audiences in China, offering its innovative platform to provide data-driven insights. And unlike the broader market, its prospects have only ripened since the start of 2020, with shares up a whopping 59% year-to-date.

iClick has become one of the top online marketing names thanks to its superior AI and machine learning-based technology. It has amassed a wealth of consumer data that covers more than 800 million users with active profiles.

It doesn't hurt that iClick has managed to attract some heavyweights as partners. For instance, it is a platinum partner with internet giant Tencent (TCEHY) in social advertising, and is one of Tencent's top partners for performance and brand advertising. While iClick offers its solutions to about 2,500 other advertisers, Tencent contributes about 60% to 70% of iClick's gross billings. That level of single-client dependency is a real risk should the relationship hit turbulence, but Jefferies' Thomas Chong argues that for now, the partnership has set up ICLK for much more upside.

"We estimate marketing solution revenue to grow at 20% year-over-year and 18% year-over-year in 2019 and 2020, benefiting from the secular trend of Tencent's social advertising," writes Chong, who has a $7.96 price target on shares (60% upside potential). "We consider iClick as an independent marketing technology player benefiting from the unique marketing environment in China."

Like Avadel, iClick isn't exactly teeming with analyst coverage. But it has received four Buys across the four analysts writing about the stock over the past six months, and its completely online presence makes ICLK one of the best potential safe-haven stocks to buy amid the coronavirus outbreak. Investors interested in learning more can see additional ICLK analysis on TipRanks.

Maya Sasson is a content writer at TipRanks, a comprehensive investing platform that tracks more than 5,000 Wall Street analysts as well as hedge funds and insiders. You can find more of their stock insights here.

Hold on to your hats, brace yourself for an uptick in volatility … and perhaps give defense stocks a look this October.

Goldman Sachs’ equity derivatives strategist John Marshall, in a recent report to clients, writes that, since 1928, volatility has been 25% higher on average during the month of October.

“Not only are earnings day moves rising relative to average daily moves, but October tends to be the quarter with the largest absolute earnings day moves for U.S. stocks,” Marshall writes. And it’s no coincidence. “We believe it is a critical period for many investors and companies that manage performance to calendar year-end.”

How should investors play this potential bout of choppiness? Get defensive – with defense stocks. Aerospace, defense and other companies that have a hand in national security are traditionally more defensive investments. They also offer notably low exposure to Chinese trade war tensions.

Encouragingly, the iShares U.S. Aerospace & Defense ETF (ITA) is currently trading up 30% year-to-date. That’s better than the S&P 500 (+18% YTD) and Dow Jones Industrial Average (+15%).

Here are five intriguing defense stocks to buy for … well, defense. We turned to TipRanks for analyst ratings across the industry. All five of these stock picks score a Moderate Buy or Strong Buy consensus based on ratings from the last three months.

Data is as of Sept. 29.

• Market value: $5.7 billion
• TipRanks consensus price target: $250.00 (10% upside potential)
• TipRanks consensus rating: Moderate Buy
• CACI International (CACI, $227.50) provides information solutions and services to support national security missions. For example, to address the growing threat posed by drones, CACI’s SkyTracker Technology Suite can covertly detect and track unmanned aircraft systems (UAS).

At CACI’s recent investor day, management revealed that its key focus now comes from driving growth through its mission technology offerings, which currently account for about 30% of product revenue. CACI estimates mission technology has a $90 billion total addressable market (TAM) that will grow at an impressive 6% annually over the next five years – that’s three times as fast as the estimated 2% CAGR for the company’s enterprise business, which has an estimated TAM of $130 billion.

Credit Suisse’s Robert Spingarn applauds that decision. “Mission technology (a ~$1.7B business now) has higher market growth, higher margin potential, and is a top priority for the (Department of Defense) customer – making it an understandable choice for management’s focus,” he writes. His Outperform rating (equivalent of Buy) comes with a Street-high $269 price target that implies 18% upside potential from current prices.

Multiple analysts reiterated their bullish calls on CACI after the event. Most notably, Goldman Sachs’ Gavin Parsons boosted his Buy rating to a rare Conviction Buy. That rating is given to equities that Goldman holds in particularly high regard, making CACI among the top defense stocks to buy at the moment. The analyst cited his expectation for “accelerating organic revenue growth to drive higher estimates.”

This positive review came alongside a $258 price target, suggesting 13% upside from here. See what other top analysts have to say about CACI on TipRanks.

• Market value: $215.4 billion
• TipRanks consensus price target: $419.00 (9% upside potential)
• TipRanks consensus rating: Moderate Buy
• Boeing (BA, $382.86), largest among defense stocks, currently garners a Moderate Buy consensus from the Street. No doubt, it’s an expression of cautious optimism as analysts wait to see what happens next with the company’s 737 Max. The fastest-selling plane in Boeing’s history was grounded in March after two fatal crashes killed a total of 346 people.

The latest? Boeing CEO Dennis Muilenburg said in mid-September that “a phased ungrounding of the airplane amongst regulators from around the world is a possibility.”

Credit Suisse’s Robert Spingarn expressed optimism a week before Muilenburg’s comments, writing, “We continue to expect that the plane will return to service eventually, and reiterate our long-term positive view and Outperform rating on Boeing.”

Morgan Stanley’s Rajeev Lalwani has gone one step further. He calls BA his “top pick” in the aerospace and defense industry and sees a “clear path” for shares to reach $500 (31% upside potential). The analyst points out Boeing’s strong balance sheet, and that the company has managed to retain “meaningful leverage to mitigate liquidity risks.”

“The combination of a healthy free cash flow yield, a stable commercial aerospace backdrop, and positive upcoming data points” are more bullish points. Lalwani is forecasting annual earnings per share (EPS) growth of 10% to 15% (vs peers at under 10%) beyond 2020, and he argues that the grounding “creates a buying opportunity while the aerospace cycle is steady.” You can check out other current pro opinions on BA at TipRanks.

• Market value: $16.7 billion
• TipRanks consensus price target: $146.13 (17% upside potential)
• TipRanks consensus rating: Moderate Buy
• Heico (HEI, $124.74) is a rapidly growing aerospace and electronics company, and its focus on niche markets stands out among defense stocks. Shares have surged 61% year-to-date, and while some analysts are wary at these levels, others argue that HEI’s lofty valuation is justified.

Interestingly, while the stock scores a cautiously optimistic Moderate Buy consensus from all analysts, it garners a more bullish Strong Buy consensus over TipRanks’ top-rated analysts. For instance, five-star Credit Suisse analyst Robert Spingarn (Outperform) anticipates consistent annual EPS growth of about 16% between 2018 and 2021.

“Though valuation remains in the stratosphere, we continue to believe that HEI’s exceptional execution, compounding cash flows, and solid M&A track record warrant a sizable premium,” Spingarn writes. He made the call after Heico reported a “beat-and-raise” quarter and sustained its recent streak of blockbuster organic sales growth.

Spingarn reiterated his Outperform rating and boosted his price target on the defense stock from $133 all the way to $163. That indicates 31% of additional upside potential from here. The analyst is confident that Heico can continue to outgrow its addressable market thanks to new product introductions, greater customer penetration and an expanding client base. “HEI’s long-term focused investor base appears willing to hold the shares despite the valuation,” he writes, suggesting to buy on any weakness. Find out how the Street’s average price target for HEI breaks down.

