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The S&P 500 had its second-best start to a year in the past 25 years, fueling a sense of optimism among investors. However, this achievement has not been the most important story of the year. In fact, the Bellwether Index’s 16% year-to-date gains were completely overshadowed by the dominance of the technology sector. With the AI hype driving the rise, it has become the best performing sector in 2023, up 31.5%.
That’s a significant amount and, in fact, represents the industry’s best opening half of a year on record, as it retreated from the S&P 500 by the largest margin in a six-month period since 1999.
Is technology poised for further gains in the second half of the year? That remains to be seen, though the segment is certainly not the only game in town. There are other corners of the market that can present opportunities for investors, and Raymond James analysts are happy to point them out. They’re looking for the stocks that will move forward for the rest of the year and have labeled some non-technical names as Strong Buys.
We ran a few of their picks through the TipRanks database for a broader view of the prospects and it seems the rest of the Street agrees with the Raymond James experts – both are also rated as ‘Strong Buys’ by the consensus of analysts. Let’s take a closer look at that.
Everest Group (Eg)
Let’s admit insurance doesn’t have the same appeal as technology and AI, but as investment legend George Soros said, “investing well is boring,” which brings us to Everest Group, a leading global provider of reinsurance and insurance solutions.
Founded in 1973, the company is an established insurance name and its global presence allows it to serve customers in over 100 countries on 6 continents. Everest offers tailored solutions to meet the unique needs of clients, operates through its subsidiaries and offers a diverse portfolio of products, including property, casualty, specialty and life reinsurance, as well as insurance coverage.
Everest has managed to post sequential improvements in revenue over the past few quarters and that was the case again in the first quarter of 2023. Revenue reached $3.29 billion, up from the $3.25 billion reported in the fourth quarter was achieved and amounted to a year of 13.8% annual increase. The figure also beat the consensus estimate by $190 million.
At the other end of the scale, boosted by continued improvement in the insurance margin, net operating income reached $443 million, translating to earnings per share of $11.31 and an improvement from the $10.31 recorded in same period last year. However, the bottom-line figure missed the analysts’ forecast at $1.23.
Raymond James analyst Charles Peters reviews the company’s prospects and maintains its Strong Buy rating, citing “positive outlook for Everest to report accelerating revenue and earnings growth.”
The 5-star analyst commented, saying: “Our assessment reflects improving reinsurance market conditions with strong pricing and terms trends continuing through the mid-year renewals. While acknowledging hurricane/catastrophe-related concerns in 2H23, we believe the risk reward [Everest] due to the tough market and our outlook for operational ROBEs of 19%+ over the next two years.”
“We continue to believe that our estimates could be positive if the company achieves the bottom line of its 2023 management goals with further improvements in 2024,” Peters summarizes.
Together with the Strong Buy rating, Peters’ price target of $450 on EG allows for 12-month returns of ~28%. (To view Peters’ track record, click here)
Looking at the consensus breakdown, the rest of the street agrees with Peters assessment. With 6 Buys and no Holds or Sells, the word on the street is that EG is a Strong Buy. The average price target of $449.17 is practically the same as Peters’ target. (To see EC stock forecast)
Copa Holdings (CPA)
Now let’s move from insurance to the aviation industry. Copa Holdings is a Panama-based company that operates as a holding company for Copa Airlines and Copa Colombia (Wingo). The company has positioned itself as a major player in the Latin American region, providing connectivity between cities in South America, Central America, North America and the Caribbean, with a wide network of 79 destinations in 31 countries. Copa operates a modern fleet of aircraft (totaling 99 at the end of the first quarter) and has built a reputation for quality service, punctuality and efficient operations.
Demand for travel has increased after the lull caused by Covid and Copa is benefiting from this development. In the first quarter, sales increased 51.7% from the same period a year ago to $867.3 million, beating Street’s forecast by $27.94 million. The figure also represented a 29% increase from pre-Covid 1Q19 levels. The company has also been economical on costs and that resulted in adj. EPS of $3.99, a figure that beat Street’s $3.25 forecast.
Not only technology stocks outperformed the market this year. That display has helped the stock make year-to-date gains of 32%. But according to Raymond James analyst Savanthi Syth, there’s more to come.
The analyst rates Copa shares as a strong buy, while her $155 price target implies a 40% upside for the coming months. (Click here to view Syth’s track record)
Explaining her optimistic stance, the 5-star analyst wrote: “We believe the relative attractiveness of Copa’s geographically advantageous and defensible hub has improved. While competitive capacity bending against a lower fuel backdrop is likely to weigh on revenues, Copa’s cost initiatives combined with an overall attractive competitive structure (further supported by global supply constraints) should support strong margins.”
Overall, this is another stock that gets full street support. With a unanimous 8 Buys, the stock has a Strong Buy consensus rating. If the average price target of $148.63 is met, investors will pocket a return of ~35% a year from now. (To see CPA Holdings stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the recommended analysts. The content is for informational purposes only. It is very important to do your own analysis before making an investment.
