What are we screening for?
S&P 500 companies exhibiting bullish analyst sentiment.
The Screen
After reaching a new all-time high to close out the last trading day in March, the S&P 500 eased off as stronger-than-expected manufacturing data released by the Institute of Supply Management on Monday signalled an upbeat U.S. economy. The positive news, which came as a surprise to some investors, could lead the U.S. Federal Reserve to delay a widely expected June rate cut. This tug-of-war between U.S. equities and U.S. inflationary data continued for much of the first quarter. During the first three months of 2024, the S&P 500 rose nearly 10 per cent, while the personal consumption expenditure price index, a key inflationary indicator, rose 2.5 per cent in the previous 12 months through February. If markets are poised to rally, we could see a flight to safety, with investors favouring quality stocks with strong fundamentals. Today, we screen for U.S.-listed companies in the S&P 500 index that are demonstrating strong analyst sentiment.
- First, we screen for U.S.-listed companies that are constituents in the S&P 500 index
- Next, we screen the StarMine Analyst Revisions Model, which is a percentile (1–100) ranking of stocks based on changes in analyst sentiment, with 100 representing the highest rank. For each stock, StarMine determines the three most relevant estimate measures to include in the model, which includes preferred earnings, EPS or EBITDA and revenue. The model also measures the accuracy of an analyst and their recommendation performance history. We screen for companies with a score greater than 95, representing the top 5 per cent of companies in the S&P 500.
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What We Found
The screen, ranked by StarMine Analyst Revisions Model, produced 13 companies across six sectors.
Micron Technology Inc. MU-Q, which was one of three companies to score 100 in the StarMine Analyst Revisions Model, is a global leader in semi-conductors, providing memory and storage technology products for industrial applications. The company reported second-quarter fiscal results on March 20, delivering revenue of US$5.3-billion and gross margins of 20 per cent, both of which were well above analysts’ expectations. Micron is expecting revenue from its DRAM products, which represented 71 per cent of second-quarter revenue, and its NAND memory chips, which represented 27 per cent of second-quarter revenue, to increase throughout 2024 and into 2025. The outlook for the semi-conductor sector remains strong, with key applications including artificial intelligence, and the internet of things, or IoT, and Micron is well positioned with its technology and product portfolio to benefit from this growth.
Super Micro Computer Inc. SMCI-Q, which scored 99 in the StarMine Analyst Revisions Model, had the largest 52-week total return at 820 per cent. The company designs and builds servers, storage systems, software and provides support services. J.P. Morgan recently initiated coverage on Super Micro Computer, providing a price target of US$1,150 per share, roughly 14 per cent above the current share price. Currently 12 of the 16 analysts covering the stock have a “buy” rating, with three analysts having a “hold” recommendation and one analyst having a “sell” recommendation. Analysts are forecasting that the company will benefit from the growth in the AI server market, which is expected to be in the hundreds of billions of dollars, while also benefiting from existing partnerships with core semiconductor companies.
Investors are advised to do their own research before trading in any of the securities shown.
Stephen Donovan, MBA, is a Senior Customer Learning Manager at LSEG, covering cross-asset trading for the LSEG Academy.