The new trading month has officially arrived, and HSBC recommends that investors expand their investment scope in the fourth quarter and look for stocks with more reasonable valuations. September was another positive month for stocks, with the S&P 500 notching its fifth straight month of gains. On the last trading day of this month, the broad market index set another historical closing record, causing the index to rise by more than 20% in 2024. The market ended on a positive note. “We believe that much of this frothiness and sublimeness is due to the dominance of ‘big’ companies in the index, not just Big Tech but also Big Retail, Big Banks and Big Pharma,” said Nicole Inui, Director, Americas Equity Strategies wrote in a recent note to clients. “These ‘big’ companies represent the lion’s share of stock index returns so far this year.” The gains came as the Federal Reserve cut interest rates last month, the first since the Covid-19 pandemic began. Inui predicts the central bank will cut interest rates by 25 basis points at the next six Federal Open Market Committee (FOMC) meetings. “As we enter a lower (but not low) interest rate environment, growth still looks quite resilient (3Q GDP consensus forecast is 2.3% year-over-year), and we believe there are opportunities for investors to expand exposure to less demanding companies. investment valuation,” the strategist also said. However, this excludes small-cap stocks, as she noted that historically, these companies have underperformed when the Fed cuts interest rates. Instead, Inui lists 15 companies with discounted valuations that investors should keep an eye on going forward. Here are some of the names on the list. Automaker General Motors makes the list. Shares have soared more than 27% so far this year. The company’s third-quarter sales exceeded Wall Street expectations, partly due to a 60% increase in electric vehicle sales compared with the same period last year, and its shares edged higher on Tuesday. GM estimates its share of the domestic electric vehicle market at 9.5%, an increase of three percentage points from the first quarter of this year. HSBC has a buy rating on the stock. Overall, 16 of the 29 analysts covering GM have a Strong Buy or Buy rating, and its $54.35 average price target implies nearly 19% upside from Friday’s closing price, according to LSEG. . Pharmaceutical giant Pfizer is another name that made the cut. The U.S. drugmaker’s shares are down nearly 1% this year. However, the stock has gained slightly over the past month. Still, Wall Street is somewhat divided on Pfizer, with 14 of 25 analysts giving it a hold rating, according to LSEG. The remaining 11 companies are rated Buy or Strong Buy. Still, the consensus price target of $33.34 implies upside of more than 16% as of Friday’s close. Goldman Sachs and Delta Air Lines both appear on the list. In 2024, Goldman Sachs’ stock price soared more than 28%, and Delta Air Lines’ stock price rose 22.5%.
