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Forget AI, Invest in 5 Surging Old Economy Stocks for Gains
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U.S. stock markets have maintained their northward journey in 2024 after an astonishing rally in 2023. The bull run has gained further thrust as major stock indexes have posted multiple all-time highs on both intraday and closing basis so far this year. Year to date, the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — have advanced 2.7%, 8% and 8.9%.
However, the major driver of last year’s and this year’s rally was globally booming artificial intelligence (AI), especially generative AI. Companies that have extensive application of AI in their final products have become multi-baggers in the past 15 months. Stock prices of some of these companies have skyrocketed 200-300% during this period.
These highly overvalued stocks make a large section of financial researchers and analysts skeptical of investing, although the near-term business outlook of these entities remains solid. The current overstretched valuation of these stocks makes them less attractive in the investing arena.
Meanwhile, several old economy stocks from sectors such as industrials, finance, auto, materials and consumer defensive have popped year to date. Investing in these untapped stocks with a favorable Zacks Rank should lead to profits.
Our Top Picks
We have narrowed our search to five old economy stocks that have provided double-digit returns year to date and have more upside left. These stocks have seen positive earnings estimate revisions in the last 30 days. Each of our picks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The chart below shows the price performance of our five picks year to date.
Image Source: Zacks Investment Research
American Express Co. (AXP - Free Report) has benefited from growth initiatives, such as launching new products, reaching new agreements and forging alliances. Consumer spending on T&E, which carries higher margins for AXP, is advancing well. AXP’s balance sheet looks strong with ample cash. Solid cash-generation abilities enable the pursuit of business investments and prudent deployment of capital via buybacks and dividends.
American Express has an expected revenue and earnings growth rate of 9.4% and 14.4%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last 30 days. The stock price of AXP has jumped 19.3% year to date.
The Travelers Companies Inc. (TRV - Free Report) boasts a strong market presence in auto, homeowners’ insurance and commercial U.S. property-casualty insurance with solid inorganic growth. A high retention rate, a rise in new business and positive renewal premium change bode well.
TRV’s commercial businesses should perform well owing to market stability. TRV remains optimistic about the personal line of business, given growth at profitable agencies like auto and homeowners businesses. Strong and reliable returns from the growing fixed-income portfolio should drive net investment income. Sufficient capital boosts shareholder value. TRV aims for a mid-teens core return on equity over time.
The Travelers Companies has an expected revenue and earnings growth rate of 11.8% and 34.7%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.9% over the last 30 days. The stock price of TRV has rallied 14.7% year to date.
Parker-Hannifin Corp. (PH - Free Report) is benefiting from higher demand from distributors and end users across the oil and gas, material handling, cars and light trucks, and farm and agriculture markets in the North American region within the Diversified Industrial segment.
Higher volume across all businesses, especially the commercial and military aftermarket businesses bolstered PH’s Aerospace Systems unit. Synergies from the Meggitt buyout are also aiding PH. Benefits from the Win strategy are driving PH’s margins.
Parker-Hannifin has an expected revenue and earnings growth rate of 4.5% and 11.7%, respectively, for the current year (ending June 2024). The Zacks Consensus Estimate for current-year earnings has improved 0.9% over the last seven days. The stock price of TRV has climbed 16.7% year to date.
General Motors Co.’s (GM - Free Report) compelling electric vehicle (EV) and internal combustion engine portfolio, displaying strong demand for its quality pickups and SUVs, bodes well. GM retained the U.S. auto sales crown in 2023. Its massive EV push is commendable.
GM plans to roll out 30 fresh EV models by 2025-end. General Motors’ Ultium Drive system and battery plants in Ohio, Tennessee and Lansing are likely to scale up its e-mobility prowess. GM is on track to deliver on its $2 billion net cost reduction program by 2024 end. Its superior liquidity profile and investor-friendly moves bode well.
General Motors has an expected revenue and earnings growth rate of 1.8% and 17.2%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.9% over the last 30 days. The stock price of GM has advanced 10% year to date.
Colgate-Palmolive Co. (CL - Free Report) has been gaining from strong pricing, and the benefits of funding growth and other productivity efforts. This, along with solid business momentum, led to a robust performance during fourth-quarter 2023.
In addition, accelerated revenue growth management plans aided CL’s organic sales in the fourth quarter. In fact, 2023 marked the fifth straight year of organic sales growth either in line or ahead of the 3-5% long-term goal. As a result, CL anticipates net sales growth of 1-4% for 2024.
Colgate-Palmolive has an expected revenue and earnings growth rate of 3.7% and 7.7%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the last 30 days. The stock price of CL has appreciated 10.5% year to date.
