Wall Street analysts’ wealth of experience and in-depth knowledge of the market can help investors determine whether to add a new name to a portfolio. Additionally, the use of technical indicators and fundamentals can point the direction of a stock’s near-term trajectory. Another way, though, is to gauge the sentiment amongst fellow investors. As the old saying goes, imitation is the sincerest form of flattery.
TipRanks’ Stock Screener has a set of filters which allows you to search out a stock according to your needs, be it by market cap, analyst consensus or various other metrics. In our case, we searched for three tickers boasting “very positive” sentiment from top TipRanks investors – a readout of individual investor portfolios tracked by TipRanks on its Smart Portfolio platform.
What’s more, in addition to piquing investors’ interest, all 3 have a further characteristic in common; all currently score a Strong Buy consensus rating from the Street. Let’s explore, then, why investors and analysts alike, are finding these names so compelling right now.
Centene Corp (CNC)
With a market-cap of $38 billion, Centene has established itself as a major player in healthcare services. The large cap has more than 33,000 employees across the country, has health plans that serve 12.3 million members in 29 states and offers health insurance to other healthcare and commercial organizations. With roughly 22 million members, Centene is the largest provider of government-sponsored health plans.
The company’s recent earnings results were a mixed affair. Centene’s Q4 revenue came in at $18.9 billion, 14% up from last year’s $16.6 billion, while also beating the analysts' estimate of $18.43 billion. The company’s higher-than-expected medical benefit ratio (the percentage of health insurance premiums paid out in claims), though, was a disappointment for investors. At 88.4%, the figure came in higher than the Street’s estimate of 87.6% and impacted the company’s medical costs.
Nevertheless, J.P. Morgan’s Gary Taylor believes CNC trades at a discount to its group. Multiple overhangs including the election, block grant and public charge, according to the analyst, “will all likely prove immaterial.” Taylor also believes Centene’s acquisition of WellCare for $17 billion in March of last year will lead to further long -term value creation.
The 4-star analyst further said, “We believe that CNC remains a long-term growth story as managed care penetration of Medicaid grows from ~68% of spending towards 75-80% over the next decade. We believe CNC’s organic opportunity (primarily fueled by its Medicaid and Medicare exposure) certainly remains above-average for the sector.”
Bottom line, then? Taylor reboots his rating on Centene with an Overweight along with a price target of $88. Should the target be met, investors stand to take home a 33% gain over the next year. (To watch Taylor’s track record, click here)
Overall, the healthcare service specialist is getting a lot of healthy love from the Street right now. 13 Buys and a single Hold converge to a Strong Buy consensus rating. At $80.54, the average target implies possible upside of 24%.
CNC has a ‘Very Positive’ investor sentiment with the number of portfolios holding CNC rising on both a 1 week and 1-month basis. (See Centene stock analysis on TipRanks)
Applied Materials (AMAT)
Next up is a fellow large cap, though from an entirely different sector. Semi-conductor company Applied Materials makes integrated circuit chips for a wide range of electronics, including TVs, smartphones and flat panel display screens. The $61 billion heavyweight’s robust start to 2020 is a direct continuation of 2019’s stellar performance; last year’s gains of 90% have been boosted by a further 9% year-to-date.
As per expectations, AMAT’s latest earnings results delivered a strong quarter and guidance. F1Q20’s revenue of $4.16 billion indicated a quarter-over-quarter increase of 11% and beat the Street’s estimate of $4.11 billion. At $0.98, EPS came in above the high end of the company's $0.87-0.95 guidance and above the Street’s call for $0.93. Looking ahead, galvanized by a continued robust foundry/logic business and the return of some memory spending, AMAT expects to see "strong double-digit" growth in its semiconductor business this year.
Deutsche bank’s Sidney Ho applauded the print and notes the guide would have been even stronger without the estimated $300 million impact of the coronavirus on its operations. Ho said, “AMAT continues to benefit from a robust foundry/logic environment and with this strength expected to continue throughout CY20, early signs of a memory recovery, and expectations for continued share gains, the company appears well positioned for a strong CY20… Post earnings, we remain encouraged by AMAT's near and long-term outlook and believe that the risk-reward for AMAT, which trades at ~12x (including pending acquisition) vs. its large cap peers at 1415x, is favorable.”
The 5-star analyst, therefore, keeps his Buy rating intact, while raising his price target up from the previous $72 to $75. The new figure implies possible upside of 15% from current levels. (To watch Ho’s track record, click here)
It turns out that the rest of the Street wholeheartedly agrees with the Deutsche bank analyst. With 19 "buy" ratings vs. 1 "sell" and 1 "hols," the message is clear: AMAT is a Strong Buy. Possible gains of 17% could be heading investors’ way should the average price target of $75.71 be met over the coming months.
In addition, based on top investor portfolios in TipRanks’ database, 6.9% hold AMAT stock. On average, top investors allocate 3.7% of their portfolios to AMAT. This gives the stock its ‘Very Positive’ investor sentiment score. (See AMAT stock analysis on TipRanks)
Staying in the semi-conductor field, we come across another big player in the shape of Microchip. This company does what it says on the tin: Sells microcontrollers, analog, and field-programmable gate array [FPGA] chips to a wide array of customers.
With earnings season in full swing, Microchip has been posting results, too. The solid quarter exhibited a beat on revenue and earnings: MCHP reported sales of $1.29 billion, compared to the $1.26 billion estimated by the street. NonGAAP EPS came in at $1.32, above the street’s estimate of $1.26. For the current quarter, MCHP expects revenue of $1.36 billion, guiding above the street’s call for $1.33 billion.
Needham’s Rajvindra Gill sees “multiple inflection points in MCHP's business.” The 5-star analyst notes the company has seen a continuation of strong backlog and bookings trends. Additionally, Gill notes MCHP’s ongoing strength in data center and industrial and auto, all recovering from a bottom, with the trends expected to continue in 2HCY20.
Gill summarized, “We could envision an optimistic scenario where we see an inventory restocking, given the historical low levels of distribution inventory, combined with genuine demand pull through driven by data center, ADAS, industrial IoT and 5G. While lead times may extend, we do think MCHP has built enough capacity to support a return in demand. In that environment, we believe revenue could return to pre-downturn levels and grow from there. Moreover, we believe MCHP is on track to hit its LT GM target of 63% (vs. 61.7% MRQ) as the $16MM underutilization charges roll-off the P&L. Net, we see upside at current levels as we roll out our new FY22 Non-GAAP estimates."
As a result Gill reiterated a Buy rating on MCHP shares, while raising his price target to $140 (from $130). The implication for investors? Potential upside movement of 30%. (To watch Gill’s track record, click here)
The consensus breakdown provides further cheer; 15 Buys and 2 Holds coalesce to a Strong Buy consensus rating. With an average price target of $123.13, analysts expect an additional 15% to be added to the share price over the next year.
Furthermore, 2.4% of all portfolios hold MCHP, with 0.2% being added in the last month alone. Top investors allocate, on average, 1.7% of their portfolio to the chipmaker’s stock. (See Microchip stock analysis on TipRanks)