• Market value: $117.7 billion
• TipRanks consensus price target: $152.25 (12% upside potential)
• TipRanks consensus rating: Moderate Buy

Keep a close eye on aircraft manufacturing giant United Technologies (UTX, $136.39). The company is on the cusp of a whopping $50 billion merger with major U.S. defense contractor Raytheon. If the “merger of equals,” announced in June, receives approval at special shareholder meetings in October, the result will be a new aerospace and defense powerhouse boasting $74 billion in 2019 pro forma revenues.

“We like the proposed RTN merger for technology synergies and enhanced financial flexibility,” top Cowen analyst Cai von Rumohr writes. Shareholder approval seems likely given diminished activist resistance, he argues, and the Defense Department appears to support the deal.

But this is a “win-win” situation, because von Rumohr is a fan of UTX with or without Raytheon. He says if the merger doesn’t go through, United Technologies should move closer to its estimated sum-of-the-parts valuation of $155 to $160 per share, “since UTX Aero will be the last large cap commercial aero systems ‘pure’ play.” That would be 17% upside at the high end of the range.

Von Rumohr also believes investors are underappreciating major cyclical turns at Otis (the elevator division) and Pratt (the aerospace division), as well as United Technologies’ recession-resistance. Discover more UTX insights from the Street at TipRanks.

• Market value: $1.9 billion
• TipRanks consensus price target: $26.25 (43% upside potential)
• TipRanks consensus rating: Strong Buy
• Kratos Defense & Security Solutions (KTOS, $18.37) specializes in unmanned systems. This includes everything from satellite communications to cybersecurity to missile defense and hypersonic systems.

It also has the highest implied potential upside among the defense stocks on this list, at 43%. That’s in part because of a significant drop in the face of Kratos losing out on a hypersonic test drone contract award to Northrop Grumman (NOC), and despite second-quarter sales and earnings that beat the analyst consensus.

Top-rated B. Riley FBR analyst Mike Crawford is particularly excited about the company’s prospects when it comes to unmanned aerial vehicles (UAVs). For instance, Crawford notes that demand for Kratos’ Valkyrie – an experimental stealthy combat drone that completed its first flight in March 2019 – “continues to both firm and expand.”

The analyst says the Defense Department has moved beyond the question of whether UAVs make sense, and is instead considering operative questions about how to integrate these tactical vehicles into the fleet. That means enabling the machines with sensors, payloads, datalinks and artificial intelligence.

“KTOS, as an early mover and clear leader in the low-cost, tactical UAV space, stands poised to capitalize on its investments in proprietary IP and capabilities, and we believe shareholders will continue to be rewarded by this investment,” Crawford writes. He reiterated his Buy rating two months ago, listing a $26 price target that implies 42% upside from here. Get the full scoop on Kratos Defense’s analyst consensus at TipRanks.

Harriet Lefton is head of content at TipRanks, a comprehensive investing tool that tracks more than 5,500 Wall Street analysts as well as hedge funds and insiders. You can find more of their stock insights here.

Goldman Sachs’ analysts last month homed in on an investing strategy designed to generate outsize returns for investors. The strategy focuses on stocks that are dominating their respective industries – aka, “superstar stocks.” Interestingly, the number of these giant, dominant companies are on the rise due to a wave of consolidation across multiple industries.

“The market positioning of superstar firms often allows for greater bargaining power over consumers and workers and higher profitability,” the firm’s chief U.S. equity strategist, David Kostin, explained to clients. “Superstar firms have been one driver of the explosion in US corporate margins post-crisis.”

And the numbers speak for themselves. Kostin writes that companies with the highest share of industry sales have returned 49% since 2015. In contrast, companies with the lowest share of industry sales have delivered returns of just 16% during the same period.

Here are five “superstar” stocks to buy, according to Goldman Sachs. We’ll look at the bull theses behind each one, and see what the rest of Wall Street thinks about these stock picks.

Data is as of July 2.

• Market value: $40.4 billion
• TipRanks consensus price target: $11.68 (15% upside potential)
• TipRanks consensus rating: Moderate Buy

Goldman Sachs points out that auto giant Ford (F, $10.12) holds an impressive 40% of the American auto market. Goldman analyst David Tamberrino is excited about the future growth potential for F shares, which already have climbed 32% year-to-date. He has reiterated a “Buy” rating on Ford with a price target of $13, implying that shares could soar another 28%.

The analyst cited the company’s aggressive restructuring as behind his bullish outlook on the stock, writing, “We believe investors will begin to start underwriting improvement in the company’s European region as restructuring actions come to fruition.” Ford is cutting back heavily in Europe, with plans to pare 20% of its workforce there by the end of 2020, as well as shut six of its 24 manufacturing plants. This will allow the company to focus on more lucrative opportunities, including electric vehicles and autonomous driving.

Tamberrino thinks the company can generate a level of European earnings “well above Street expectations for the region over the long-term.”

Bank of America’s John Murphy is also bullish on Ford, upgrading the stock from “Neutral” to “Buy” in May, writing, “Our annual Car Wars analysis indicates that Ford will have one of the freshest line-ups in the US market over the next four years.” He sees the stock hitting $14 within the next 12 months.

See what other top analysts have to say about F on TipRanks.

• Market value: $276.6 billion
• TipRanks consensus price target: $109.36 (2% downside potential)
• TipRanks consensus rating: Moderate Buy

With 41% of U.S. industry sales, Procter & Gamble (PG, $111.48) holds the highest share of the household products market, Goldman Sachs says. Indeed, PG is the name behind scores of popular brands that crop up in our daily lives: Bounty paper towels, Charmin bathroom tissue, Crest toothpaste, Gain laundry detergent, Gillette razors, Pampers diapers and Vicks cough and cold products are just a few of the company’s billion-dollar brands.

Goldman Sachs analyst Jason English has upgraded the stock from “Hold” to “Buy” and hiked his price target from $114 to $125 (12% upside potential). And this comes despite a roaring 43% advance in PG shares over the past 52 weeks.

“(Procter & Gamble) has been a clear benefactor of the recent acceleration in end-market growth, and we expect the market to continue to grow in the 3%-plus range in the future,” English writes.

Investors have been deterred in recent years by concerns that PG wasn’t able to “grow volume profitably,” he continues. But the tide is finally changing: “We forecast organic volume and profit dollar growth in 12 of the next 13 quarters.” English sees the potential for double-digit total returns annually, coming from stock appreciation amid high-single-digit earnings growth, as well as the company’s low-single-digit dividend yield. And a reminder: PG is a Dividend Aristocrat that has been growing its payout for 63 consecutive years without interruption.

With this upbeat outlook in mind, the analyst writes: “We believe there is a role in investors’ portfolios for a large liquid global staples company such as this and note that PG remains the most underweight US listed mega-cap global consumer packaged goods company among mutual funds.” Find out how the Street’s average price target for PG breaks down.

• Market value: $256.5 billion
• TipRanks consensus price target: $154.25 (8% upside potential)
• TipRanks consensus rating: Strong Buy

Mickey Mouse creator Walt Disney (DIS, $142.53) remains one of the world’s leading entertainment companies. Disney accounts for 49% of American entertainment sales, according to Goldman’s research.

