Four under-the-radar stocks to buy and hold for the second half: Portfolio manager
The year has reached its halfway mark and several stocks have seen massive rallies as investors remain bullish on themes like artificial intelligence, electric vehicles and more. The S & P 500 benchmark and Nasdaq Composite have been on the uptrend, with both hitting new 52-week highs on Friday, the last trading day of the quarter. Looking ahead to the second six months of the year, one long-term investor is “pretty positive” on the market, naming stocks he is betting on as the “market goes from strength to strength.” “In terms of opportunities for the rest of the year, I feel it is worthwhile to have a good weighting in technology and communications services. I would also look to have exposure to industrials, energy, healthcare and large financials,” Christopher Carey, portfolio manager at the U.S.-headquartered Carnegie Investment Counsel which manages around $4 billion, told CNBC Pro. Speaking on June 26, Carey described his investment strategy as finding “the best of the breed,” which offer “great margins, superior moats, fantastic financials and superior management teams.” “The goal is to be able to hold these stocks for a while to benefit from the magic of compounding, which can take a long time.” he added. Cintas Corp Top of Carey’s list is Cintas , which offers products and services for businesses ranging from uniforms to cleaning supplies and safety courses. Calling it a “great company,” the portfolio manager likes the size and scale of its operations and focus on acquisitions. “Cintas is getting stronger and stronger with each acquisition they make and every new customer they get. There are many other companies in the industry, but over time, they either sell out to Cintas or their financials look terrible in comparison,” Carey said. Shares in Cintas have been on the rise, gaining around 16.2% year-to-date and nearly 41% in the last 12 months. According to FactSet data, of 19 analysts covering the stock, 10 give it a buy or overweight rating. The average price target on the shares is $710.34, which implies a slight upside. Deere & Company Another company that Carey likes is Deere & Company , or John Deere. The agricultural equipment manufacturer is set to “benefit from precision agriculture and less arable land worldwide,” he said, as climate conditions get harsher and put pressure on the need for alternate food sources. “This is a company that has demand regardless of how the economy performs. It is not like AI which can go out of fashion. Everyone needs to eat, so it will never go out of fashion,” Carey added. Deere’s stock has underperformed of late following a lower full-year profit forecast , falling 6.6% year-to-date and around 7.8% over the last 12 months. Of 27 analysts covering the stock, 14 give it a buy or overweight rating, according to FactSet data. The stock’s average price target of $425.27 gives it upside potential of 13.8%. Charles Schwab Financial services player Charles Schwab is another of Carey’s favorites given its pivot away from the traditional banking and brokerage model toward the more niche registered investment advisors (RIA) space. This transition has given Schwab “tremendous growth in terms of their client base and the assets under their custody,” the portfolio manager said. “I have seen the dollars that are going into RIA firms — the flow is set to overtake the bank and brokerage world within the next couple of years, which is remarkable and Schwab is becoming a completely different company.” The company completed the integration of former rival TD Ameritrade earlier this year. It is also planning to roll out an alternatives platform for investors with more than $5 million. Shares are up around 7.1% year-to-date and about 30% in the last 12 months. Fourteen of 21 analysts covering the stock give it a buy or overweight rating, according to FactSet data. The average price target of $79.67 gives it upside potential of 8.1%. Stryker Another stock Carey is watching is medical technology player Stryker . The company, which manufactures hospital equipment and implants used in joint replacement and trauma surgeries, is set to see strong demand and “incredible margins and gains” from a globally ageing population,” he said. “Stryker is a company that should capitalize on multi-decade trends, and that’s where we want to be positioned,” Carey added. Shares in Stryker are up around 13.6% year-to-date and 12.5% in the last 12 months. FactSet data shows that 21 of 31 analysts covering the company have a buy or overweight rating on the stock, with an average price target of $378.58 indicating around 11.3% upside.
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