Here are the hottest stock sectors for Wall Street right now – and analysts’ favorite ways to play them
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If you were asked which stock market sector was the favorite of analysts who work for Wall Street brokerage firms, you would probably say “tech”. And you would be right. But you might be surprised that the industrial and materials sectors are also heavily favored.
Below are lists of analysts’ favorite stocks in their favorite sectors.
Notes from top to bottom
Here’s a breakdown of sentiment among analysts polled by FactSet for ratings across the 11 sectors of the S&P 500 SPX,
:
| S&P 500 sector | Share “buy” reviews | Share “buy” notes – June 30, 2020 | Share “buy” notes – December 31, 2019 |
|
Computer science |
78% |
76% |
71% |
|
Industrial |
68% |
63% |
61% |
|
Materials |
60% |
53% |
50% |
|
Health care |
59% |
56% |
53% |
|
55% |
48% |
48% |
|
|
Immovable |
51% |
51% |
49% |
|
Energy |
47% |
42% |
44% |
|
Basic consumer products |
47% |
43% |
42% |
|
Consumer discretionary |
35% |
34% |
34% |
|
Utilities |
28% |
36% |
35% |
|
Communication services |
25% |
21% |
21% |
| S&P 500 complete | 57% | 53% | 51% |
Analysts working for brokerage firms are positive in their ratings, and they certainly avoid “selling” or equivalent ratings. In fact, only one company in the S&P 500 has majority “sell” ratings: Lumen Technologies Inc. LUMN,
the old CenturyLink, which is rated as a “sale” or equivalent by seven of 16 analysts surveyed by FactSet.
The table above compares the current rating breakdown with those at the end of June 2020 (after the S&P 500 recovered from the worst of its pandemic decline) and the pre-pandemic ratings at the end of 2019. You can see it for in the six sectors currently rated mostly “buy”, enthusiasm has increased since 2019 for all except real estate. The materials sector saw the biggest improvement in sentiment, but the improvements were also significant for the IT, industrials, healthcare and finance sectors.
Sentiment is higher even though the index’s forward price-to-earnings ratio fell from 18.4 to 21.5 at the end of 2019. Unprecedented federal stimulus, excitement of a new period of economic growth, increase of money supply from Reserve bond purchases and negative long-term interest rates in Europe and Japan have all made the US stock market an attractive hotbed for investor liquidity.
Favorite stocks in privileged sectors
Wall Street analysts have set 12-month price targets. A year is not necessarily a long enough time for a serious, committed investor who is looking to win because a business consists of profit and cash flow.
Some companies with high percentages of “buy” ratings have stock prices close to target prices. We could call these “fully valued”. Again, the 12 month course goal may be too short for you. This is one of the many reasons why it is important to do your own research and make up your own mind about a company’s ability to remain competitive for at least the next decade or so, before buying individual stocks. for long term investments.
Here are the lists of the six preferred sectors of the S&P 500. For each sector, the top five companies, by percentage of analysts qualifying the stocks as “buy” or the equivalent, are listed. Or six in case of a tie.
Information Technology Sector
Here are the six S&P 500 information technology stocks with the highest percentages of “buy” or equivalent ratings among analysts polled by FactSet:
(Set of facts)
Microsoft Corp. MSFT,
has the highest percentage of “buy” ratings in the tech sector, and analysts see a 16% rise for stocks over the next year.
The listed stock with the highest upside potential over the next year, analysts say, is ServiceNow Inc. NOW,
which gets the “buy” sign from 91% of analysts.
Next is Visa Inc. V,
with 87% “buy” or equivalent ratings. Its rival in processing Mastercard Inc. MA payments,
is considered a “buy” by 84% of analysts, so it narrowly missed the list.
Nvidia Corp. NVDA,
is the highest rated semiconductor manufacturer on the list. The second highest rated chipmaker in the S&P 500 is Analog Devices Inc. ADI,
with 83% of “buy” ratings.
PayPal Holdings Inc. PYPL,
is tied with Fiserv Inc. with 85% “buy” ratings. Square Inc. SQ,
a rival of PayPal, is not a component of the S&P 500; it is considered a “buy” by 55% of analysts surveyed by FactSet.
Read: PayPal vs. Square – what’s the best stock to own right now?
Industrial sector
Here are the five S&P 500 manufacturers with the highest percentages of “buy” ratings:
(Set of facts)
Materials sector
Here are the six S&P 500 materials stocks with the highest percentages of “buy” ratings: Freeport-McMoRan Inc. FCX,
and PPG Industries Inc. PPG,
are tied for fifth place:
(Set of facts)
Health sector
Healthcare Industry Has Another Link – UnitedHealth Group Inc. UNH,
and Cigna Corp. THIS,
both have 85% “buy” ratings.
(Set of facts)
Financial sector
Financials is also tied, with 81% buy ratings for MetLife Inc. MET,
and BlackRock Inc. BLK,
:
(Set of facts)
Real estate sector
Here are the five names in the real estate industry with the highest percentages of “buy” ratings:
(Set of facts)
Alexandria Real Estate Equities Inc. ARE,
and Assurant Inc. AIZ,
(in the financial sector) are the only two S&P 500 companies rated 100% “buy”.
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