DIS already is buzzing in 2019, logging a 36% gain on numerous successes (and anticipated successes), including Avengers: Endgame – the second-highest-grossing movie of all time with $2.74 billion in global ticket sales – new Star Wars park attractions and the upcoming launch of its direct-to-consumer streaming service, Disney+, later this year.

“It is the dawn of a new era at Disney,” Goldman analyst Drew Borst told investors recently as he reinstated coverage of the company with a bullish “Buy” rating. “The $70 bn acquisition of Fox is now closed and the approaching debut of Disney+ streaming service in late CY19 marks a momentous shift in the company’s content monetization model from third-party licensing to direct-to-consumer streaming.”

Borst expects near-term headwinds for Disney+ but views it as a “positive long-term strategy. He expects the service will reach 7.5 million global subscribers by 2020 and 73 million by 2025. What are other financial experts saying about Disney’s outlook? Find out on TipRanks.

• Market value: $772.4 billion
• TipRanks consensus price target: $1,333.89 (21% upside potential)
• TipRanks consensus rating: Strong Buy
• Alphabet (GOOGL, $1,112.60) is the only FAANG stock to make it onto Goldman’s list of “superstar” stocks to buy. The parent of Google captures 63% of the media & services sales in the U.S., Goldman says. For perspective, Facebook (FB) only laid claim to 24%.

But is this dominance set to last? According to media reports, the Department of Justice is preparing to investigate Google for potentially anti-competitive conduct. The news has clipped the wind from underneath Alphabet’s sales. “Potential implications for Google could include new regulations on business practices, or an antitrust probe leading to a breakup,” Bank of America’s Justin Post says. “It is very rare to break up a company but not unheard of.”

Nonetheless, analysts (including Post) are sure that GOOGL remains a stock worth buying into. Needham’s Laura Martin argues that Alphabet looks “too cheap” right now and reminds investors that the DoJ “only has an antitrust agenda, not privacy goals.” This five-star analyst has a “Buy” rating on the stock and a $1,350 price target (21% upside potential).

What’s more, she calculates that Alphabet shareholders could even see 50% upside in a worst-case breakup scenario. “Investors generally pay more (in aggregate) for pure plays because each investor can decide how much cloud risk vs video risk vs. search engine risk vs Waymo risk, etc. they want, rather than owning all of them,” Martin explained.

Likewise, Jefferies’ Brent Thill believes a breakup is unlikely, but that in any case Alphabet’s “sum-of-the-parts may be worth more than the whole.” He reiterated his GOOGL “Buy” rating on June 13 with a $1,450 price target (34% upside potential). See why other top analysts are also bullish on Alphabet.

• Market value: $90.9 billion
• TipRanks consensus price target: $55.33 (14% upside potential)
• TipRanks consensus rating: Moderate Buy

By far the most prominent tobacco company in the U.S. is Marlboro maker Altria Group (MO, $48.60). The company, which owns Philip Morris USA, earns a whopping 88% of American tobacco sales. That makes it Goldman Sachs’ No. 1 “superstar stock.”

However, as most investors appreciate, this is a tough time for the tobacco industry. Regulatory pressures continue to mount, and that has constrained share price growth. Most notably, the FDA is likely to publish a proposed rule on maximum nicotine levels this October.

“Reducing nicotine in cigarettes to non-addictive or minimally addictive levels would be a potential gamechanger for the US industry,” writes Morgan Stanley’s tobacco research team. But even though this would be a negative catalyst, implementation would take years. “The consensus view is that maximum nicotine regulation is unlikely to come into force within the next 10+ years, and that this is far enough away to allow the tobacco manufacturers to delever their balance sheets, protect their dividends and pivot their businesses away from traditional cigarettes.”

Indeed, Altria has already made a strategic investment by snapping up 35% of popular e-cigarette manufacturer Juul. “We are taking significant action to prepare for a future where adult smokers overwhelmingly choose non-combustible products over cigarettes by investing $12.8 billion in Juul, a world leader in switching adult smokers,” Altria CEO Howard Willard said back in late 2018.

More recently, Altria surprised investors by raising cigarette prices 6 cents per pack, including for signature brand Marlboro. Wells Fargo’s Bonnie Lee Herzog sees this as a sign of the company’s significant pricing power, and reiterated her “Outperform” rating (equivalent of “Buy”) on MO with a $65 price target, implying 34% upside potential.

“We increasingly believe MO has multiple levers to pull to offset decelerating cigarette volumes and drive increased profitability including; strong pricing power, cost savings and JUUL service agreement payments,” Herzog writes. Discover how the overall analyst consensus breaks down on TipRanks here.

Harriet Lefton is head of content at TipRanks, a comprehensive investing tool that tracks more than 5,000 Wall Street analysts as well as hedge funds and insiders. You can find more of their stock insights here.

If you are stuck for investing inspiration after a breakneck first quarter, Goldman Sachs has some valuable tips. The firm has just released a report advising investors to focus on growth stocks with rapidly growing revenues. These are the kinds of companies that should outperform as costs rise over the coming year, Goldman analysts say.

“Mounting pressures from wage inflation and other input costs will pressure margins, making further expansion from currently all-time high margins unlikely,” writes David Kostin, Goldman Sachs’ head U.S. equity strategist. “As a result, growth in (earnings per share) will be driven entirely by top-line sales.”

That’s already playing out so far this year. Goldman Sachs recently calculated that stocks it considers “high revenue” have outperformed the Standard & Poor’s 500-stock index by 400 basis points already since the start of 2019.

Here are seven growth stocks to buy, according to Goldman’s expectations for high revenue expansion across the rest of 2019.

Data is as of March 31.

• Market value: $21.9 billion
• TipRanks consensus price target: $85.78 (62% upside potential)
• TipRanks consensus rating: Strong Buy

Managed-care giant Centene (CNC, $53.10) is gearing up for significant sales growth of 18% in 2019, according to Goldman Sachs’ estimates. Wall Street seems to agree, with a consensus estimate of 17.9%. And broadly speaking, the Street is bullish on the stock, which over the past three months alone has garnered 11 “Buy” ratings and one “Hold.”

One of these bullish ratings comes from Oppenheimer’s Michael Wiederhorn. The five-star analyst recently attended Centene’s health-care conference, where management discussed the company’s rapidly growing Ambetter unit — an Affordable Care Act exchange plan business set to account for more than 60% of EPS in the first half of 2019.

“The company has remained the best performer among the insurers on the exchanges, given its lower-income and tighter networks,” Wiederhorn writes. Centene also reaffirmed its plans to enter four new states with Ambetter, as well as expanding its presence in six other states.

“Overall, Centene remains confident in its outlook for 2019, highlighted by stable Exchange performance and strong growth prospects,” Wiederhorn writes. “As a result, we maintain our Outperform rating.”

That “Buy”-equivalent rating includes an $83 price target on this health-insurance stock, suggesting stellar upside potential of over 45%. For more information on Centene’s shares, get a free CNC Research Report from TipRanks.

