Valentine's Day Stock Check

Valentine's Day is not only a time for love, but also a perfect opportunity to examine the stocks that Wall Street truly adores. We have conducted numerous screenings of the most beloved stocks in the past, and it is no different this Valentine's Day. Our approach involves evaluating a combination of strong Buy-rating ratios and the potential for gains based on analysts' price targets.

Understanding the Buy-rating ratio is quite simple – it represents the number of Buy calls on a stock divided by the total number of ratings. Upside, on the other hand, compares the average analyst price target to the stock's current trading price.

When it comes to running a screen, there is no one-size-fits-all approach. Various universes of stocks can be considered, such as the Russell 1000 or Nasdaq Composite, providing alternatives to the S&P 500.

The key is to create a straightforward and logical screen. Focusing on stocks with top Buy-rating ratios is a prudent course of action since analysts possess valuable insights into a company and its industry.

In our latest Valentine's Day screen for 2023, we identified 12 stocks within the S&P 500 that boasted strong Buy-rating ratios and showcased an upside potential of at least 10%. Notably, this list included notable winners like Amazon.com and Alphabet.

However, it is crucial to note that the overall returns from these stocks were not as enticing as expected – rather akin to a half-eaten box of chocolates that has been sitting around for a year. Over the past year, this dozen of stocks saw an average increase of only 6%, lagging behind the S&P 500 by a significant margin of 14 percentage points.

This Valentine's Day: Focus on Quality Stocks

This year, Valentine’s Day brings a new twist to gift-giving. Instead of sweets and flowers, we suggest considering an alternative present that keeps on giving - stocks! Not just any stocks, but the cream of the crop in the S&P 500. Our experts at FactSet have identified the top six stocks with the highest Buy-rating ratios, and they are definitely worth considering.

The Elite Six:

1. NiSource
2. Amazon
3. Microsoft
4. Targa Resources
5. Delta Air Lines
6. Schlumberger

Compared to the S&P 500 average, these six stocks boast an impressive average Buy-rating ratio of 96%. This is significantly higher than the average of approximately 55% for other stocks in the market. Moreover, when it comes to potential upside, these stocks stand out as winners with an average target price increase of 24%. In contrast, the average target price increase for companies in the S&P 500 is a mere 9%.

Over the past year, these stocks have also demonstrated their resilience with an average return of 24%. However, it's worth noting that two of the six stocks experienced negative returns during this period: NiSource and Schlumberger.

While the valuations for these stocks vary considerably, they offer a mix of growth and value opportunities. Amazon stock, for instance, currently trades at roughly 41 times its estimated 2024 earnings. On the other hand, Delta Air Lines' shares are trading at a modest multiple of approximately six times.

If you are intrigued by this collection of top performers, you may be wondering about the financial commitment involved. Well, buying one share of each of these six stocks - perhaps as a thoughtful gift for a loved one - would cost you around $936. This may seem like a substantial amount, but it's worth mentioning that the average person is projected to spend approximately $185.81 this Valentine's Day, according to the National Retail Federation. Surprisingly, this figure is slightly lower than the average spending of around $190 in 2023.

So, this Valentine's Day, why not consider a gift that offers more than just a temporary delight? Stocks are not only enjoyable but also have the potential for long-term growth. Keep in mind that investing in stocks requires careful research and evaluation. Our suggested stocks are a fantastic starting point, promising plenty for investors to sink their teeth into. Happy Valentine's Day!