Stock Opinions by Stephanie Link, Chief investment strategist, Hightower

DON'T BUY
GameStop Corp.

Total speculation. GME has no earnings, revenues are down and trades at 365x EBITDA.

specialty stores
COMMENT

The market will be volatile between now and earnings in a few weeks. Use that volatility, because the economy will stay strong. The Fed doesn't need to do anything.

Unknown
PARTIAL SELL
Amazon.com, Inc.

Is taking profits to buy Apple. 

specialty stores
BUY ON WEAKNESS
Apple Inc

Is a little worried because shares have run up and Monday they unveil new AI product(s). Apple is on the cusp of an AI theme. Will buy Apple on any weakness.

electrical / electronic
BUY
Seagate Technology

Just bought this for the first time. AI is driving a new refresh cycle in PCs. Also, we haven't upgraded PCs in 4-5 years. Dell just said their PC business was up 3% instead of the expected -2%. HPQ will see growth in the second half of this year, for the first time in 2 years. Also, AMD said last Sunday that their AI PC chips are 5x the speed of existing chips. Seagate leads this sector. Gross margins are poised to go higher. Margins could expand 1,000 basis points year over year. They have pricing power and volumes are rising. She might be early on it, but that's fine.

computer software / processing
BUY ON WEAKNESS
3M Co.

Was upgraded today. Most calls remain sell. This is a turnaround story, but shares are cheap at 14x. They cut the dividend, now 2.8% but it remains higher than the industry average of 1.8%. They spun-off their healthcare business, so the company is simplifying. The current CEO as a good, massive track record from L3Harris and UTX. Will buy on any weakness.

mngmnt / diversified
BUY
Broadcom

It reports Wednesday and she expects their AI business to be strong and VMware will make a bigger contribution. Software will total 40% of total revenues, positive for gross margins.

0
STRONG BUY
Broadcom

She trimmed her holdings a month ago and felt foolish as the price kept rising, but remains a big believer in AVGO. Shares are up 51% in the last 3 months, so expectations are really high, and from 16x forward PE to 25x (2023-4). But it should be around that multiple, because their AI business is only starting, from $7.5 billion to $10 billion (2023-4). Problem is, AVGO didn't raise numbers across all their businesses, some of which are troughing. Software is a home run, though. Share are falling despite beating in their report, but they needed to crush numbers. They've been transitioning from more hardware to more software, which boasts higher margins. she expects double-digit revenue growth.

0
BUY
Eaton Corp.

Just bought it, because they're increasing their backlog a lot as orders rose from 2-7% in the last quarter. Are benefitting from the electrical side and power quality plus they have aviation/aerospace exposure, industrial areas she loves. She just started with a partial position.

electrical / electronic
BUY

Just bought it after the January numbers came out; cash sorting was much better than expected at $6.8 billion on their balance sheets though $9 billion was expected as clients suffer FOMO and are buying stocks. But this helps their net interest income and net interest margin.

investment companies / funds
BUY
Lennar Corp.

Remarkable story and she expects a good quarter and upside surprise. Trades at 11x earnings while the group is 9-11x. She prefers Home Depot, the laggard, but likes housing overall due to the housing shortage in the U.S., especially when rates come down.

REAL ESTATE
PARTIAL SELL
Nike Inc

Nike reported and disappointed. Shares falling 11% today. She was terrified going into the quarter, which wasn't terrible. Expected flat revenue growth, yes, but profits beat her expectation. But the outlook was not good. She expects they'll eventually reach around 10% growth, but doesn't know when. They have a product cycle in 2024, but that will take time to get into the system. It's dead money for 6 months or more. This remains 27% up from lows. Is taking profits, though is not buying other stocks during this rally. Expectations, especially over margins, were so high going into this report.

misc consumer products
BUY ON WEAKNESS
TJX Companies

Not a cheap stock, but are benefitting from excess inventory of recent years. They increased their comp guidance last quarter from 3-4% to 4-5%, unheard of for them. Has owned this forever. They have pricing power. Buy on the day they report earnings, because it always sells on the news.

clothing stores
PARTIAL SELL

She's been trimming this given its strong run. Up 193% this year, but remains cheap at 24x PE and 25% revenue growth which she expects to grow fruther next year. 

Technology
PARTIAL BUY
Broadcom

Trades at 24x forward PE, up because of the VMware deal which is 30% accretive and gets them 50% software exposure in recurring revenues. Not worried that this has run up so much this year. Likes it a lot and owns a big position.

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