• Market value: $22.7 billion
• TipRanks consensus price target: $275.50 (3% downside potential)
• Align Technology (ALGN, $284.33) is the company behind the popular transparent teeth-straightening aligners known as Invisalign. For 2019, Goldman Sachs sees Align capable of recording 23% sales growth — again, close to the broader consensus, which sees a scooch more at 23.4% this year.

While ALGN’s target price doesn’t reflect it, the analyst community — which has slapped six “Buys” and two “Holds” on the stock over the past three months — thinks Align is primed for a successful year.

Piper Jaffray’s Matthew O’Brien is ranked in the top 50 of more than 5,200 analysts tracked by TipRanks. And this top-performing analyst has just reiterated his “Overweight” (equivalent of “Buy”) rating on ALGN while ramping up his price target from $250 to $300, or 6% higher from current prices. According to O’Brien, Align Technology represents one of the med-tech world’s most compelling growth stories right now.

O’Brien supports his bullish thesis by citing a recent call with an industry expert who heads a dental consultancy. This expert told O’Brien that there is not a single case where Invisalign can’t be used. And it is the rare ability to treat both complex cases and “the low-hanging fruit on the simple cases” that sets Align apart from its rivals, the analyst explains.

Also worthy of note is Robert W. Baird’s Jeff Johnson, who recently decided to bump up his own price target on ALGN. Johnson now sees the stock reaching $286 (roughly in line with current prices), up from his previous $255 price target, thanks to growth in the second half of 2019. You can check out more analysis in TipRanks’ ALGN Research Report.

• Market value: $475.7 billion
• TipRanks consensus price target: $193.94 (16% upside potential)
• TipRanks consensus rating: Strong Buy

Social media giant Facebook (FB, $166.69) is on track for 23% expected sales growth in 2019, according to the Goldman Sachs report, while the consensus is for 23.5% top-line expansion. Goldman analyst Heather Bellini has a “Buy” rating on the stock with a $195 price target (17% upside potential).

Oppenheimer’s Jason Helfstein has the same price target and an “Outperform” rating on FB that he reiterated despite a recent string of executive departures. Longstanding product chief Chris Cox announced his resignation in March, and WhatsApp head Chris Daniels made a surprise exit at the same time.

“CPO Cox’s departure confirms Zuckerberg is likely to purse a more aggressive product refresh,” Helfstein writes.

This refresh is likely to introduce a single encrypted messaging service that incorporates both Instagram and WhatsApp into Facebook. If you consult the rumor mill, this is a potential reason behind the departure of Instagram’s founders from Facebook back in 2018. “Just as (Amazon) has been emulating (Alibaba) in the push to offline retail, FB appears to want to emulate WeChat’s ecosystem, allowing information sharing, communications and commerce in a single application,” Helfstein writes.

Just understand the risks. Needham’s Laura Martin, for instance, isn’t taking the news so lightly. She recently downgraded FB from “Buy” to “Hold,” writing, “Since we believe that people are a key competitive advantage of FAANG companies, this implies accelerating value destruction until senior executive turnover ends. We prefer to move to the sidelines until we see senior employee turnover stabilize.”

Still, FB is rated “Buy” or equivalent by 33 of 39 analysts evaluating the stock, making it a consensus “Strong Buy.” Discover more about Facebook’s investing potential in the TipRanks’ FB Research Report.

• Market value: $11.7 billion
• TipRanks consensus price target: $288.22 (30% upside potential)
• TipRanks consensus rating: Strong Buy
• SVB Financial Group (SIVB, $222.36) is the holding company for Silicon Valley Bank, a high-tech commercial bank based in California. The bank has helped fund more than 30,000 startups, and its projected sales growth is reminiscent of the nascent companies it serves — GS predicts revenues could surge by 24% in 2019.

SIVB — one of the top analyst picks for 2019 — has received eight back-to-back “Buy” ratings over the past three months, including from Stephens analyst Tyler Stafford.

“We continue to recommend SIVB given the valuation of just 11.6x our 2020 EPS for what we think is one of the best franchises in the country,” he writes.

Despite short-term deposit pressures, Stafford still sees the company’s guidance as achievable. “We believe SIVB’s existing guidance of high-single-digit average deposit growth is still very much on the table and could ultimately be conservative if the yield curve steepens,” he writes.

Stafford cites “potential balance sheet leverage and a sustainable and long-term earnings/profitability profile” that’s well ahead of the bank’s peers as reasons to love the stock. He backs that up with a $290 price target on the stock, implying 30% upside from current prices. Find out what other analysts think of this financial stock in TipRanks’ SIVB Research Report.

• Market value: $130.0 billion
• TipRanks consensus price target: $291.05 (9% upside potential)
• TipRanks consensus rating: Moderate Buy

Software giant Adobe (ADBE, $266.49) is set to enjoy explosive sales growth of 25% this year, Goldman Sachs believes. That’s with strong new-feature momentum, expanding marketing-tech budgets and selling higher in the organization (which means larger deals).

As Canaccord Genuity’s Richard Davis writes, “Adobe has the strongest franchise in Marketing Tech — and yes, that means better than Salesforce in terms of total reported growth and importantly in our view, margins, by a lot.” The two things he believes are really important for Adobe are 1) reduced churn and 2) the pace of large deals, because that reveals whether Adobe is becoming more strategic to its customers.

Davis, the No. 1 analyst ranked by TipRanks, continues with more high praise: “The fact that the company has reached this pinnacle of execution from humble beginnings in 1990 as just a laser printer font company, through 50 acquisitions, is a case study in management talent.”

Citing the company’s best-in-class growth profile, Davis reiterates his “Buy” rating on Adobe with a $300 price target (13% upside). For more information on Adobe’s latest market activity, get a free ADBE Research Report from TipRanks.

• Market value: $34.2 billion
• TipRanks consensus price target: $176.71 (13% upside potential)
• TipRanks consensus rating: Moderate Buy
• Autodesk (ADSK, $155.82) makes software for people who make things. By visualizing and simulating real-world performance through digital prototypes, designs can be optimized before the building process even begins. This can save time and money for professionals across a wide range of industries, including architecture and engineering.

For 2019, Goldman Sachs expects that Autodesk will deliver sales growth of 26%. A sizable chunk of these sales should come from the construction industry, following Autodesk’s moves in late 2018 to snap up a pair of construction firms. ADSK spent $875 million in November for PlanGrid, then $275 million in December for BuildingConnected.

“BuildingConnected should round out the moves in the construction vertical, which the company sizes as a $10B market opportunity as it looks to digitalize the construction process from design to build,” writes five-star RBC Capital analyst Matthew Hedberg, who recently reiterated his “Outperform” rating on ADSK.

He adds, “We believe Autodesk now likely has the needed assets in place for its strategy and would not anticipate another near-term acquisition in the vertical.”

Hedberg currently has a Street-high price target of $200 on ADSK, which implies 28% upside from current prices. For further insights on this tech stock, turn to TipRanks’ ADSK Research Report.

• Market value: $155.7 billion
• TipRanks consensus price target: $402.93 (13% upside potential)

The No. 1 growth stock for sales potential right now is Netflix (NFLX, $356.56). The online streaming giant is poised to deliver a whopping 28% sales growth in 2019, says Goldman Sachs — an estimate that’s on par with Wall Street’s consensus.

And that projected expansion comes on the back of a decade’s worth of growth that made NFLX one of the best stocks of the 10-year bull market.

