We have just been through a period of abundant stock market gains, but that is no coincidence, according to one legendary stock picker.
Ken Fisher calls the last 9 months the “midterm miracle.” That is, history has shown that the 9 months starting October of a midterm election year turn out to be the most consistently profitable period in the stock market in all stock market history. With the huge strides made since October 1 last year, this scenario has played out in a “picture perfect” way.
But what happens now that period has been and gone? Well, the Fisher Investments founder, whose net worth is valued at ~$7.2 billion, concedes that the back half of the year that follows isn’t quite as bountiful, but it is still meaningfully better than average. For example, normally, stocks rise 65-70% of the time, but in the midterm miracle period they rise, historically, 92% of the time, and in the period that follows that, they’re normally positive about 85% of the time, with slightly lower average returns of about 4 to 5% (compared to the midterm miracle’s 6.5%).
“Will that happen this time?” asks Fisher. “Well, you don’t really get the average except for by luck, but it’s probably a profitable time. It’s a good time, partly because people still remain skeptical. People keep coming up with yeah buts to try to justify why this can’t really be a bull market. And it is a bull market.”
With such a positive outlook, then, it makes sense to find out which stocks Fisher thinks are the ones that will keep on delivering the goods, and we’ve gotten the process started. We ran a pair of names Fisher remains heavily invested in through the TipRanks database to see if there’s widespread agreement on the Street that these are both worth leaning into right now. Turns out there certainly is – both are currently rated as Strong Buys by the analyst consensus. Let’s find out why.
Las Vegas Sands (LVS)
For our first Fisher-backed name, we’ll head to the hospitality and entertainment sector and Las Vegas Sands, a company known for its prestigious resort properties and casinos. Founded by the late billionaire entrepreneur Sheldon Adelson, the company played a pivotal role in shaping the Las Vegas Strip into a hub of luxury and extravagance. The company sold its Las Vegas properties in 2021, but its footprint is now global with properties in Macau and Singapore (Marina Bay Sands).
The stock market has made a remarkable recovery this year and that has been mirrored by the big improvement made at LVS in 2023, as was evident in the company’s recent Q2 report. Revenue climbed by 142% year-over-year to $2.54 billion, beating the Street’s call by $160 million. Adj. EPS came in at $0.46, ahead of the forecasts by $0.03.
However, investors were a bit disappointed in the quarter’s Macau visitors, which reached around 6.7 million. That is roughly 68% of the 9.9 million visitors seen in 2Q19, the last comparable period before the Covid-19 pandemic impacted operations. That said, despite the post-earnings drop, the stock’s 23% year-to-date return is still better than the 19% gains delivered so far by the S&P 500.
Meanwhile, Fisher keeps hold of a big LVS position, being the owner of 9,242,005 shares, currently worth over $547 million.
The company also has a fan in Stifel analyst Steven Wieczynski, who is not bothered about the visitation numbers, and in fact, is impressed with the way things are shaping up for LVS.
“The recovery in Macau/Singapore continues to exceed our expectations,” said the 5-Star analyst after scanning the Q2 print. “Moving forward we expect to witness positive earnings revisions as the recovery and profitability in both markets is not fully embedded in current consensus, in our opinion. With fears continuing to swell around the domestic consumer, we believe owning LVS and their Macau-centric peers presents the best risk/reward setup for the remainder of 2023… LVS and other Macau-centric names remain momentum stocks and as long as visitation/spend patterns continue to be healthy over the next couple of months, we believe shares should outperform.”
Translating these thoughts into grades and numbers, Wieczynski’s Buy rating is accompanied by a $78 price target, suggesting the shares have room for growth of 31% in the year ahead. (To watch Wieczynski’s track record, click here)
Most on the Street agree. Based on 9 Buys vs. 2 Holds, the stock claims a Strong Buy consensus rating. Going by the $70.95 average target, a year from now, investors will be locking in returns of ~19%. (See LVS stock forecast)
Marvell Technology (MRVL)
Our next Fisher-backed name offers an entirely different value proposition. Marvell is a prominent semiconductor firm known for its innovative solutions and advancements in the field of data infrastructure. The Santa Clara, California-based company has established itself as a global leader in providing integrated circuits and storage solutions for a wide range of applications.
Its product portfolio includes a diverse array of offerings, such as data storage controllers, networking products and custom application-specific integrated circuits (ASICs), while the company caters to diverse markets, including data centers, automotive, enterprise networking, cloud, and carrier infrastructure, among others.
Tech has driven the market gains this year, and MRVL shares have participated in the rally – the stock is up by 75% year-to-date. A big chunk of those gains came in the wake of the company’s first quarter of fiscal 2024 report (April quarter). While revenue fell by 9% y/y to $1.32 billion, that figure beat the consensus estimate by $20 million. Likewise on the bottom-line, adj. EPS of $0.31 edged out the $0.29 forecast. The outlook impressed, as well. For FQ2, at the midpoint, revenue is expected to reach $1.330 billion, compared to consensus at $1.31 billion, while adj. EPS is anticipated to hit $0.32 vs. the Street’s call of $0.31.
Fisher, then, must be pleased with his ongoing investment. He owns 1,356,647 MRVL shares, which currently boast a market value just over $88 million.
Assessing MRVL’s prospects, Wolfe analyst Chris Caso points out several reasons why investors should consider adding shares of this semi heavyweight to their portfolios.
“Our constructive thesis is underpinned by a return to normal in MRVL’s cyclical businesses (consumer, enterprise networking, wired carrier networking and storage – about half of CY24 revenue), coupled with MRVL’s structural growth businesses… We expect Inphi/optical to be the fastest growth business within MRVL due to the need to move to optical interconnect as hyperscale speeds move higher, and copper runs into physical limits… We view auto growth to be secure since MRVL has the only multi-Gb solution and automakers are clearly migrating to ethernet over time. Semi-custom growth is also likely with secure design wins (albeit at dilutive GMs, though accretive OMs),” the 5-Star analyst wrote.
These comments form the basis for Caso’s Outperform (i.e., Buy) rating while his $80 price target implies shares will climb 23% higher over the one-year timeframe. (To watch Caso’s track record, click here)
Elsewhere on the Street, one analyst remains unconvinced, but all 19 other recent reviews are also positive, making the consensus view here a Strong Buy. (See MRVL stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.