Buy these 15 stocks to mimic a strategy that’s crushed the S&P 500 since 2008 and has more than doubled its returns in the last 12 months
- Stocks have rallied this week as optimism builds about earnings and interest rates.
- Strategists at BMO Capital Markets see the gains continuing through year-end.
- Here are the 15 stocks in BMO’s market-beating US large-cap list.
According to BMO Capital Markets, US stocks can extend their winning streak until the end of 2023.
The S&P 500 is up 4.9% this week after a 7% drop in September and October, thanks to better-than-expected third-quarter earnings and less-hawkish interest-rate rhetoric.
The Federal Reserve declined to raise interest rates at its November 1 meeting, as expected. As recently noted by Bill Adams, Comerica Bank’s economy chief, Chairman Jerome Powell indicated that higher long-term interest rates set by the market made another hike unnecessary.
“The bar is clearly rising for the Fed to make further rate increases before deciding that rates have peaked for the cycle,” Adams wrote in a commentary for Insider following the Fed’s decision.
Some strategists are concerned that the US economy will tip over due to its rapid growth. Although high inflation may prevent the Fed from cutting rates anytime soon, bulls still do not expect a recession given the labor market’s and consumer spending’s resilience.
“The economy continues to expand, unemployment remains low, and the stock market is likely to drift higher in the absence of concrete signals that the Fed will resume hiking interest rates and/or that the economy is on the verge of entering a recession,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, in a commentary sent to Insider.
Despite the market’s recent ups and downs, BMO has maintained its year-end S&P 500 price target of 4,550. In BMO’s base case, the index, which is trading near the firm’s initial target of 4,300, could rise 5.3% in the coming weeks. BMO’s bull case of 5,050, on the other hand, would require a miracle, such as the Fed cutting rates next month, to achieve.
15 best stocks to buy right now
BMO strategists design stock lists and track their performance each month, and the US-large cap list has been the best performing basket in the last year. The 15 stocks in that group are up 25.5% in the last year through October, which is more than double the 12.1% gain in the S&P 500. Since its inception in January 2008, the list has outperformed the broader market by an average of 3.7% per year.
The 15 stocks in BMO’s top-performing US large-cap list are listed below, along with their ticker, market capitalization, previous close, and price-to-earnings (P/E) ratio.
1. AbbVie
Ticker: ABBV
Market cap: $252.9B
Previous close: $143.26
P/E ratio: 39.2x
2. Air Products & Chemicals
Ticker: APD
Market cap: $64.3B
Previous close: $289.62
P/E ratio: 29.4x
3. Apollo Global Management
Ticker: APO
Market cap: $50.5B
Previous close: $84.17
P/E ratio: 134.9x
4. Costco
Ticker: COST
Market cap: $246.2B
Previous close: $555.97
P/E ratio: 39.3x
5. Eli Lilly
Ticker: LLY
Market cap: $550.9B
Previous close: $580.29
P/E ratio: 80.6x
6. MasterCard
Ticker: MA
Market cap: $358.9B
Previous close: $382.69
P/E ratio: 33.3x
7. Microsoft
Ticker: MSFT
Market cap: $2,590B
Previous close: $348.32
P/E ratio: 33.7x
8. Nvidia
Ticker: NVDA
Market cap: $1,070B
Previous close: $435.06
P/E ratio: 105.1x
9. Palo Alto Networks
Ticker: PANW
Market cap: $73.6B
Previous close: $236.80
P/E ratio: 194.9x
10. Prologis
Ticker: PLD
Market cap: $96.8B
Previous close: $104.72
P/E ratio: 32.3x
11. Regeneron Pharmaceuticals
Ticker: REGN
Market cap: $88.9B
Previous close: $818.79
P/E ratio: 21.6x
12. Constellation Brands
Ticker: STZ
Market cap: $43.7B
Previous close: $238.00
P/E ratio: 29.7x
13. TJX Companies
Ticker: TJX
Market cap: $102.9B
Previous close: $89.92
P/E ratio: 26.4x
14. Texas Instruments
Ticker: TXN
Market cap: $133.8B
Previous close: $147.31
P/E ratio: 19.1x
15. Union Pacific
Ticker: UNP
Market cap: $128.9B
Previous close: $211.34
P/E ratio: 20.3x