Despite a 5,900% run over the past decade, five-star RBC Capital analyst Mark Mahaney still believes shares are undervalued. He writes, “We believe that Netflix has achieved a level of sustainable scale, growth, and profitability that isn’t currently reflected in its stock price.”

This conclusion is based on Mahaney’s assessment of Netflix’s 61 million U.S. subscribers and 88 million international subscribers, which makes Netflix one of the largest global entertainment subscription businesses.

Mahaney believes Netflix can survive in an increasingly crowded marketplace. Potential new rivals include Apple (AAPL), Disney (DIS) and AT&T (T), all of which are launching new streaming services this year. However, the Internet TV opportunity is so massive that Mahaney believes it can support two or three providers, and that Netflix — based on scale, brand and value proposition — will be one of them.

The RBC Capital analyst reiterated his “Buy” rating on NFLX with a relatively high $480 price target, indicating he sees 35% upside from current levels. Find out more from TipRanks in its NFLX Research Report.

Harriet Lefton is head of content at TipRanks, a comprehensive investing tool that tracks more than 5,000 Wall Street analysts as well as hedge funds and insiders. You can find more of their stock insights here.

Don't let your broker sweep your cash yield into the basement.

Many major brokerage firms in recent years have eliminated higher-yielding money-market funds as a sweep option, pushing customers into lower-yielding bank sweep accounts. Often, the cash is routed to banks affiliated with the brokerage firm, plumping up the firm’s profits.

Brokerage firm Edward Jones eliminated its money-fund sweep option for new brokerage customers in February. Merrill Lynch removed money-fund sweep options for most new accounts last September, and most existing money-fund balances have been moved to deposit accounts at Bank of America, Merrill’s parent-company bank. Charles Schwab eliminated money-market funds as a brokerage sweep option for most new accounts in 2016.

Such moves can seriously crimp customers’ yields. The 100 largest taxable money funds yield 2.25% on average, according to Crane Data, while the average brokerage sweep account now yields just 0.25% for balances up to $100,000. Schwab’s sweep options currently yield 0.33% for balances below $1 million, while the yield on Merrill’s bank sweep ranges from 0.14% to 0.75%, depending on the level of account assets.

The firms say they’re still offering competitive cash options. “Our approach allows clients to choose from among an attractive set of cash-management options while Schwab earns returns on the net interest income,” says Schwab spokesman Mike Peterson. “Those returns are then reinvested in serving clients and returning value to the firm’s stockholders.”

Brokerage firms are trying to squeeze more profits out of customers’ cash as their earnings from trading commissions have taken a hit. An industry price war has driven commissions down to just a few dollars—or even zero, in some cases. By flocking to brokerage firms offering low-cost trades, consumers “have voted with their dollars, and they want $4.95 trades instead of reasonable-paying cash,” says Peter Crane, president of Crane Data, which tracks money funds and other cash vehicles. “It’s like consumers in effect want fees they can’t see.”

Hunt for High Yields

For retirees holding significant amounts of cash, of course, maximizing cash yields may well be a top priority. If your only sweep options are low-yielding bank accounts, you can always move that cash into a money-market mutual fund.

The top-yielding money funds available to individual investors now yield north of 2.5%. Investors looking for the safest cash options may want to stick with money funds holding Treasuries and other government securities. Top government money funds yield roughly 0.2 percentage point less than top “prime” money funds, which hold corporate debt.

A few firms have retained money-market funds as sweep options. At Vanguard, for example, the only sweep option is the Vanguard Federal Money Market Fund (symbol VMFXX), a government money fund that yields about 2.3%.

Another option: Shift your cash to a high-yield bank account. Goldman Sachs’s online bank Marcus, for example, offers a 2.25% yield. Pay attention to fees and other fine print. High-yield savings accounts may require a minimum balance to avoid fees or earn the best yield. If you want some help chasing the highest yields, MaxMyInterest will spread your money among various online savings accounts and regularly reallocate the cash to capture the highest rates, for a fee of 0.08% annually.

Cheap stocks are few and far between. Goldman Sachs’ bear market indicator – which analyzes trends in unemployment, manufacturing, core inflation, the yield curve and stock valuations – is at its highest levels since the late 1960s and early 1970s. By some metrics, such as the price-to-sales ratio, U.S. stocks are at their most expensive levels in history, even more expensive than at the top of the 1990s tech bubble.

“It is particularly scary this time around,” says John Del Vecchio, co-manager of the AdvisorShares Ranger Equity Beat ETF (HDGE), “because we’re dealing with a historical bull market. This means that the coming bear market – and there will be a bear market again – is likely to overshoot to the downside too. There’s a lot of excess to work off.”

Meanwhile, the Fed and other major central banks are draining excess liquidity out of the system, and growth in most overseas markets is slowing. But perhaps worst of all is that we’re now coming up on the one-year anniversary of the tax cuts. That means we’re no longer comparing post-tax-cut earnings to pre-tax-cut earnings, so the comparables get a lot more difficult.

All the same, it’s usually a mistake to sell everything and run for the hills. Many of the conditions in place today were also in place in the late 1990s. Then, as now, the Fed was getting more hawkish at a time when asset prices were exceptionally expensive, yet prices continued rising for years. Even after the bubble burst in 2000, many value investors continued to generate excellent returns for another two years.

Today, let’s take a look at five cheap "diamond in the rough" stocks to buy. These are five stocks that are objectively cheap enough to potentially generate respectable returns no matter what the market throws at us.

Data is as of Dec. 5, 2018. Dividend yields are calculated by annualizing the most recent quarterly payout and dividing by the share price.

• Market value: $34.7 billion
• Dividend yield: 4.4%
• Forward price-to-earnings ratio: 7.8

Plastics and specialty chemicals firm LyondellBasel Industries (LYB, $90.57) is one of the largest plastics companies in the world. Apart from its plastics and chemicals businesses, the company also refines crude oil into gasoline, diesel fuel and other products.

Given the rather gritty, old-economy nature of LyondellBasel’s operations, the stock can be remarkably volatile. The share price has bounced around in a range of $85.60 to $121.95 per share over the past year, and at time of writing the shares traded at just shy of $91.

LyondellBasel is one of the cheapest stocks in the Standard & Poor’s 500-stock index. It trades for just 6.3 times trailing earnings and less than 8 times analysts’ estimates for next year’s earnings. Compare this to the S&P 500, which trades for 21.7 times trailing earnings and 16.6 times forward earnings. LYB also looks cheap relative to its annual revenues; shares trade for 0.9 times sales, compared to a price-to-sales ratio of 3.2 for the S&P 500.

Part of Lyondell’s cheapness reflects the cyclicality of its earnings. The company tends to do well when the economy is booming, but its sales tend to dry up when the economy is slowing. Even so, at these prices it would seem that Wall Street is overly fearful.

LyondellBasel also is one of the highest-yielding stocks in the S&P 500, with a payout well above 4%. Given that LYB pays out only 26% of its profits as dividends, that dividend would appear safe for the foreseeable future.

Share buybacks are somewhat controversial, as many companies seem to make a habit of buying their shares when they are overpriced only to turn around and issue new ones when they are cheap. But Lyondell does them right. The company has been taking advantage of its depressed stock price to repurchase shares, reducing its share count by over 30% over the past decade.

