Investors should be wary of a slate of stocks that are not making new highs during this bull market and are seeing a weakening earnings picture, according to Evercore ISI. A collection of so-called momentum misers are already seeing their 2024 earnings estimates revised downward and the stocks have few reasons that could drive them higher, according to Julian Emanuel, Evercore ISI managing director and head of equity, derivatives and quantitative strategy. The lack of a catalyst among stocks in the group is so pronounced that these names might not even benefit if their earnings were to surprise to the upside because short interest in the stocks has waned. That means a stock pop on a short covering event is unlikely, according to Emanuel. When an investor shorts a stock, they are making a bet its value will decline. They borrow the stock, and buy it back at a later date, in the hope of pocketing the difference. However, if the stock rises, those investors lose money when they buy it back. To find “momentum misers,” Evercore ISI screened stocks in the Russell 3000 with the following criteria: Market cap below $10 billion 2024 earnings estimates have been cut year to date Stocks on the list have not closed at an all-time high since the 2022 market peak or before Short interest in each stock is in the bottom quartile for the shares dating back to the 2022 market high Home improvement retailer Lowe’s made the list. Its stock is up about 4% in 2024, but the shares haven’t closed at a new all-time high since December 2021. Lowe’s first-quarter results are due out on May 21, but 2024 earnings estimates have fallen 4.7% year to date, according to Evercore. LOW YTD mountain Lowe’s stock. The retailer has been hurt by high interest rates, which are keeping people in their homes longer and making them less likely to borrow for big home improvement projects. Both trends can dampen demand Lowe’s products. Morgan Stanley analyst Simeon Gutman noted on Sunday that he doesn’t expect Lowe’s to update its full-year 2024 forecast. Gutman added that any upside investors may be looking for in 2025 forecasts will likely be limited. “We think the market is concerned it may take longer for the Home Improvement category to inflect positively in light of still-elevated interest rates and home prices (the stock is ~13% off of its March ’21 peak vs. a ~3% decline in the S & P 500,” Gutman said. MicroStrategy also made the Evercore list. Its stock has more than doubled in 2024, and often moves in tandem with the value of bitcoin since the software company is a large holder of the cryptocurrency. MSTR YTD mountain MicroStrategy stock. Still, its 2024 earnings estimates have been revised down by more than 116% since the year began. MicroStrategy missed Wall Street’s revenue estimates in its first-quarter earnings report on April 29. While the value of bitcoin is up more than 48% since the beginning of the year, the cryptocurrency has been under pressure more recently as its major catalysts that drove its price higher are now behind it . Those events were the roll out of bitcoin exchange traded funds earlier this year and the so-calling halving last month, which limited the supply of bitcoin. Other stocks on the list include Coterra Energy and Citigroup .
Sumber: www.cnbc.com
