Blue-chip stocks are pushing higher again on Monday, as the combination of speculative excitement surrounding bitcoin mixes with the holiday spirit and seasonal tailwinds to keep prices marching higher. A solid non-farm payroll report on Friday, the passage of the GOP’s tax plan in the Senate and the avoidance of a government shutdown are all tailwinds as well.
While emotions are high, overvaluations, tepid breadth and the risk of a poor reaction to a likely Federal Reserve interest rate hike later this week suggests investors should remain cautious — and focus on areas of value in the market, including turnaround plays.
Moreover, keep an eye on large-caps versus small-cap stocks, with larger issues enjoying strong outperformance over the past few weeks.
Here are five blue-chip rebound candidates to consider:
Blue-Chip Stocks: Apple (AAPL)
Apple Inc. (NASDAQ:AAPL) shares look ready to rise up and out of a two-month consolidation range as doubts about iPhone X demand and supply chain issues gives way to renewed optimism about the upgrade cycle.
UBS analysts recently walked back some doubts they had on this topic. The company is also expected to be a big beneficiary of the GOP’s tax cut plans, which includes a tax holiday on repatriated earnings.
The company will next report results on Jan. 30 after the close. Analysts are looking for earnings of $3.77 per share on revenues of $86.3 billion.
When the company last reported on Nov. 2, earnings of $2.07 beat estimates by 20 cents on a 12.2% rise in revenues.
Blue-Chip Stocks: General Electric (GE)
General Electric Company (NYSE:GE) lately, with the stock down nearly 50% from the highs set last December as investors have lost faith in new management and plans to streamline the company by selling legacy business divisions like lighting and locomotives.
With sentiment near a nadir, I expect execution on M&A plans and improving cash flow to turn shares around in early 2018.
The company will next report results on January 19 before the bell. Analysts are looking for earnings of 30 cents per share on revenues of $33.6 billion.
When the company last reported on October 20, earnings of 29 cents per share missed estimates by 20 cents on a 11.5% rise in revenues.
Blue-Chip Stocks: Disney (DIS)
Walt Disney Co (NYSE:DIS) is consolidating its rise back above its 200-day moving average, returning to levels not seen since August and up more than 10% from the September-November lows, as fears over the loss of ESPN subscribers and tepid box office performances is being replaced by optimism over the new Star Wars moving and the company’s looming launch of its own over-the-top streaming service.
The company will next report on February 6 after the close. Analysts are looking for earnings of $1.60 per share on revenues of $15.5 billion.
When the company last reported on November 9, earnings of $1.07 missed estimates by five cents per share on a 2.8% drop in revenues.
Blue-Chip Stocks: IBM (IBM)
International Business Machines Corp. (NYSE:IBM) is enjoying a smooth upward trajectory from tis August lows, up more than 7%, thanks to a post-earnings surge in October related to surprisingly strong quarterly results featuring traction for the company’s turnaround plans.
As a reminder, IBM has been bogged down by years of top-line compression as legacy businesses have faltered and new efforts including a focus on the cloud.
The company will next report results on January 18 after the close. Analysts are looking for earnings of $5.15 per share on revenues of $22.1 billion. When the company last reported on October 17, earnings of $3.30 per share beat estimates by two cents on a 0.4% drop in revenues.
Blue-Chip Stocks: Merck (MRK)
Merck & Co., Inc. (NYSE:MRK) shares look ready to emerge from a three-month consolidation range near $55 — representing a near 20% decline from its September high. A quieting of calls for action on drug prices have helped biotech and drug stocks perk up in recent days. The rebound was enough to bag Edge Pro subscribers a 10% rise on their MRK December call options.
The company will next report results on February 2 before the bell. Analysts are looking for earnings of 94 cents per share on revenues of $10.5 billion.
When the company last reported on October 27, earnings of $1.11 beat estimates by eight cents despite a 2% drop in revenues.
Anthony Mirhaydari is the founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.