• Market value: $82.7 billion
• Dividend yield: 2.2%
• Forward price-to-earnings ratio: 22.2

Moving on, let’s take a look at one of the most ubiquitous brands in the world: Seattle-based coffee chain Starbucks (SBUX, $66.65).

Other than McDonald’s (MCD) golden arches, Disney’s (DIS) Mickey Mouse ears and the Coca-Cola (KO) bottle, Starbucks’ green mermaid logo may be the most recognized company logo in the world. We have no way of knowing what consumer tastes will be like 50 years from now. But it is safe to assume they will spend at least a decent chunk of their leisure time enjoying those tastes in a Starbucks.

SBUX is not exceptionally cheap, as its shares trade for about 21 times trailing 12-month earnings. But it’s rare for a stock with Starbucks’ name recognition and branding power to trade roughly in line with the rest of the market. It generally trades at a premium.

Starbucks shares have essentially gone nowhere since late 2015, during a stretch where the S&P 500 has jumped by about a third. Yet interestingly, SBUX shares have been showing signs of life recently, and the shares are sharply higher over the past three months despite the market volatility. The company reported that its delivery business in China is picking up, and it has continued to cut costs back at home by announcing layoffs in the corporate office.

Starbucks might not be the growth dynamo it was a decade ago. But it looks like a good place to ride out any continued market volatility.

• Market value: $3.6 billion
• Dividend yield: 9.6%
• Forward price-to-earnings ratio: 8.3

When you see a nearly 10% dividend yield, it’s often a good idea to run. Yields that high are rarely sustainable and often times point to potential distress.

But not always.

• Macquarie Infrastructure Corporation (MIC, $41.50) appears to be one of those exceptions.

Macquarie Infrastructure owns a quirky collection of cash-flowing infrastructure assets: terminals, storage tanks, aircraft parking and de-icing, wind and solar energy assets, and waste disposal. None of it is particularly sexy, and you probably wouldn’t want any of these assets in your backyard. But given the cash they throw off, you should absolutely want them in your portfolio. At current prices, MIC yields a very attractive 9.6%.

Dividend yields that high often signal a company in distress. But in Macquarie’s case, it’s more an issue of poor communication. The company made a decision in February to temporarily take some of its terminal assets offline to repurpose them. This lowered their cash flow projections for the year and prompted management to reduce the dividend by about 31%.

Management did a very poor job of telegraphing this investors, who were completely taken by surprise. As a result, they dumped the shares, which are now down by more than 40% in 2018.

The common market wisdom is that dividend cuts are like cockroaches: There’s never just one. But in the case of Macquarie, the cut really does appear to be an isolated event. Based on current cashflows, the company should be able to maintain its dividend indefinitely, and as the offline assets start to come on line again, Macquarie should be in excellent position to start raising the payout aggressively.

In the meantime, you can ride out any coming market turbulence while collecting a fat dividend.

• Market value: $57.2 billion
• Distribution yield: 6.6%*
• Forward price-to-earnings ratio: 13.1

For another gritty workhorse stock, consider midstream master limited partnership Enterprise Products Partners (EPD, $26.21).

Conservation efforts and the emergence of alternative energy should significantly reduce demand for fossil fuels in the years ahead. But realistically, the United States and other major developed countries will continue to need natural gas for the foreseeable futures. And as one of America’s largest transporters of natural gas and natural gas liquids, Enterprise Products is well positioned to benefit.

Enterprise Products manages a sprawling empire of more than 50,000 miles of pipelines, 260 million barrels of storage for natural gas liquids and other refined products, and over 14 billion cubic feet of natural gas storage capacity. The company also owns and manages natural gas liquids export and import terminals on the Gulf of Mexico.

With all of the volatility in the energy markets this year, Enterprise Products’ stock price has mostly moved sideways. But that’s OK. Even if the stock price never moves a nickel, anyone buying Enterprise Products at today’s prices enjoys a $1.73 per share distribution. That works out to a cash yield of 6.3%, which isn’t too shabby.

What’s more, Enterprise Products has a long history of raising its distribution. The company has hiked its payout every year since 1998. Over the past 10 years – which were rocky one for the energy sector – the company managed to grow its distribution by nearly 6% per year.

The market might go up, down or sideways from here, but it’s probably safe to bet that whatever happens, EPD will continue trucking along as always, raising its distribution like clockwork.

*Master limited partnerships pay distributions, which are similar to dividends, but are treated as tax-deferred returns of capital and require different paperwork come tax time.

• Market value: $6.4 billion
• Dividend yield: 6.9%
• Forward price-to-earnings ratio: 13.3

If we really are heading into a rough patch, then distressed debt specialist Oaktree Capital Group (OAK, $40.62) is a stock worth owning.

Oaktree, which is headed by one of the most respected investors in the business in Co-Chairman Howard Marks, is an asset manager that serves primarily institutional investors such as sovereign wealth funds, public pensions, corporations and endowments.

The company’s alternative strategies run the gamut – everything from private equity to emerging market bonds – but one of its primary specialties is in distressed debt. Over the years, Oaktree has done well by identifying troubled borrowers that eventually recovered. So, Oaktree’s best opportunities to really shine happen when the economy is weak and distressed debt deals are abundant.

We’re not quite there, at least not yet. But that doesn’t mean that Oaktree isn’t an attractive stock. At current prices, Oaktree yields an attractive 6.9%.

One thing to keep in mind with Oaktree is that its dividend is variable. Given the irregularity of the company’s cash flows (they tend to get windfalls from performance fees), the board opts to maintain a flexible dividend that fluctuates with cash flows. So, don’t be alarmed if the dividend bounces around a little.

As of this writing, Charles Sizemore was long EPD, LYB, MIC, OAK and SBUX.

For most of the past decade, investors have embraced the idea that companies should pay them first—via fat dividend checks or stock buybacks that bump up investors’ share of company profits—rather than funneling cash back into the business.

But investors are starting to get jazzed about capital spending, too, whether it’s the opening of a new data center, the retooling of an aging manufacturing plant, or increased spending on tech to boost competitiveness and help a business grow. Since the start of 2016, a basket of stocks of companies investing the most for growth—which includes capital expenditures (or “capex”), and research and development, have gained a cumulative 63%, compared with just 34% for firms that are returning cash to shareholders, according to Goldman Sachs data through early July.

Capital expenditures are on the upswing as many companies take advantage of savings from a lower tax rate and a more favorable depreciation schedule. The increase is not surprising, considering that the average age of corporate “fixed” assets—buildings, equipment, office furniture and the like—is now 16.3 years old, according to Strategas Securities. The last time assets were that old was back in the 1960s.

For 2018, capex spending by S&P 500 companies could climb to an estimated $690 billion, up 10% from 2017 and the highest dollar amount since 2014, predicts Goldman Sachs. That makes it a good time to buy into companies that are investing in themselves, like these six firms

Prices and other data are as of August 31.

