Growth and technology firms led the way in 2020, but many of last year’s winners are now in bear market territory. As of this past Friday only about 40% of Nasdaq 100 constituents were trading above their respective 50-day moving averages, indicating market breadth has weakened substantially from the November peak. While the QQQ ETF that tracks this index is only about 5% off its all-time highs, some notable growth and technology names are faring far worse as we can see below.
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QQQ is presently testing support at its own 50-day moving average, and it remains to be seen if Santa will bring the Christmas sleigh and stocks will rally into December. There’s nothing magical about moving averages – they are simply reference points that investors should keep in mind. Despite the underperformance of some individual holdings, QQQ is still up over 23% for the year.
While the former leaders shown above have been in panic mode lately, three stocks we will analyze below are showing relative strength beneath the surface. When buying pressure is exceeding selling pressure for a stock – particularly during a time when most equities are falling – it’s a clear indication that institutional buying is strong and sellers are few and far between. Following the money is a good way to let the market do the talking instead of incorporating stories or opinions.
Let’s take a more detailed look at three market leaders that are showing some immunity to the recent volatility.
CDW Corporation (CDW)
CDW Corp. provides information technology products and services to government, business, education and healthcare customers. Headquartered in Vernon Hills, IL, CDW’s hardware products include notebooks, mobile devices, data storage, video monitors, printers and desktops. CDW also provides licensing management and software solutions.
The company believes that its addressable markets in the US, UK and Canada represent more than $325 billion in annual sales. Last year, net sales for CDW improved 2.4% year-over-year to $18.47 billion. Both revenues and earnings for CDW have been steadily trending upward, with current full-year estimates at $20.33 billion and EPS of $7.81 representing annual growth rates of 10.07% and 18.51%, respectively.
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These are the trends investors like to see when investing in the stock. CDW, a Zacks #2 (Buy) stock, has posted a trailing four-quarter earnings surprise of 12.17%, helping push the stock over 50% higher on the year. CDW has exceeded earnings estimates in each of the last twenty quarters.
CDW Corporation Price, Consensus and EPS Surprise
The Zacks Consensus Estimate for 2021 EPS stands at $7.81, a nearly 19% increase over last year. Analysts have revised CDW earnings estimates for next year upwards by 3.24% to $8.61 over the past 60 days. Positive earnings estimate revision activity can help guide investors to stocks that are outperforming the market.
Apple Inc. (AAPL)
Apple is engaged in the designing, manufacturing and marketing of mobile communication and media devices, personal computers, and portable digital music players. Headquartered in Cupertino, California, AAPL’s well-known products include the iPhone, iPad, Mac and Apple TV, in addition to its software applications like iOS and the MAC OS X operating systems.
While many of the big-tech names haven’t held up well through the recent market selloff, AAPL has been making a series of new 52-week highs. Even though supply chain constraints owing to industry-wide shortages have disrupted operations, AAPL continues to defy expectations due to its cult-like following.
AAPL has either met or beat earnings estimates in each quarter for the past five years and is averaging a +22.29% surprise over the last four quarters, supporting the stock’s 26% return in 2021.
Apple Inc. Price, Consensus and EPS Surprise
The Zacks Consensus Estimate for AAPL’s full-year earnings sits at $5.77, advancing nearly 3% compared to the previous year. AAPL’s next earnings announcement is set for late January and it wouldn’t be surprising to see the company maintain its history of beating estimates as services such as Apple Pay and Apple Music continue to gain traction.
HP Inc. HPQ
HP Inc. is a leading global provider of personal computing, imaging and printing products, and other related services to individual consumers, small businesses, as well as clients in the government, health and education sectors. Headquartered in Palo Alto, CA, HPQ has continued to benefit from solid demand for its PCs, printers and other products as the pandemic has lingered on.
HPQ last reported EPS for the quarter ending in October of $0.94, a 6.82% positive earnings surprise. Over the last four quarters, HPQ has averaged a +17.98% surprise, exceeding estimates in each quarter.
The stock has outperformed this year, climbing over 55% as the company has taken advantage of the pandemic-stricken environment. HPQ management is expected to repurchase at least $4 billion worth of stock next year which should further support its price.
Analysts are in agreement in terms of earnings revisions and have upped their consensus estimates for the current year to $4.16 (a 10.64% increase) over the past two months. If HPQ is able to achieve this, it would represent growth of 9.76% over the $3.79 EPS of 2020.
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