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The Zacks Analyst Blog Highlights: Microsoft, Intel, Apple, IBM and Procter & Gamble

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For Immediate Release

Chicago, IL – March 16, 2020 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Microsoft Corp. (MSFT - Free Report) , Intel Corp. (INTC - Free Report) , Apple Inc. (AAPL - Free Report) , IBM Corp. (IBM - Free Report) and The Procter & Gamble Co. (PG - Free Report) .

Here are highlights from Friday’s Analyst Blog:

Bear Market May Be a Good Opportunity for Long-Term Investors

Wall Street’s historic bull run, which continued for 11 years, finally came to an end on Mar 12. The coronavirus pandemic acted as a catalyst for the start of a fresh bear market. All three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — are in the bear market territory at present.

In fact, it took the Dow just 19 trading days to enter the bear market from its all-time high on Feb 12. Meanwhile, both the S&P 500 and Nasdaq Composite needed just 16 trading days to enter the bear market territory from their all-time highs recorded on Feb 19. These declines only highlighted the plight of Wall Street at the moment.    

Market volatility is still significantly high and the COBE VIX, recognized as the best volatility index of Wall Street, jumped nearly to 72 — its highest since recession period of 2008. We may witness more selling over the next few weeks and the market is likely to remain extremely choppy. However, a simple theory of finance — buy the dip and sell the high — may provide a good opportunity for long-term investors in the bear market scenario.

Meanwhile, the question remains — is it the right time to buy or more selling is on the way? Although we do not have any clear cut answer to this question, especially at the time when the coronavirus is still spreading across the globe, three simple observations may provide a silver lining.  

Market May Not Be Overvalued Now

Wall Street ended 2019 in an impressive note with the Dow, the S&P 500 and the Nasdaq Composite — rallied 22.3%, 28.9% and 35.2%, respectively. At this point, several economists and market experts started warning that the market is overvalued, especially the U.S. GDP growth rate declined well below 3% with economic expansion is continuing for 11 years — its longest expansion historically.

However, the coronavirus-led downtrend erased almost all the gains. As of Mar 12, these indexes have plummeted 25.7%, 23.2% and 19.7%, respectively, year to date. Moreover, the Dow, the S&P 500 and the Nasdaq Composite — plunged 28.3%, 26.9% and 26.8%, respectively, from their all-time highs.

Notably, the Dow and the S&P 500 are presently below their 2018-end levels. Notably, in 2018, all three major stock indexes recorded their worst ever yearly performance since 2008.   

Realization of Profit Made During Bull Run

During the 11-year long bull run, the S&P 500 rallied 400%. Moreover, the Dow and the Nasdaq Composite also skyrocketed by more than 300% and 500%, respectively. At a certain stage, these enormous gains have to be capitalized. Coronavirus-led mayhem may act as a catalyst to sell stocks and realize gains.

Initially, market participants were rushing to safe-haven assets like U.S. government bonds and precious metal like gold from risky equities. However, on Mar 12, gold futures for April delivery tumbled 3.2% and the yield on 10-Year US Treasury yield rose to 0.882% from 0.318% on Mar 9.

This looks like that instead of looking for safe-haven assets, investors may start holding cash and wait for a suitable time to enter the market.

2020 Earnings Expectations Still Positive

On Mar 12, in his latest article titled, How the Coronavirus Has Impacted Earnings, our Director of Research, Sheraz Mian, stated that for full-year 2020, total earnings for the S&P 500 index are currently expected to be up 5.3% year over year, with all of the growth coming in the back half of the year.

However, Sheraz Mian also warned that “we suspect an unusually high proportion of companies coming out with negative pre-announcements following March 31st once they officially close their books on the calendar period.” This may change the whole estimates.

Nevertheless, at present, full year 2020 earnings expectation are not disappointing and may aid in market’s recovery.

Several Stocks at Large Discount

At present, plenty of goods stocks are trading at a large discount. However, it will be prudent to invest on corporate behemoths as they have a well-established business model with robust and highly diversified product portfolio. Moreover, these companies have solid cash balance to sustain sluggish business. Moreover, these companies are regular dividend payers that will act as income stream in market downtrend.

Here we offer five blue-chip stocks with a favorable Zacks Rank.

Microsoft Corp.: The Zacks Rank #1 (Strong Buy) company is currently trading at 27.1% discount from its 52-week high recorded on Feb 11. You can see the complete list of today’s Zacks #1 Rank stocks here.

As of Dec 31, 2019, the company had $134.25 billion of cash and equivalents. Microsoft currently offers a dividend yield of 1.33%. The company has an expected earnings growth rate of 18.3% for the current year (ending June 2020).

Intel Corp.: The Zacks Rank #1 company is currently trading at 34.3% discount from its 52-week high recorded on Jan 24. As of Dec 31, 2019, the company had $13.1 billion of cash and equivalents. Intel currently offers a dividend yield of 2.56%. The company has an expected earnings growth rate of 2.1% for the current year.

Apple Inc.: The Zacks Rank #2 (Buy) company is currently trading at 24.3% discount from its 52-week high recorded on Jan 29. As of Dec 31, 2019, the company had $107.2 billion of cash and equivalents. Apple currently offers a dividend yield of 1.12%. The company has an expected earnings growth rate of 13.6% for the current year (ending September 2020).

IBM Corp.: The Zacks Rank #2 company is currently trading at 35.2% discount from its 52-week high recorded on Feb 6. As of Dec 31, 2019, the company had $9 billion of cash and equivalents. IBM currently offers a dividend yield of 5.49%. The company has an expected earnings growth rate of 4.3% for the current year.

The Procter & Gamble Co.: The Zacks Rank #2 company is currently trading at 20.5% discount from its 52-week high recorded on Feb 21. As of Dec 31, 2019, the company had $6.3 billion of cash and equivalents. The Procter & Gamble currently offers a dividend yield of 2.67%. The company has an expected earnings growth rate of 10.2% for the current year (ending June 2020).

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