A trader works on the floor of the New York Stock Exchange during the afternoon of December 4, 2015 in New York City.
Andrew Burton/Getty Images
CS sees GDP growing 8% this year and says the 10-year yield might reach 2% in the next 12 months.
US growth stocks outperformed value 57% of the time over the last 30 years when yields rose.
This time, 14 high-quality growth stocks could outperform the market.
See more stories on Insider's business page.
Stocks fell from all-time highs on Friday as the market digested better-than-expected earnings results from key companies, Biden's spending plans, and US economic data that indicates potential inflationary pressures to the economy. On Tuesday, the Conference Board announced consumer confidence jumped to a 14-month high of 121.7 in April, from 109 in March. And on Thursday, the Commerce Department said US GDP grew around 1.6% in the first quarter of 2021, or 6.4% on an annualized basis. Although growth during this period marked the second-fastest pace for any quarter in the US since 2003, GDP could grow even faster, with the pace likely reaching 8% this year, according to Andrew Garthwaite, a global strategist at Credit Suisse. Since consumers have around $1.9 trillion in excess savings and are changing their spending behaviors on the back of increased confidence in their wealth, US GDP could grow by 1% to 2%. Additionally, Biden's first fiscal package is likely to boost GDP by 6%, while the second and third packages could raise GDP by 1% to 2% per year, he said. And even though Biden's second and third packages still have to pass the House before being signed into law, there are growing concerns about the inflationary pressures that might arise from Biden's massive spending plans and the Fed's ongoing dovish stance. "We think US 10-year yields will rise to 2% with the bond yield rising to 20bps in the next 12 months; critically we expect this to be led by inflation expectations rather than real yields," he wrote, adding that the TIPS yield (which represents the real yield that factors in the rate of inflation) likely won't see a major rise.A bond's future cash flow is threatened by inflation, as it erodes the value of cash. And if market participants believe higher inflation is coming, interest rates and bond yields typically rise to make up for the loss of future purchasing power. And against a backdrop of rising yields, US growth stocks have been able to outperform their value peers 57% of the time over the last 30 years. Furthermore, this year's environment could be a favorable one for some names within growth, even as the area isn't expected to outperform, he said. "For growth to outperform, we would need to see a fall in the TIPS yield and we do not see that happening given our positive view on GDP growth and productivity," he said. Additionally, growth valuation has entered the "danger zone" of previous bubbles, inflation expectations are growing, and analysts are positively altering initial earnings expectations for value, according to Garthwaite.Yet, big areas within value such as autos, fossil fuels, and tobacco are facing disruptions from renewable energy and could be viewed as ESG-toxic to some, he added. Consequently, some high-quality growth stocks could outperform the market. To identify such names, Garthwaite and his team looked for high-quality names where most of their finances are in the form of equity rather than debt, that are generating enough cash to pay obligations, in the top 25% of operational quality, and look cheap to their HOLT tool that compares company valuations. The stocks are listed below in alphabetical order. We have included their corresponding tickers, Net Debt/EBITDA (a measurement of leverage), and 12-month forward price-to-earnings ratio.
Ticker: GOOGLNet Debt/EBITDA: 0.3812-month forward PE: 31.2Source: Credit Suisse
2. Applied Materials
Ticker: AMATNet Debt/EBITDA: 0.1712-month forward PE: 20.6Source: Credit Suisse
Ticker: BXNet Debt/EBITDA: 0.3012-month forward PE: 23Source: Credit Suisse
Ticker: DHRNet Debt/EBITDA: 0.2612-month forward PE: 30.7Source: Credit Suisse
Ticker: EBAYNet Debt/EBITDA: 0.3512-month forward PE: 15.1Source: Credit Suisse
Ticker: FBNet Debt/EBITDA: 0.2012-month forward PE: 25.1Source: Credit Suisse
Ticker: HSYNet Debt/EBITDA: 0.2012-month forward PE: 23.4Source: Credit Suisse
8. Home Depot
Ticker: HDNet Debt/EBITDA: 0.3712-month forward PE: 25.1Source: Credit Suisse
Ticker: KEYSNet Debt/EBITDA: 0.1612-month forward PE: 24.1Source: Credit Suisse
Ticker: KLACNet Debt/EBITDA: 0.2712-month forward PE: 22.5Source: Credit Suisse
Ticker: MSFTNet Debt/EBITDA: 0.3212-month forward PE: 32.5Source: Credit Suisse
Ticker: MCONet Debt/EBITDA: 0.1912-month forward PE: 28.9Source: Credit Suisse
13. Texas Instruments
Ticker: TXNNet Debt/EBITDA: 0.5312-month forward PE: 27.1Source: Credit Suisse
14. Thermo Fisher Scientific
Ticker: TMONet Debt/EBITDA: 0.1612-month forward PE: 22.8Source: Credit Suisse
Shares of Nokia (EPA: NOKIA) are trading in a sideways fashion after a period of higher volatility amid the WSB frenzy. Fundamental analysis: HMD Global rolls out new series of Nokia phones HMD Global, the company behind the Nokia mobile brand introduced a new series of smartphones on Thursday as the startup struggles to compete with giants Samsung and Apple. Are you looking for fast-news, hot-tips and market analysis? Sign-up for the Invezz newsletter, today. HMD Global acquired Nokia’s phone unit in 2016 and has the license to make and sell Nokia phones ever since. Over this period, the startup has launched a number of smartphones and “dumb phones”, such as the redesigned versions of the Nokia 8110 and 2720 flip model. And just yesterday, Nokia introduced 6 new models across three different series: X, G, and C. The X series involves the flagship models, while G is somewhat less expensive and the budget-friendly C series. The Nokia C10 costs only €75 ($89), while the most expensive model and best in terms of specs is the Nokia X20, priced at 349 euros, or about $415. The X20 features a 6.67-inch screen, four back cameras including a 64-megapixel main lens, and it supports 5G internet. Both X20 and the cheaper X10 feature Qualcomm’s Snapdragon 480 5G chipset and operate on Google’s Android operating system. The Finnish company has been struggling to close the gap behind big hitters including Apple, Samsung, and Huawei in the smartphone market. “I think it will continue to be very hard for (Nokia) to be able to compete in the highest portfolios on the market — that’s why they are now targeting lower price bands,” said Francisco Jeronimo, associate vice president for European devices at IDC. Tip: looking for an app to invest wisely? Trade safely by signing-up with our preferred choice, eToro: visit & create account Technical analysis: Consolidation taking place Shares of Nokia are trading in a tight consolidating range after a period of higher volatility. On a monthly level, Nokia stock is up over 1% after it gained a bit more than 3% in March. Nokia daily chart (TradingView) Nokia stock price is trading between the two key moving averages on a daily chart, with
Neuralink CEO Elon Musk.
Philip Pacheco / AFP via Getty Images