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Despite a Fresh All-time High for the S&P 500, These Strong Performers Remain Cheap

May 15, 2024
minute read

Several stocks remain attractive despite the broader market reaching record highs.

The S&P 500 and Nasdaq Composite both hit all-time highs on Wednesday, driven by a lower-than-expected April consumer inflation report that boosted investor sentiment. This month, the broader market and the 30-stock Dow Jones Industrial Average have each risen over 5%, while the Nasdaq has climbed about 6.5%.

Using the CNBC Pro Stock Screener Tool, we identified stocks still considered "cheap" compared to the broader market and meeting the following criteria:

  • Up 20% or more year-to-date
  • Lower valuation than the S&P 500, with a forward price-to-earnings (P/E) ratio under 21
  • A price target indicating at least a 10% upside potential

Airlines Delta Air Lines and United Airlines, both of which have gained over 30% this year, fit these criteria. Among these, United Airlines has the highest potential upside, with analysts' consensus price target suggesting roughly 24% growth.

HSBC analyst Achal Kumar recently started coverage on Delta, United, and American Airlines but preferred Delta. Kumar set a price target of $72.80 for Delta, implying a potential 37% upside. Kumar highlighted Delta's strong competitive positioning, noting its nearly 70-75% market share at its top six hubs, which account for more than 50% of its capacity. Delta also has the highest penetration in the premium traffic segment among the three major U.S. full-service carriers. Kumar believes airlines will benefit from a continued recovery in corporate travel and strong demand for international vacations.

Western Digital, a digital storage stock, also made the list. Its shares have surged 43% year-to-date, the most among the group, and analysts' consensus forecast indicates the stock could gain another 15.2% over the next 12 months. The company posted a robust fiscal third-quarter report, prompting Benchmark analyst Mark Miller to upgrade the shares to buy last month. Miller expects stronger semiconductor pricing to drive another rally for the stock.

Automotive manufacturer General Motors (GM) has the lowest forward P/E ratio in the group, at about 4.98. GM shares have risen more than 26% this year, significantly outperforming the S&P 500. Wall Street firms, including Citigroup and Bank of America, believe GM is well-positioned to capture a larger share of the electric vehicle market.

In summary, despite record-high levels in the broader market, several stocks still offer attractive investment opportunities. Airlines like Delta and United are poised to benefit from a resurgence in corporate and international travel. Western Digital shows promise with its strong performance and favorable semiconductor pricing outlook. Lastly, General Motors presents a compelling case with its low valuation and potential for growth in the electric vehicle sector.

Eric Ng
Eric Ng
John Liu
Editorial Board
Bryan Curtis
Adan Harris
Managing Editor
Cathy Hills
Associate Editor

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