- Huntington Ingalls Industries (HII): The geopolitical flashpoint bolsters momentum for naval warships.
- Delta Air Lines (DAL): With pandemic fears fading, analysts are eyeballing DAL.
- IBM (IBM): A reliable though boring tech play could make things more exciting for investors.
- CoreCivic (CXW): Wildly cynical, CXW could benefit from unfortunate social realities.
Recently, I wrote a piece regarding publicly traded companies which analysts downgraded. Although the concept of betting alongside market experts is a questionable one, for those that believe in the methodology, I have the other angle to present to you: Four stocks analysts love.
As we move toward the halfway point of 2022, expert sentiment for stocks to buy has been noticeably waning. With inflation continuing to spiral out of control, combined with Russia’s belligerence in Ukraine, it’s no wonder that recession fears are rising. Mainly, this risk stems from the Federal Reserve, which must raise interest rates to combat inflation. Thus, that there are still stocks analysts love is quite a big deal.
Still, we’ve got to be realistic. As I mentioned with the analyst downgrades, the data on the accuracy of expert price targets is surprisingly disappointing. Researchers at the University of Waterloo and Boston College discovered in their 2012 study that price targets are only 30% accurate across a 12-month horizon. Therefore, take the implication of stocks analysts love with a grain of salt.
But to end on a positive, investors might also not want to throw the baby out with the bath water. Sometimes, the experts can get it absolutely right — it’s a case-by-case situation. With that in mind, here are four stocks analysts love.
|HII||Huntington Ingalls Industries||$227.06|
|DAL||Delta Air Lines||$45.46|
Huntington Ingalls Industries (HII)
Arguably the most understandable of stocks analysts love from recent ratings, Huntington Ingalls Industries (NYSE:HII) benefitted from a renewed fundamental focus by Cowen. Last week, the financial firm upgraded HII to “outperform” from “market perform.” Additionally, Cowen has a $270 price target on the stock, a significant lift from its earlier target of $200.
Why the boost in bullishness? As the largest military shipbuilding company in the U.S., Huntington Ingalls represents a key component of our defense profile and military readiness. Further, HII may have received increased attention due to Ukrainian forces allegedly striking — and subsequently sinking — the Moskva, Russia’s flagship in the Black Sea.
With the Russian navy demonstrating either extreme incompetence or vulnerabilities (or both), now is the time for the U.S. to really take the lead in naval supremacy. HII also sends a subtle message to China about a possible annexation of Taiwan, making it one of the cynically effective stocks analysts love.
Delta Air Lines (DAL)
Devastated by the coronavirus pandemic, Delta Air Lines (NYSE:DAL) has been struggling ever since. Sure, DAL is up much higher compared to the spring doldrums of 2020 when airports were basically rendered ghost towns. However, the equity unit remains below levels witnessed just before the Covid-19 crisis. However, Barclays sees a different implication.
Experts there upgraded its rating on DAL to “overweight” from “equal weight.” Over the past few months, several other folks have piled on the bullish narrative, making Delta one of the stocks analysts love. For instance, earlier in January, UBS Group upgraded the underlying stock to “buy.” Other firms, such as Raymond James, have set a “strong buy” rating on the airliner.
Why the positive sentiment for a company which presently has ugly financials relative to pre-pandemic norms? In two words, revenge travel. As the Washington Post detailed earlier this year, consumers are ready to reclaim their everyday lives. That includes experiential activities such as vacations, turning DAL into one of the contrarian stocks analysts love.
Before the dawn of the internet, IBM (NYSE:IBM) was a computer and technology powerhouse. It still is, though developments in Software as a Service (SaaS) and cloud computing saw “Big Blue” fight an increasing number of competitors on the backfoot. Nevertheless, IBM is looking rather interesting despite its slow and boring reputation.
But that’s probably one of the reasons why Morgan Stanley recently upgraded IBM, calling the stock a good “place to hide” amid worrying geopolitical and macroeconomic pressures. Part of the benefit of flying under the radar is that when it comes to investors jettisoning their holdings, the spotlight is somewhere else. Plus, IBM currently has a 5.2% dividend yield, which is really attractive given the wider backdrop.
But Big Blue also deserves to be one of the stocks analysts love for what it actively brings to the table. For instance, its initiatives in cybersecurity and artificial intelligence are only going to grow in relevance. Therefore, keep close tabs on IBM stock.
CoreCivic (NYSE:CXW) is an example of one of the stocks analysts love that also serve as a reminder not to shoot the messenger: I’m just reporting the facts. And the fact of the matter is that Wedbush analysts upgraded CXW to “outperform” from “neutral.”
It gets better (or worse, depending on how you look at it). Wedbush also placed CXW as one of its best ideas list, prompting a huge lift in the share price. So, what’s the big fuss all about? Well, CoreCivic owns and manages private prisons, presenting a ghoulish cloud over the business. In some ways, the industry preys on the underprivileged, though this narrative must be balanced with personal responsibility.
If you can come to terms with the moral implications behind supporting private prisons, CoreCivic deploys an awfully cynical take. Essentially, evidence published by the Department of Justice suggests a correlation between higher inflation and higher property crime rates. Logically, this thesis makes sense, although profiting from this dynamic is always going to be a controversial subject.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.