Editor’s Note: As a reminder, the stock market will be closed tomorrow, March 29, in observance of the Good Friday holiday. The InvestorPlace offices and customer service departments will also be closed on Friday. I hope you enjoy the long holiday weekend!
The market action has been a bit muted since this is a short trading week (the market is closed tomorrow in observance of Good Friday). But the S&P 500 is on track for a fifth-straight month of gains – something we haven’t seen since 2013.
March is also drawing to a close, which means we’re approaching the end of the first quarter.
And what a phenomenal first quarter it has been! The S&P 500 has gained about 9.4% this year, the Dow is up 4.8%, while the NASDAQ has climbed nearly 8.6%.
The biggest catalyst behind the market’s rally was the stellar fourth-quarter earnings season. Earnings growth clocked in at 2.9% in the fourth quarter, well above initial estimates for a 1.4% decline, according to FactSet.
Now, since Easter is approaching, this is a good time to mention the fact that I often refer to the stocks in our Breakthrough Stocks Buy List as “bunny stocks.”
Simply put, small- and mid-cap stocks tend to “sit” during quiet times in the market. And then, they suddenly “hop” on positive company news or earnings surprises.
So, patience is the key during quiet times when our stocks are “sitting” and not “hopping.”
The great news is that we will not have to wait much longer for our bunny stocks to hop back into the spotlight. The first-quarter earnings announcement season will kick off in mid-April, and based on analysts’ early expectations, it’s going to be another phenomenal season.
FactSet anticipates that the S&P 500 will achieve 3.6% average earnings growth in the first quarter. If that holds true, it would be the index’s third-straight quarter of year-over-year earnings growth.
I should note that back on December 31, 2023, the earnings growth estimate was 5.7%. So, the bar has been lowered, which leaves plenty of room for earnings surprises from fundamentally superior stocks.
As we gear up for the second quarter and for earnings season, you’ll want to make sure you are positioned in fundamentally superior stocks with persistent institutional buying pressure. These are the stocks that will “hop” the most during earnings season.
On the flip side, you’ll want to avoid stocks with weak fundamentals and buying pressure. So, in today’s Market 360, I’ll share the stocks that might struggle in the weeks ahead. I’ll also tell you where you can find fundamentally superior stocks that are poised to “hop.”
This Week’s Ratings Changes
I took a fresh look at the latest institutional buying pressure and each company’s financial health and revised my Portfolio Grader for 56 big blue chips. Of these 56 stocks, 20 were downgraded from a B-rating (Buy) to a C-rating (Hold), and 11 stocks were downgraded from a C-rating to a D-rating (Sell).
I’ve listed the first 10 stocks rated as Sell below, but you can find the full list – including the stocks’ Fundamental and Quantitative Grades – here.
Chances are that you have at least one of these stocks in your portfolio, so you may want to give this list a skim and adjust accordingly.
| Ticker | Company Name | Total Grade |
|---|---|---|
| AAPL | Apple, Inc. | D |
| AMX | America Movil SAB de CV Sponsored ADR Class B | D |
| COO | Cooper Companies, Inc. | D |
| COTY | Coty Inc. Class A | D |
| CVX | Chevron Corporation | D |
| DOW | Dow, Inc. | D |
| FCX | Freeport-McMoRan, Inc. | D |
| KMB | Kimberly Clark Corporation | D |
| PARAA | Paramount Global Class A | D |
| TDY | Teledyne Technologies Incorporated | D |
The bottom line is that 2024 is proving to be a good year for the market… and the first-quarter earnings season should propel stocks higher in the second quarter.
Now, I’d be remiss if I didn’t mention that 2024 has been a good year for Breakthrough Stocks, too. My current Buy List has outperformed significantly, rising more than 19% so far this year. And with the first-quarter earnings announcement season just around the corner, I suspect that many of my Buy List stocks will “hop” on positive results and drive my Buy List even higher.
However, I also expect a lot of our winners will be from a few select artificial intelligence stocks…
The truth is there is a lot of hype around AI stocks right now. But instead of blindly throwing your money at any company with “AI” tacked to the end of its name, you need to make sure that they also have superior fundamentals.
That’s why I have hand-picked five stocks that I expect to lead the charge as AI explodes. If you become a member of Breakthrough Stocks now, I’ll send you the names in my brand-new special report: 5 Small-Cap Gems for the 2024 A.I. Boom. These are five companies that are properly incorporating AI into their businesses or stand to directly profit.
And just as there will be big AI winners, there will also be real losers – and I list three stocks that are directly in the crosshairs of AI in another new report – The A.I. Landmines: 3 Stocks to Avoid in the Age of A.I. These companies could get left behind as they wait too long to incorporate AI into their businesses. Given their popularity, there’s a good chance you have at least one of these ticking time bombs in your bank account.
Join me at Breakthrough Stocks now and I’ll send you this report as well. You’ll also have full access to my Breakthrough Stocks Portfolio, all my Weekly Updates, Monthly Issues, Special Reports, Special Market Podcasts – and much more.
(Already a Breakthrough Stocks member? Click here to log in to the members-only website now.)
Sincerely,
Louis Navellier
Editor, Market 360
