Weekly Radar: Our Top Picks for The Days Ahead

Despite a mid-week rally, Stocks ended last week with marginal changes as the first quarter earnings season began to wind down.  While the S&P 500 and the Dow experienced slight weekly declines, the Nasdaq managed to secure a modest gain.

As we gear up for another week of trading, all eyes will be on major retailers as they prepare to release their quarterly reports. Target, Home Depot, Walmart, and other prominent companies are set to unveil their performance in the coming days.   We’ll also get an update on consumer spending on Tuesday as the Census Bureau reports retail sales for April.  Additionally, market watchers can expect several updates on the housing market including the latest data on building permits, housing starts, existing home sales, and the NAHB’s Housing Market Index for May.

For those determined to stay ahead of the game in the investment world, our weekly stock watchlist offers the perfect solution. Our team of expert analysts diligently scours the market to bring you the three most compelling stocks that demand your attention in the coming week. Our first recommendation is a company that’s coming off of a hot quarter and upped its second quarter and full year guidance.  

Canadian National Railway (CNI)

There’s nothing new or flashy about transportation stocks. That said, transportation stocks remain integral to the economy, contributing more than 5% of the country’s gross domestic product (GDP) annually, or about $1.3 trillion.  Transportation stocks tend to be mature and established companies with a track record of delivering strong earnings growth and returns to shareholders.  

Canadian National Railway is one such name.   The railway operator serves all of Canada and the midwestern U.S. and reported record first-quarter revenue of $4.31 billion due largely to strong grain shipments and elevated oil prices.  Earnings per share also grew 38% in Q1 to $1.82 from $1.32 a year earlier, and beat the $1.72 consensus forecast of analysts surveyed by Refinitiv.

Also encouraging was the fact that the company raised its full-year 2023 guidance, forecasting EPS growth in the mid-single digits. CNI also raised its quarterly dividend nearly 10% to 79 cents per share, equating to a current yield of around 2%. CNI stock price has been flat over the past year, offering a nice entry point.  Over the past five years, the company’s share price is up 52%.

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Taiwan Semiconductor’s (TSM)

For market participants looking to strengthen their portfolios through diversification or create new avenues to explosive growth, stocks with global exposure can be an excellent addition.  Taiwan Semiconductor is attractive for multiple reasons aside from its geographical diversification of its production outside Taiwan, including its strong margins, the secular growth of the chip industry, and its attractive valuation. share price has been on the rise after hitting a two-year low in October due to a sharp slowdown in global chip demand.  Still down more than 35% from its January 2021 peak, anyone on the sidelines might consider now an appropriate time to strike.  “Only a small number of companies can amass the capital to deliver semiconductors, which are increasingly central to people’s lives,” said Tom Russo, a partner at Gardner, Russo & Quinn.

TSM is currently trading more than 15% below its 52-week high, and well below its all-time from early 2022, making this an attractive deep-discount play. P/E values have ranged between 9.3 and 40.5 over the last five years, so the stock is at an attractive entry point currently at just thirteen times price to earnings.  

Analysts see earnings growth of 25.3% next year, leveling off to around 21.5% a year over the next five years.  TSM has outperformed the S&P 500 by an average of 8.4% per year over the last five years.

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Amazon.com (AMZN)

Amazon.com stock is still down by a whopping 40% from its all-time high of $186, reached in mid-2021.  But its long-term thesis remains sound, and cost-cutting efforts can help position the company to bounce back when conditions improve.

In March, Amazon announced plans to cut 9,000 white-collar employees, mainly from the cloud, advertising, and HR units. The cuts follow an earlier round of layoffs that eliminated more than 18,000 positions.  Cost-cutting can create sustainable value for investors because Amazon’s macroeconomic challenges (such as inflation) look temporary.

A potential long-term growth driver is Amazon’s new initiative called project Kuiper.  The company plans to launch a fleet of Low Earth Orbit satellites designed to provide affordable broadband connections around the world starting in 2024.  All in all, there is a lot to be excited about Amazon, and the current stock price weakness looks like an opportunity to buy the dip.

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