Today’s General Motors (symbol GM, $34.38) isn’t your father’s GM. The 110-year-old Detroit-based automaker is positioning itself as a leader in new growth areas, such as electric cars and driverless vehicles. And its investments to do so are sizable. In the second quarter of 2018, GM’s capital spending outlays totaled nearly $6.7 billion, which ranked first among companies in the S&P 500. Among other things, the money is going toward developing faster-charging batteries for electric cars and funding Cruise Automation, GM’s driverless-car unit. GM has promised to launch a self-driving car with no steering wheel, pedals or manual controls by 2019.

JPMorgan Chase auto analyst Ryan Brinkman says the rollout schedule gives GM “a significant first-mover advantage” in the market for autonomous cars. Despite a recent downdraft in the stock due to auto-tariff headwinds, he believes GM’s shares could trade at $58 by the end of the year, which represents a nearly 70% increase from its recent close.

Most investors still equate this tech giant with its Xbox gaming console, Office software suite or Outlook e-mail program, but today’s Microsoft (MSFT, $108.74) is focused on cloud computing. Microsoft’s most recent earnings report shows that for the quarter ending June 30, the company’s Intelligent Cloud unit—which includes Azure, it’s publicly accessible cloud service—posted a 23% jump in revenues, to $9.6 billion, accounting for nearly 32% of Microsoft’s total sales of $30.1 billion.

It takes money to build sales and market share. Microsoft spent $4 billion on capex in the three months that ended in June—up 74.3% from a year ago, according to S&P Global Market Intelligence. In June, the company announced plans to build two new cloud data centers in Norway, and it began testing one on the sea floor off the coast of Scotland that will deliver Internet and cloud services to coastal cities.

Microsoft made a sizable investment in its gaming business, too, with the goal of creating more games exclusively for its Xbox One console. The company is also working on a subscription-based game-streaming service in a bid to become the “Netflix of gaming,” says Morgan Stanley analyst Keith Weiss, who says the stock, with a current market value of more than $860 billion, could reach $1 trillion in market value by March 2019.

Drillers in the capital-intensive business of energy exploration like nothing better than rising oil prices, which are up 167% from a low in 2016. But acquisitions made when oil prices were sinking and the industry was floundering have set up Noble Energy (NBL, $29.34) nicely for future growth, says Welles Fitzpatrick, an analyst at SunTrust Robinson Humphrey. Noble bought Rosetta Resources in 2015 and Clayton Williams Energy last year “on the cheap,” says Fitzpatrick, adding 4,200 U.S. drilling sites with the deals. “The conviction to buy oil assets in those dark times really speaks to the company’s long-term vision,” he says.

Noble plans to plow $2.7 billion to $2.9 billion into the business this year. Nearly 70% of the investment will be spent on onshore U.S. assets, and about 25% will be allocated overseas, primarily for the development of its Leviathan offshore natural gas field off the coast of Israel. Noble expects Leviathan to account for 25% of 2020 production.

“Leviathan will be the highest-return-generating asset in Noble’s portfolio,” says Norm MacDonald, portfolio manager at Invesco Energy Fund. After tumbling more than 23% in 2017, Nobel’s shares are up nearly 3% this year, but they have more room to run, say the bulls.

Royal Caribbean (RCL, $124.04) recently spent more than $1 billion to build the biggest cruise ship ever. The 228,081-ton Symphony of the Seas (pictured here) set sail on its maiden voyage in April from Barcelona. The palace-at-sea features glow-in-the-dark laser tag, a surfing simulator, and a one-of-a-kind, two-story family suite with its own private 3-D cinema. The jumbo purchase boosted the world's second-biggest cruise company's capex spending to $1.72 billion in 2018’s first quarter alone, a 1,301% increase from a year ago. The firm spent another $493 million in the second quarter, a 231% jump from last year's April–June quarter.

In all, Royal Caribbean will roll out four new ships this year. And Spectrum of the Seas, the largest, most expensive ship in Asia, is slated to set sail in June 2019. The spending spree comes at a time when U.S. consumers are feeling better about their finances. There are few, if any, signs of a recession, and the U.S. unemployment rate is at an 18-year low. As a result, bookings are tracking ahead of last year, and passengers are paying higher rates for tickets, as well as spending more on booze, food and on-board activities. And yet the stock is a bargain, trading at 12 times estimated 2019 earnings of $10.08 per share, compared with a price-earnings ratio of 16 for the S&P 500.

The world leader in delivering small packages is known for its brown trucks, efficiency and reliability. But as online shopping increases and Amazon.com’s digital sales soar, United Parcel Service (UPS, $123.70) is modernizing its facilities to keep up with demand. Big Brown kicked off a three-year spending plan in 2018, bringing capex investment to $20 billion in the 2018–20 period, analysts say.

The money will be used to open or upgrade 18 facilities, including new regional hubs in Salt Lake City and Atlanta, as well as in London and Paris. In all, UPS is adding 5 million square feet of package-sorting capacity. In February, UPS announced an order for 14 Boeing 747-800 cargo jets and four 767 aircraft. The goal: to earn more profit on each package and reduce the bottlenecks that plagued UPS during the past holiday season, when delivery requests outstripped forecasts. “UPS has seemingly put its execution issues behind it,” says Jim Corridore, of Wall Street research firm CFRA, who recommends the stock.

Perhaps no sector of the economy burns through more cash to drive future growth than health care—especially companies in the business of developing new drugs and getting them to market. Biotech firm Regeneron (REGN, $397.93) has a history of success with medicines such as Eylea, which treats macular degeneration, and has prospects that could emerge as name-brand drugs with big profit potential. Six are currently in the Food and Drug Administration’s third and final trial phase, including a drug that targets respiratory viruses and another for osteoarthritis-related pain. Regeneron has a total of 25 drugs in its pipeline.

Shepherding medicines from the testing lab to patients is expensive. Regeneron spent $1.03 billion in the first six months of 2018 on research and development, up slightly from the same period last year. The firm expects to spend $1.2 billion to $1.3 billion for the full year. Still, the biotech’s profitability is solid. CFRA analyst Jeffrey Loo, who has a “buy” rating on the shares, estimates earnings per share of $19.95 this year, or roughly double 2017 profits, and forecasts 10% profit growth in 2019.

Chinese stocks, while hardly the under-covered investment opportunity they were more than a decade ago, still have intriguing growth prospects. They still offer exposure to China’s enormous market – according to PricewaterhouseCoopers, China could be the largest economy in the world with about 20% of world GDP by 2050. And they still can leverage the country’s expanding middle class and booming Internet presence.

China has several companies that operate essentially parallel to big U.S. stocks, especially in the technology sector. However, many of these companies have evolved into massive hybrid beats, catering to their users in both the online and offline space.

Several of these stocks are trading on the cheap thanks to ongoing trade-war fears between the U.S. and China. However, Goldman Sachs (GS) CEO Lloyd Blankfein calls Trump’s threat of slamming tariffs on another $200 billion of Chinese imports a negotiating tactic. “That’s what you would do if it was a negotiating position, and you wanted to remind your counterparty just how much firepower you had to bring to the negotiation,” he said.

With this in mind, we used TipRanks’ unique market data to pinpoint five trending Chinese stocks with big Wall Street support.

The following is a look at these stocks, analysts’ average price targets and an explanation as to why Wall Street is so bullish right now. Here’s a look at these five “Strong Buy” stocks from the “Middle Kingdom.”

Data is as of June 19, 2018.