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Forget AI, Invest in 5 Surging Old Economy Stocks for Gains
U.S. stock markets have maintained their northward journey in 2024 after an astonishing rally in 2023. The bull run has gained further thrust as major stock indexes have posted multiple all-time highs on both intraday and closing basis so far this year. Year to date, the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — have advanced 2.7%, 8% and 8.9%.
However, the major driver of last year’s and this year’s rally was globally booming artificial intelligence (AI), especially generative AI. Companies that have extensive application of AI in their final products have become multi-baggers in the past 15 months. Stock prices of some of these companies have skyrocketed 200-300% during this period.
These highly overvalued stocks make a large section of financial researchers and analysts skeptical of investing, although the near-term business outlook of these entities remains solid. The current overstretched valuation of these stocks makes them less attractive in the investing arena.
Meanwhile, several old economy stocks from sectors such as industrials, finance, auto, materials and consumer defensive have popped year to date. Investing in these untapped stocks with a favorable Zacks Rank should lead to profits.
Our Top Picks
We have narrowed our search to five old economy stocks that have provided double-digit returns year to date and have more upside left. These stocks have seen positive earnings estimate revisions in the last 30 days. Each of our picks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The chart below shows the price performance of our five picks year to date.
Image Source: Zacks Investment Research
American Express Co. (AXP - Free Report) has benefited from growth initiatives, such as launching new products, reaching new agreements and forging alliances. Consumer spending on T&E, which carries higher margins for AXP, is advancing well. AXP’s balance sheet looks strong with ample cash. Solid cash-generation abilities enable the pursuit of business investments and prudent deployment of capital via buybacks and dividends.
American Express has an expected revenue and earnings growth rate of 9.4% and 14.4%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last 30 days. The stock price of AXP has jumped 19.3% year to date.
The Travelers Companies Inc. (TRV - Free Report) boasts a strong market presence in auto, homeowners’ insurance and commercial U.S. property-casualty insurance with solid inorganic growth. A high retention rate, a rise in new business and positive renewal premium change bode well.
TRV’s commercial businesses should perform well owing to market stability. TRV remains optimistic about the personal line of business, given growth at profitable agencies like auto and homeowners businesses. Strong and reliable returns from the growing fixed-income portfolio should drive net investment income. Sufficient capital boosts shareholder value. TRV aims for a mid-teens core return on equity over time.
The Travelers Companies has an expected revenue and earnings growth rate of 11.8% and 34.7%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.9% over the last 30 days. The stock price of TRV has rallied 14.7% year to date.
Parker-Hannifin Corp. (PH - Free Report) is benefiting from higher demand from distributors and end users across the oil and gas, material handling, cars and light trucks, and farm and agriculture markets in the North American region within the Diversified Industrial segment.
Higher volume across all businesses, especially the commercial and military aftermarket businesses bolstered PH’s Aerospace Systems unit. Synergies from the Meggitt buyout are also aiding PH. Benefits from the Win strategy are driving PH’s margins.
Parker-Hannifin has an expected revenue and earnings growth rate of 4.5% and 11.7%, respectively, for the current year (ending June 2024). The Zacks Consensus Estimate for current-year earnings has improved 0.9% over the last seven days. The stock price of TRV has climbed 16.7% year to date.
General Motors Co.’s (GM - Free Report) compelling electric vehicle (EV) and internal combustion engine portfolio, displaying strong demand for its quality pickups and SUVs, bodes well. GM retained the U.S. auto sales crown in 2023. Its massive EV push is commendable.
GM plans to roll out 30 fresh EV models by 2025-end. General Motors’ Ultium Drive system and battery plants in Ohio, Tennessee and Lansing are likely to scale up its e-mobility prowess. GM is on track to deliver on its $2 billion net cost reduction program by 2024 end. Its superior liquidity profile and investor-friendly moves bode well.
General Motors has an expected revenue and earnings growth rate of 1.8% and 17.2%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.9% over the last 30 days. The stock price of GM has advanced 10% year to date.
Colgate-Palmolive Co. (CL - Free Report) has been gaining from strong pricing, and the benefits of funding growth and other productivity efforts. This, along with solid business momentum, led to a robust performance during fourth-quarter 2023.
In addition, accelerated revenue growth management plans aided CL’s organic sales in the fourth quarter. In fact, 2023 marked the fifth straight year of organic sales growth either in line or ahead of the 3-5% long-term goal. As a result, CL anticipates net sales growth of 1-4% for 2024.
Colgate-Palmolive has an expected revenue and earnings growth rate of 3.7% and 7.7%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the last 30 days. The stock price of CL has appreciated 10.5% year to date.