 These are the main themes taking over the markets in 2025, ones that investors should consider when aligning their portfolios.. ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ |
| | Written by Gabriel Osorio-Mazilli 
Now that 2024 is coming to an end, it is easy for investors to sit back and look over the past 12 months and the gains they have made. However, getting too comfortable in the stock market typically leads to losing track of the game just when investors need to be the most focused. Starting 2025 on the right foot is essential, as having a profitable first quarter can give investors the confidence they need to take on more of their ideas. For this reason, investors need to become aware of the main themes that could dominate the entire market during 2025 to align their portfolios in the right direction. These themes comprise fundamental and technical trends, all leading investors to three market areas that might deliver outsized returns. Starting with value stocks, this is where the relationship between the iShares S&P 500 Value ETF (NYSEARCA: IVE) and the iShares S&P 500 Growth ETF (NYSEARCA: IVW) comes into play, which might call for a rally in value stocks soon. Then, as the economy heats back on interest rate cuts, the energy sector will be one to keep an eye on through the Energy Select Sector SPDR Fund (NYSEARCA: XLE). Lastly, when all of these themes play out, overseas Chinese stocks like Alibaba Group (NYSE: BABA) and the iShares MSCI China ETF (NASDAQ: MCHI). Value Stocks Will Take Over in 2025 When investors look at the spreads between value and growth stocks over the past five years, it becomes evident that value stocks are at a cyclical low compared to growth stocks, and that typically has to do with the business cycle. As the cycle resets itself, consider how the Federal Reserve (the Fed) has begun its interest rate-cutting cycle again. However, interest rate cuts usually come into play when the economy is not doing well, and the Fed's admittance creates a level of uncertainty that could lead to market volatility. This volatility will drive capital to safer stocks, like the biggest brands in their respective industries. This article includes a list of value stocks, including discounted value plays like PepsiCo Inc. (NASDAQ: PEP), Nike Inc. (NYSE: NKE), and even ASML Holdings (NASDAQ: ASML). Aligning portfolios with this view might make it worth their while in the coming months of 2025. If investing in individual stocks seems daunting for some, then tracking the broader value ETF might be a better way to find alpha in the stock market for the coming quarters. A Buffett View Is Always a Good View There’s a reason why Warren Buffett decided to buy up to 29% of Occidental Petroleum Co. (NYSE: OXY) throughout the year: He knows that the sector's risk-to-reward ratios are the best. As the economy picks back up on these new interest rate cuts, several industries will create more oil demand to help these stocks take off again. The relationships described between growth and value stocks have always been mirror images of oil prices. As value underperforms growth, low oil prices accommodate easier and more flexible business environments. The opposite is true: as value starts to outperform, it is typically due to high oil prices that make large-cap stocks with economies of scale more attractive, as they can more easily diversify away costs through international operations and exposure. This is why Wall Street analysts see so much upside in stocks like Transocean Ltd. (NYSE: RIG), being at the top of the oil value chain commands a consensus $6.25 price target, or 77% upside from today’s stock price. In case investors haven’t realized it yet, there is a common theme in the way that energy stocks and value stocks could outperform in 2025, and that’s a lower dollar index. A lower dollar will also help a completely different set of stocks in 2025, across the world this time. It’s Time for Chinese Stocks A lower dollar will raise the price of any stock or commodity quoted in dollars, which is why the bullish themes behind value and oil stocks will directly favor Chinese stocks. A lower dollar has historically been the catalyst for stocks like Alibaba and the broader China ETF. This time around, though, other major players in the Chinese economy could also take off, such as Nio Inc. (NYSE: NIO) and PDD Holdings Inc. (NASDAQ: PDD), which could fall into the value category for China’s stock market. Knowing this, it shouldn’t come as a surprise to see analysts from Barclays reiterated an overweight rating for Alibaba stock as of November 2024, placing a $130 a share price target to call for up to 52% upside from where the stock trades today.  Read This Story Online | |
| Written by Thomas Hughes 
Shoe Carnival (NASDAQ: SCVL), Mondelez’s (NASDAQ: MDLZ), and Kroger (NYSE: KR)announced major buybacks in December that should help support their price action over time. Today's question is whether these stocks will be classified as Buys, Sells, or Holds for 2025, and the answer is Buy, if for differing reasons with each stock. Here’s a look at why investors should be interested in them. Shoe Carnival: Undervalued Small-Cap With a Solid Dividend Shoe Carnival faces headwinds in 2024, like all retailers, but still generates reasonably stable results and sufficient cash flow to sustain its capital return outlook. That includes up to $50 million in share repurchases, about 5% of the market cap, but that is not why this stock is a Buy. The company’s buybacks are a backstop to share-based compensation and are unreliable as capital returns. The highlights from 2024 include no repurchases, a moderately higher share count, and significantly improved shareholder value tied to operations and acquisitions. It’s a buy because of its balance sheet and dividend. The company’s operations and balance sheet allow it to make acquisitions such as Rogan’s, which added 28 or about 7% more stores to the footprint. At the end of FQ3, the balance sheet highlights included increased cash, current, and total assets partially offset by increased liabilities. The net result was an 11% increase in shareholder equity and total leverage of less than 0.8x equity. The cash flow and balance sheet also allow for a healthy and reliable dividend worth 1.6% in yield with shares near $34.25. The dividend is less than 20% of the earnings outlook, and the distribution is growing. The company has increased for 12 consecutive years and is on track to make another double-digit increase in early 2025. 
