Investors are still overwhelmed by the fever of generative artificial intelligence. However, as he anticipated Ambitthere are undervalued areas of the market that could offer extraordinary gains, as analyzed in its latest report by JPMorgan Asset Management.
The so-called “Magnificent Seven” companies – which include giants like Nvidia, Meta and Microsoft – boasted annual earnings per share growth of 50% in the first quarter alone. The rest of the stock market S&P 500 has the task of catching up.
By the fourth quarter of 2024JPMorgan expects earnings growth for the other 493 S&P 500 stocks to match that of the “Magnificent Seven”a forecast shown in the following graph. “Markets do not appear to have fully priced in this forecast, which is reflected in the increasingly limited nature of the equity market rally.“.
Investors looking for unrealized gains would do well to look for stocks that No belong to the Magnificent Seven with “low” valuations that do not yet take into account the recovery in earnings growth.
“These names could function as ‘spiral springs’,” the note adds, highlighting three specific sectors:
Semiconductors
JPMorgan says there are plenty of opportunities in the semiconductor sector outside of AI.Depressed areas such as personal electronics, communications and business activity could soon rebound as demand revives from low levels left by pandemic over-ordering.“, writes the signature.
Transport and logistics
These values are set to rise due to the “unexpected resistance” of the U.S. economy and the growing need to transport materials. Automation in the sector is also expected to increase efficiency, which could drive increases.
Home improvements
Americans have put home improvements on hold, slowed by high interest rates and the fact that many had already renovated during the pandemic. But that trend is likely to reverse in the future, strategists say.
“As the average age of American homes increases, the likelihood of significant maintenance costs increases. In addition, labor-related backlogs on older projects are clearing as immigration has helped address labor shortages,” they say.
JPMorgan’s suggestions are indicative of Wall Street’s shift toward diversification, rather than continuing to chase the gains of the Magnificent Seven. This has been the case as uncertainty swirls around the election and Federal Reserve rate cuts in the year ahead.
Some defensive investments, such as energy and utility stocks, have posted outsized gains over the past year, with returns outpacing even major AI-powered companies such as Nvidia.
Source: Ambito
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