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The year we have just put behind us was one of strong growth for the main stock indices. If we exclude the -14% of Hong Kong (the Chinese stock market has been declining for four years in a row and is a special case at the moment) all the main stock lists have been turbocharged. On Wall Street the S&P 500 rose by 26%, even better the technological Nasdaq rose by 44%. European stock markets also performed very well.
However, the rise was mostly driven by a few stocks. In the USA it was the “magnificent 7” that took the lion’s share, forcefully riding the euphoria over the possible future developments of generative artificial intelligence.
One of the critical aspects that may be hidden behind last year’s exceptional rise was its distribution. Not all listed companies have taken part in this surge in the same way. Of that 26% achieved by the S&P 500, 16% was contributed by the “magnificent 7” (Apple, Amazon, Google, Microsoft, etc.) and only 10% by all the other 493. All things considered, it was an increase little attended. This limited extent of the movement would have been even more evident if there had not been the Christmas rally which, particularly from mid-November, saw capital return to medium-small capitalization companies, those which had remained at a standstill throughout 2023 . And so the Russell 2000, the index that includes this type of company that is part of the US street economy, went from a flat performance to +14% in just a few weeks.
THE MOST DISCOUNTED SHARES WITH GROWING PROFITS IN 2024 ON WALL STREET
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Overall, however, there remains a bitter taste in the mouth of a year in which many companies did not participate in much of the upward movement. Companies which technically, if they were to record growing profits in 2024, could be undervalued. On this front, CNBC has developed a sort of screener that identifies the most discounted companies at the moment. This category includes those securities of companies that have a) a ratio between the market price and expected profits for the next 12 months of less than 21; b) expectation of earnings per share growth (eps) of at least 20% for the coming year; c) an average of “buy” ratings from the analysts who follow them of at least 50% of the total ratings.
By placing this filter on the 500 companies of the main Wall Street index, nine emerge: four belong to the financial sector (Arch capital group, Bank of New York Mellon, JP Morgan Chase and Paypal) three to the energy sector (Halliburton company, Schlubmberger, Targa resources), one to the industrial sector (Deltra Airlines) and one to the communication services sector (Match group).