Mondelez Authorizes $9 Billion Repurchase Authorization: Share Count Is Falling Mondelez's $9 billion repurchase authorization is more of a meal for investors. This stock is a Buy for its dividend and buybacks, which reduced the count by 1.9% year-over-year for Q3 and by 1.7% year-to-date. The new authorization replaces the old and is sufficient to keep the company buying shares at the current pace for several quarters. Capital return, including dividends, is $2.9 billion for the first nine months of the year and will top $3 billion by the end of the year. The dividend is attractive. The stock yields over 3%, trading at 17x, which is more than double the broad market average at a value and a high-yielding value compared to peers. The company is also growing its distribution at a double-digit rate, which it can sustain due to core growth and the declining share count. Regarding the balance sheet, the company uses debt to improve cash flow, but it is well-managed at only 0.6x equity, leaving it in a healthy position. Analysts agree that this stock is a value. The consensus estimate has fallen modestly since earlier in the year but is relatively steady compared to last year and earlier in 2024, suggesting a 30% discount with the stock trading near $59.50. 
Kroger Buys Back Shares! Albertson’s Merger Quashed Kroger could not buy Albertson’s (NYSE: ACI), but it doesn’t matter. The company’s financial position was robust and only strengthened as the process extended. The net result is that Kroger had built an incredible cash position preparing for the acquisition and is now using the cash to buy back shares. The company authorized a $7.5 billion buyback plan, worth about 17% of the market cap, with $5.5 allotted for an accelerated buy completed in mid-December. The remainder is worth a mid-single digit share amount and is likely to be executed in 2025 with cash on hand and then later increased. 
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| Written by Gabriel Osorio-Mazilli 
Most investors in the technology sector have been focused on the trends and developments around artificial intelligence names, particularly those in the semiconductor industry responsible for building the infrastructure necessary to allow for these models to work and grow from the data they are fed. The darling in this industry is found in NVIDIA Co. (NASDAQ: NVDA), but there are signs that a new contender might knock on the door of a new massive rally. While NVIDIA dominated the artificial intelligence and semiconductor space during 2024 and most of 2023, some might say that it has pushed too high as valuations reach stratospheric highs. The future growth rates projected by Wall Street analysts aren’t high enough to potentially justify today’s valuations, let alone higher ones. Knowing this, investors might look around to other names in the space for a better risk-to-reward setup. And that is exactly where shares of Advanced Micro Devices Inc. (NASDAQ: AMD), also known as AMD, come into play. Key valuation ratios, compared to industry peers, highlight how AMD offers one of the better setups for a potential buy. Wall Street analysts agree, and even institutional investors are finding this enough reason to buy the stock ahead of the new year. What Makes AMD Stock Better than Peers Today? Two things typically drive a stock’s price: interest in that stock from the broader marketplace and earnings per share (EPS). With that foundation set, investors can assess whether a stock is in favor or out of favor with the market. This is where price action becomes important. There is a massive divide between shares of AMD, which now trade at 55% of their 52-week highs, and shares of NVIDIA, which still stand at 92% of their 52-week highs. It is safe for investors to assume that NVIDIA has won the market’s popularity contest today. But how about tomorrow’s? That is where the fundamentals start to matter moving forward, and it seems that AMD has stacked up enough evidence in that realm to make it a potentially better buy than NVIDIA is today. Starting with Wall Street EPS forecasts for $4.91 for the next 12 months, calling for a net jump of 48.3% from today’s $3.31 EPS. Compared to NVIDIA’s EPS projections for $4.14 a share, which would only grow the underlying earnings by 41.3%, AMD looks like it has a better chance of taking over the market’s premium in this regard. However, growth rates that are less than 10% apart are not enough reason to buy a stock; valuations need to be considered. On a forward price-to-earnings (P/E) ratio, the way the markets place a value today on tomorrow’s earnings, AMD trades at a 25.6x valuation compared to NVIDIA’s 34.0x multiple. This significant discount starts to make NVIDIA look a bit more expensive, but the trend doesn’t end there. When comparing the two on a price-to-book (P/B) basis, NVIDIA stock trades at a massive 51.4x multiple, while AMD stock is only at 3.9x today. Looking at it this way, investors can see how NVIDIA’s comparable EPS growth rates don’t really justify paying this high of a multiple. Wall Street Wants to Close the Gap Looking at all these divergences between AMD and the industry leader, NVIDIA, made a few analysts on Wall Street aware of a potential easy win for their careers and reputations. Particularly those at Citigroup, who, as of October 2024, placed—and kept—a buy rating on AMD stock, this time with a $200 price target. To prove these views right, the stock would have to rally up to 59% from where it trades today, not to mention get close to its 52-week high prices. As bullish as these projections are, these analysts weren’t the only ones willing to make their optimism public. Institutional buyers from State Street, as of November 2024, decided to boost their holdings in AMD stock by 2.3%, netting their position at a high of $11.5 billion today, or 4.3% ownership in the company to give investors another bullish gauge to lean on. Even the bears know better than to bet against this stock, as the company’s short interest declined by 8.8% over the past month, a sign of bearish capitulation facing all of the bullish factors out in the market today. Read This Story Online | $2 trillion has disappeared from the US government's books.
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