After posting their first loss in 2018 since the financial crisis, global markets rallied last year and are now trading at new record highs. Investors have broadly disregarded geopolitical tensions, trade wars, and other risks, and instead focused primarily on persistent earnings growth. A trend to watch in the coming weeks and months is multiple expansion, as stock prices (as measured by the S&P 500) have risen at a faster pace compared with underlying forward earnings (see Stocks have broken away from underlying earnings chart).
If you think the bullish long-term trend will continue, and are looking for new stock ideas, you might consider Fidelity's Stock Screener to enhance your search. Here, we feature 4 stock screens, plus the top results for each.
Looking for value
With stocks trading at record highs, valuation may be a particularly important factor when seeking investing ideas. The price-to-earnings (P/E) ratio is among the most widely used measures of value by investors. An extension of the P/E ratio that some investors believe adds value when evaluating the relative attractiveness of a stock is the price-to-earnings growth (PEG) ratio, which incorporates growth.
The PEG ratio divides a stock's forward P/E by its projected annual earnings-per-share growth rate. Generally, a higher PEG ratio implies a pricier stock, and a lower PEG ratio implies a cheaper stock. Typically, a value greater than 1.0 indicates a stock that is trading at a premium, and a value less than 1.0 indicates one that is trading at a discount.
Here are the top results for large-cap stocks with the lowest PEG ratio (under 1.0), as of January 23:
- American International Group (AIG)—0.39 PEG ratio
- Icici Bank (IBN)—0.57 PEG ratio
- Synchrony Financial (SYF)—0.58 PEG ratio
- NetEase (NTES)—0.69 PEG ratio
- Credit Suisse (CS)—0.69 PEG ratio
- Spotify (SPOT)—0.71 PEG ratio
- Citigroup (C)—0.76 PEG ratio
- VMware (VMW)—0.79 PEG ratio
- Toyota Motor (TM)—0.83 PEG ratio
- Delta Air Lines (DAL)—0.83 PEG ratio
Of course, stock screens require additional research for any of the results that you are considering. When using P/E or the PEG ratio, it’s important to recognize there may be reasons for it to be low. That is, the “price” component of the P/E or PEG ratio may be lower relative to peers due to fundamental company weakness or some other legitimate reason. Simply because a stock is trading at a discount based on its P/E or PEG ratio to comparable companies, that doesn’t necessarily mean it has better relative value.
Going for growth
If your strategy involves looking more for growth than value, there are a variety of options you can select in a screener to generate ideas. These include earnings growth, revenue growth, and cash flow growth.
Here are the top results for mid-cap and larger stocks with the highest forward earnings per share long-term growth (3-5 years), highest revenue growth (past 5 years), and cash flow growth rate (past 5 years), sorted by market cap, as of January 23:
- Amazon (AMZN)
- Adobe (ADBE)
- Salesforce (CRM)
- Netflix (NFLX)
- Broadcom (AVGO)
- Charter Communications (CHTR)
- Vertex Pharmaceuticals (VRTX)
- JD.com (JD)
- Shopify (SHOP)
- Atlassian (TEAM)
A factor to think about when evaluating this list is that it is technology-sector heavy: Many tech companies tend to prioritize growth. It also includes a depository receipt for a foreign company, an investment that carries its own unique risks.
Stock analyst recommendations
Whether you do all of your own research as an active investor or you incorporate advice from others, recommendations from research analysts—professional experts who closely follow individual stocks—can provide useful information on both sentiment for a stock as well as a deep dive into the fundamentals of a company.
Fidelity.com offers the Equity Summary Score (ESS), provided by StarMine from Refinitiv, which provides a consolidated view of ratings from independent research providers. Here are the top results for large-cap companies with the highest Equity Summary Score, sorted by highest ESS, as of January 23:
- AbbVie (ABBV)—9.9 ESS out of 10 (Very bullish)
- Citigroup (C)—9.7 ESS out of 10 (Very bullish)
- UnitedHealth Group (UNH)—9.7 ESS out of 10 (Very bullish)
- Adobe (ADBE)—9.5 ESS out of 10 (Very bullish)
- Intel (INTC)—9.5 ESS out of 10 (Very bullish)
- Eli Lilly (LLY)—9.5 ESS out of 10 (Very bullish)
- Qualcomm (QCOM)—9.5 ESS out of 10 (Very bullish)
- Apple (AAPL)—9.3 ESS out of 10 (Very bullish)
- GlaxoSmithKline (GSK)—9.3 ESS out of 10 (Very bullish)
- Amgen (AMGN)—9.2 ESS out of 10 (Very bullish)
Putting it all together
An effective method to find investing ideas that align with your objectives can be selecting multiple screening criteria. Combining all of the screens above for medium-cap stocks or higher generates the following list, sorted by those companies that are rated neutral, bullish, or very bullish according to ESS, as of January 23:
- Vertex Pharmaceuticals (VRTX)—9.2 ESS (Very bullish)
- Vipshop (VIPS)—8.9 ESS (Bullish)
- XPO Logistics (XPO)—6.5 ESS (Neutral)
- Parsley Energy (PE)—4.3 ESS (Neutral)
- Diamondback Energy (FANG)—3.7 ESS (Neutral)
More research is needed to determine if any of these stocks are right for your specific strategy. You should fully understand the risks involved, and each investing opportunity should be considered within the context of a well-diversified investment strategy that conforms to your specific time horizon, objectives, and risk parameters.