• Market value: $91.7 billion
• TipRanks consensus price target: $296.75 (13% upside potential)
• TipRanks consensus rating: Moderate Buy*
• Baidu (BIDU, $262.11), also known as the “Google of China,” is a Chinese search operator that also offers everything from maps to cloud services to artificial intelligence. And it’s undervalued, top Oppenheimer analyst Jason Helfstein (view Helfstein’s TipRanks profile) recently said.

The valuation is particularly compelling among Chinese stocks when you compare it to the stock’s impressive core growth rate. Helfstein lauded BIDU’s valuation of 11 times estimates for 2019 core EBITDA – too low for China’s leading search engine, and too low for a company that’s estimated to grow at 25% annually between 2017 and 2020.

He reiterated his “Buy” rating on BIDU on May 21 with a $295 price target, believing that the market overreacted to news in May that COO Qi Lu was leaving the company, especially given that Baidu still has a disciplined budget system in place.

Baidu also is investing heavily in a several new technologies, including AI, the cloud, self-driving cars and online video. According to Helfstein, Baidu is in prime position to benefit from the growth of internet advertising in China. “We think key drivers include increasing number of paid clicks, higher conversion rates, and higher cost-per-click (CPC)” he writes. The penetration of smartphones in China provides another strong revenue stream for BIDU as it starts to monetize mobile search separately.

* BIDU garners a consensus “Strong Buy” from TipRanks-designated “Top” advisers.

• Market value: $528.9 billion
• TipRanks consensus price target: $246.07 (20% upside potential)
• TipRanks consensus rating: Strong Buy

E-commerce giant Alibaba (BABA, $204.43) is consistently one of the Street’s favorite Chinese stocks. Indeed, our data shows that BABA has received only buy ratings from Wall Street analysts for more than 10 months. And the latest opinion from the Street is that the future will be just as bright.

Five-star Susquehanna analyst Shyam Patil (view Patil’s TipRanks profile) has just boosted his BABA price target from $220 all the way to $305. This suggests robust upside potential of almost 50%.

“Our checks suggest that Alibaba continues to take share in the China e-commerce market and the significant new user additions in F2018 should provide a tailwind to growth through (fiscal) 2019,” Patil writes. He continued: “Alibaba has numerous levers in the pipeline to drive continued strong advertising revenue growth, but we expect the company to remain measured in its approach, as it appears focused on sustainable growth and careful not to over-monetize.”

Patil says three big growth drivers for the stock include 1) predictive search, 2) Taobao shopping and 3) TMall’s Weitao social-media channel. This is a shopping-news social media app that allows merchants to reach out to users via text, video and interactive campaigns.

Patil was excited about the stock ahead of China’s big 618 online shopping festival, which took place on June 18. This is the second biggest shopping festival in China after Single’s Day and was created to celebrate the founding of BABA rival JD.com (JD), which just received a $550 million investment from Alphabet (GOOGL).

However, as Patil points out, Alibaba’s presence in electronic sales means it likely also got a boost from the 618 festival.

• Market value: $10.4 billion
• TipRanks consensus price target: $56.80 (11% upside potential)
• TipRanks consensus rating: Strong Buy

Welcome to the ‘Tinder of China.’ Momo Inc. (MOMO, $51.09) is a free social search and instant messaging mobile app that specializes in match-making, especially following the February acquisition for Tantan – “China’s Tinder” – for $735 million.

The Chinese stock recently soared 15% following stellar first-quarter results. MOMO announced revenue for the quarter of $435 million – up 64% year-over-year, and easily enough to crush the Street’s consensus estimate of $396.3 million.

“Our community continued to grow in size and engagements despite the negative seasonality, thanks to the product and marketing initiatives we have been taking in recent quarters,” Momo CEO Yan Tang said. “The content ecosystem continues to improve, driving robust organic growth momentum for live streaming business.” And thanks to Tantan, MOMO is on the way to delivering upbeat second-quarter revenue of $470 million to $485 million.

UBS analyst Jerry Liu upgraded Momo from “Hold” to “Buy” following the report. He is one of four analysts who recently ramped up their MOMO price targets. Jeffries’ Karen Chan (view Chan’s TipRanks profile) now has a $60 price target (17% upside potential), up from $55 previously. She believes there is “ample room” for MOMO to expand its user base and is very bullish on the company’s strong live streaming momentum. Live-streaming is incredibly popular in China, despite its ongoing battle against with Chinese censorship.

• Market value: $485.4 billion
• TipRanks consensus price target: $65 (28% upside potential)
• TipRanks consensus rating: Strong Buy

Chinese web giant Tencent (TCEHY, $50.82) is best known for hugely popular WeChat app. This app is like a pumped-up version of Facebook’s (FB) WhatsApp, enabling users to do everything from scheduling an appointment, to making visa applications and paying fines.

However, Tencent’s interests are far broader than just chat.

The company’s offerings span everything from AI to the cloud to the world’s largest mobile gaming franchises. It even has a small hand in alcohol sales. Tencent has just announced that it is partnering with distiller Pernod Ricard (PDRDY) to help it up its marketing efforts in China through sponsorship, content creation and analytics. This isn’t surprising when you consider that Tencent’s network reaches a staggering 98% of Chinese internet users. Indeed, WeChat alone counts more than 1 billion users.

“We view Tencent a core holding in the Chinese internet sector as the stock offers unique exposure to compelling opportunities in the online social and mobile areas,” Benchmark Company analyst Fawne Jiang (view Jiang’s TipRanks profile) recently wrote. “We remain positive on Tencent’s multifaceted growth drivers, which leverage its dominant position in China’s mobile gaming and social networks.”

Jiang sees mobile gaming as a core growth driver, while online advertising also has “ample upside potential.”

Meanwhile top-rated Wells Fargo analyst Ken Sena (view Sena’s TipRanks profile) spies a big opportunity for Tencent in the fast-growing video programming space. He has conducted an in-depth analysis into Tencent’s video offering, and he believes that video revenue can surge over the next five years with four times as many as subscribers.

• Market value: $9.1 billion
• TipRanks consensus price target: $208.33 (23% upside potential)
• TipRanks consensus rating: Strong Buy

The best plays among Chinese stocks aren’t just tech-oriented.

Biopharma BeiGene (BGNE, $165.10) is working on the next generation of cancer treatments. It is focused specifically on molecularly targeted and immuno-oncology cancer therapeutics, and it has a deep pipeline of late-stage drug candidates. Most recently, BGNE announced that its PARP inhibitor candidate pamiparib (BGB-290) has moved into a pivotal study for ovarian cancer in China.

On the back of this announcement, top Maxim analyst Jason McCarthy (view McCarthy’s TipRanks profile) ramped up his BGNE price target from $200 to $225. He notes that none of the three existing PARP inhibitors on the market have been approved in China.

“BeiGene as a China-based company which also now has a China focused commercial sales force from Celgene has a distinct advantage, in our view, and could bring the first PARP to the China market” McCarthy writes. This drug could be priced at about $100,000 per patient (based on global market prices for existing therapies).

The pivotal study will specifically target ovarian cancer (OC) maintenance therapy – the largest OC population. In China, there are 50,000 new OC cases with the majority moving on to maintenance therapy, McCarthy writes.