August is off to a strong start for Wall Street, with the Dow and the S&P 500 closing Friday’s session at new record highs. The Dow gained 0.8% for the week while the S&P edged up 0.9%. The Nasdaq led the way with a 1.1% increase.
Fresh evidence that the labor market is on the mend helped add fuel to the tank. Stocks jumped late last week after the Labor Department reported that the U.S. Economy added 943,000 jobs in July, exceeding expectations of 845,000 new jobs for last month and that the unemployment rate dropped to 5.4%.
Wall Street is especially tuned into data that could potentially impact the Federal Reserve’s policy going forward. Last week it was employment numbers. This week, investors will focus on inflation data with the consumer price index and the producer price index set for release on Wednesday and Thursday, respectively.
Markets are hanging on anything that will help determine when the central bank will start to step away from the measures it took to support the economy during the pandemic, including its $120 billion per month purchases of Treasury bonds and mortgage-backed securities.
“While uncertainty over monetary policy is likely to cause further bouts of volatility, we believe the Fed’s move towards tapering is unlikely to prompt a reversal of the equity rally,” noted strategists at UBS.
“Labor market slack, well-anchored inflation expectations, and risk from the delta variant make interest rate increases before 2023 unlikely,” the firm added.
With current conditions in mind, our team has a few recommendations of stocks to add to your watchlist now. Continue reading to find out who.
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Bank of America Corporation (BAC) provides banking and financial products and services for individual consumers, institutional investors, large corporations, and governments worldwide. It operates through the following segments: consumer banking; global wealth & investment management; global banking; and global market segments.
Thanks to its global investment banking and financial services portfolio, most are familiar with this financial titan. In the U.S., BAC currently operates via 4,300 retail financial centers, 17,000 ATMs, and digitally serves 41 million active users. Furthermore, the company is also present in 34 other countries across the globe.
After more than doubling since its pandemic-era low, let’s take a look at the factors that could boost BAC going forward. For one thing, the Fed has signaled two interest rate hikes as soon as late 2023, which should help BAC increase its interest income down the road. Zooming in a little closer, according to Globe Newswire, the global financial services market is expected to grow at a 9.9% CAGR to hit $22.5 trillion this year.
Furthermore, BAC’s shift in focus towards the digital space seems to be benefiting the company. Last week, BAC reported that its Bank of America app facilitates 85% of deposit transactions on its network now. In the second quarter, this accounts for nearly 48 million checks that BAC customers deposited.
If you need another reason, consider BAC’s uninterrupted 21-year history of rewarding investors through dividends. The company recently raised its quarterly dividend to $0.21 per share, up 16.7% from the previous quarter. New investors won’t be included in the September 24th payout. Even still, it’s worth mentioning because, with their impeccable history, BAC’s dividend is not likely going anywhere anytime soon.
The Wall Street pros are mostly bullish on BAC. Of 29 analysts polled, 17 rate the stock a Buy, 9 rate it a Hold, and only 2 say to Sell BAC stock. A 12-month median price target of $44 represents a 10% increase from its current level.
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Well-known chocolate, candy, and snack manufacturer Mondelez International (MDLZ) has been gaining robust demand in developed markets while performance in the emerging markets continues to improve. All the while, Mondelez has been focused on lucrative acquisitions, cutting costs, and brand building through innovation.
The oreo-maker recently acquired Chipita, a Greek company whose croissants and baked snacks helped generate $580 million in sales last year. The company’s products are most popular in Eastern Europe but have great potential for growth around the globe, especially in emerging markets.
“It’s a real win-win situation in my opinion,” Mondelez CEO Dirk Van De Put said in an interview with CNBC’s Jim Cramer. “We can use their distribution, their presence to build on distribution, but also to bring our brands to their products. Imagine a croissant with Cadbury chocolate.”
Organic revenues have also benefited from efficient pricing strategies and higher volumes. Plus, the company is currently engaged in rationalizing operational structures to cut costs. This bodes well for the stock in the mid and long term.
MDLZ shares have gained nearly 20% in the past year and nearly 11% year-to-date. The stock also comes along with a 1.97% dividend yield.
Of 22 analysts polled, 19 rate the stock a Buy, 4 rate it a Hold. There are no Sell ratings for Mondelez. The 20 analysts offering a 12-month forecast for the stock have a median target of $71, which represents a 14.94% upside from its current level.
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Analysts expect oil prices to hit $80 a barrel or more in the months to come based on the strengthening demand outlook. Simultaneously, several large operators are reducing supply or rebranding to focus on renewable energy. ExxonMobil Corp. (XOM) lost a proxy fight to an activist hedge fund that will force it to reduce production. Royal Dutch Shell (RDS.A) is considering selling off American oil fields. This creates a huge opportunity for Canadian Natural Resources (CNQ).
Headquartered in Calgary, Canada, Canadian Natural Resources (CNQ) has operations heavily focused on the Canadian oil sands, and its fields are set to last until the 2050s and beyond. The company has recently set its focus on becoming a net-zero emitter. Since its projects are already in production, it should face less environmental opposition than yet-to-be-built oil projects. Already hugely profitable Canadian Natural seems set to reap the rewards as many large operators, like ExxonMobil Corp. (XOM), reduce supply.
Canadian Natural is the recent recipient of an upgrade to Buy from Goldman Sachs, along with a $44 price target, based on the potential upside to consensus and material free cash flow generation on its above-consensus oil price outlook. Goldman’s Neil Mehta sees Canadian Natural “generating 20% free cash flow yield in 2022 enabling deleveraging and potential for buybacks, including its already peer leading dividend.”
According to Mehta, risk around the Line 3 replacement project that would add more barrel capacity has been “more than priced into valuation,“ as CNQ shares have underperformed Canadian oil peers by around 13% since mid-January.
CNQ is arguably a current favorite among analysts. Of 21 offering recommendations, 17 say to Buy the stock, and 4 call it a Hold. There are no Sell ratings for CNQ. A median 12-month price target of $43.67 represents a 31% increase from its current price.
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