In 2022, stocks entered a bear market, as much of Wall Street entered into a panic about the Federal raising interest rates. Stocks bottomed in October 2022 as very slowly, but surely, many investors realized that the “Don’t fight the Fed” mantra was inaccurate. That’s because, in-line with my predictions, higher rates did not cause the economy to enter a recession. It also did not cause corporate profits to tumble or these stock superstars to falter.
However, just as much of the stock market was really starting to take off last summer, treasury rates began soaring. Rates ultimately rose by a percentage point. Once again, Wall Street fell back into its old habit of panicking about rates. This caused the stock market to pull back about 10%. In recent days, the market has recovered as treasury rates have stabilized and many companies reported very favorable third-quarter financial results. Consequently, I believe that Wall Street has gotten over its latest episode of “rate phobia.” Moreover, it is now beginning to focus on strong earnings and the economy’s good fundamentals. This is setting us up for a year-end rally. Here are three superstar stocks to buy to benefit from the market’s comeback.
Intel (NASDAQ:INTC), as I noted in a previous column, is starting to benefit from selling chips that enable localized artificial intelligence. The firm has created Gaudi chips, which are used to develop AI are surging. CEO Pat Gelsinger noted that, “The overall orders for those chips doubled in the 90 days that ended on Oct. 26,” as I reported in my Oct. 31 article.
Also importantly, Gelsinger noted that INTC had recruited, “A major customer” for its new business of making chips for other firms.
Investment bank Northland Capital was upbeat on Intel’s results and outlook. Northland Capital predicted that Intel and Taiwan Semiconductor would be the two main global chip makers going forward. Northland added that INTC, “Is better positioned than widely recognized.”
All of Wall Street appears to have become much more upbeat on Intel, as its shares have climbed 12.5%.
Specifically, the firm’s top line jumped 25% versus the same period a year earlier to $2.29 billion, while its income from operations, soared 30% YOY to $676 million.
Multiple banks were also impressed with NOW’s Q3 results. For example, Japanese bank Mizuho called the print “remarkably strong.” They also said that the bank was “very well-positioned” to expand rapidly throughout the long term. Similarly, TD Cowen believes that the firm generated powerful growth. Moreover, the bank, like me, thinks that AI will meaningfully boost the size of the firm’s revenue increases going forward.
Indicating that AI is indeed lighting a fire under NOW’s growth, COO CJ Desai reported recently that the technology is boosting NOW’s expansion. Desai noted that the firm’s revenue from the federal government had soared 75% last quarter versus the same period a year earlier.
Given all these points, INTC is certainly one of the best stocks to buy for the year-end rally.
JPMorgan (NYSE:JPM), America’s largest bank, reported excellent third-quarter results. It is very well-positioned to benefit from the country’s strong economy going forward. Its earnings per share came in at $4.33. This was well above analysts’ mean outlook of $3.97 and much higher than the EPS of $3.12 that it reported in Q3 of 2022. Also noteworthy is that it increased its 2023 net interest income guidance to $88.5 billion from its previous outlook of roughly $87 billion.
JPM stock has retreated in the wake of the company’s results and a decision by CEO Jamie Dimon to unload 1 million of his shares of JPM stock.
However, JPM’s results were strong, while Dimon is 67-years-old and is probably making his portfolio less risky, which is the prudent move for anyone nearing retirement.
Given these points, I believe that the shares’ pullback is overdone, and I recommend that investors buy JPM on weakness.
On the date of publication, Larry Ramer held a long position in INTC and his wife held a long position in NOW. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.