This past week stock markets kicked off earnings season with a bang and the right stocks to buy where financials. Major banks and brokerages showed strong profits helped form rising bond yields and inflation. Asset management and trading divisions also benefited from higher transaction volumes and net new asset growth. The upcoming week will show more results from financials and we expect to see outperformance in the sector to continue. Alcoa Corp also reported and showed excellent growth with the company re starting quarterly dividend payments and increasing its share buyback program. Alcoa’s report should bode well for the industrial and materials sectors.
Heading into the new trading week stock markets look to continue the recovery it started last week. The S&P500’s price action has shown a bullish reversal after weeks of declines that added up to a nearly 5% decline since September 1. With 80% of companies still yet to report we believe stocks are setup for a move higher into the end of 2021. Big tech stocks like IBM, Netflix, Snap and Intel will report results through the week. IBM and Netflix show good potential for beating estimates and raising guidance. IBM has reported significant growth in cloud and AI and will divest its services business into a spinoff unit. This should be taken positively from analysts and we expect target prices to be increased for IBM.
Seasonality also favours the bulls as the timeframe between November to January historically yields the best 3 months returns of any calendar year for stock markets. The comparison analysis chart below highlights some names we have been bullish on and continue to show bullish. Investors can see by comparing these stocks to the returns of the S&P500 that financials, energy, materials and information technology are outperforming.
Earnings season stocks to buy