Weekly Radar: Our Top Stock Picks for This Week

Last week started on a cautious note as sluggish debt ceiling negotiations weighed on investor sentiment. However, as the week progressed, momentum shifted with reports of progress on Capitol Hill. Results across major indices varied significantly. The NASDAQ delivered a solid total return of 2.5%, the S&P 500 saw a modest gain of 0.3%, while the Dow slipped by 1.0%.

As we enter the upcoming holiday-shortened week, the market may face challenges due to lingering rate hike concerns and uncertainty surrounding the debt ceiling as the earnings season continues to wind down. Notable companies scheduled to report this week include Salesforce, HP, Broadcom, Dollar General, Lululemon Athletica, Macy’s, and Dell Technologies. Additionally, the labor market will be in the spotlight, with the release of the JOLTS report for April, ADP’s National Employment Report tracking private sector payrolls, and the Labor Department’s nonfarm payrolls report for May.

Congratulations to our readers who traded alongside us last week and seized the opportunity to invest in NVDA shares ahead of its earnings call on Wednesday. Those who participated in this move witnessed an impressive 24% surge in their investment following the release.

Continue to the full article latest edition of our Weekly Radar, featuring three timely stocks to consider in the coming days. Stay ahead of the game and gain a competitive edge by accessing our latest watchlist here. Don’t miss out on this valuable opportunity!

Exciting investment opportunities sometimes lie in plain sight.  Our first recommendation is one of the most undervalued technology names from the S&P 500.  

ON Semiconductor Corp (ON)

Semiconductor giant Onsemi is firing on all cylinders with a large market footprint in exciting growth sectors like automotive computing.  ON share price is up nearly 300% in the three years since the summer of 2020 and revenue has grown 28.3% over the past twelve months.  The U.S. based chipmaker has been solidifying its reputation as a top player among its auto/industrial peers.  However, several factors exist that support the case that there’s plenty of runway left for this bet on an electric future.  

Following ON’s stellar performance of the past few years, the stock still looks undervalued at just 13.8x earnings and 15.74x 12-months forward earnings.  In fact, it’s currently one of the cheapest tech names in the S&P 500.  

Onsemi recently initiated a $3 billion share repurchase plan at its final 2022 financial update. The new shareholder return policy is good through 2025.  Management is targeting about 50% of free cash flow generated to be returned to stockholders each year.  If the company uses up all $3 billion in authorized buybacks through 2025, that would equate to nearly 10% of the current market cap or roughly 3% a year in cash returns to shareholders over the next three-year stretch. Not too shabby.  

Bank of America sees ON as a top-3 global/top US vendor of smart power and sensing chips for EVs and they’re alone.  Onsemi holds a highly attractive 1.37 (overweight) rating from the Wall Street pros who cover it.  

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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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LPL Financial Holdings (LPLA) 

San Diego-based independent investment advisory LPL Financial generates revenue through a small percentage of the fees and commissions of the 21,000 financial advisors using its technology. In other words, it makes a little from a lot of advisors. LPL allocates client cash to third party banks which pay a fixed or variable rate on the deposits.  In a higher stress environment LPL may actually benefit because the deposits the company it provides to banks will be in greater demand.  

Due to the larger mix of smaller accounts LPL is less susceptible to cash sorting – where account owners move funds from low-yielding cash accounts to higher-yielding options.  Cash sorting may put a dent in revenue for some firms, which benefitted last year from a surge in net interest income. In the first quarter LPL added $21 billion in net new assets, an annualized organic growth rate of 7.5%.  Additionally, it recently made two strategic acquisitions for around $150 million, providing a sizeable boost to the number of advisors using its products and services.  As of March 31, 2023, LPL Financial’s total brokerage and advisory assets were $1,175.2 billion.  Could this lead to higher earnings in the second quarter?  The pros on Wall Street seem to think so. The current consensus among 15 polled analysts is to Buy LPLA, with no sell recommendations in the group.  A median price target of $242.50 leaves room for a 27% upside.

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