Here is your VIP list of Pro Picks for the week, offered exclusively to InvestingPro subscribers: a hand-picked selection of S&P 500 stocks that InvestingPro awarded a high financial health score of at least 2.75 out of 5.00.
This week, we've put together a list of 2.75+ scored stocks that some of Wall Street’s biggest investors are also taking massive bets on.
Historically, stocks that rated above 2.75 have had a high potential to outperform the S&P 500. For a deeper dive into how we make our Pro Picks, read more here.
Signet Jewelers (NYSE: SIG ) was snapped up by The Big Short’s Michael Burry last quarter for a $9.7 million investment, or 9.1% of his Scion Capital portfolio. And it’s no wonder: The jewelry retailer boasts 375% growth in cumulative diluted earnings per share over the past three years, as well as exceptional free cash flow yield, both of which contribute to its excellent 3.38 InvestingPro financial health score. And Signet has been diligently returning cash to shareholders, bumping up its share-buyback program yet again in March to an authorization of $775 million. It also hiked its dividend for the second year running, now paying out a 1.3% annual yield to investors.
Shares are up more than 7% for the year, and look to have plenty of runway left: both analysts and InvestingPro’s fair value algorithm puts share upside at roughly 34% above current levels.
Capital One Financial
Michael Burry also disclosed a $7.2 million stake in Capital One (NYSE: COF ), or 6.7% of his portfolio. InvestingPro gives the credit card company a burly health score of 3.29 out of 5, supported by its sky-high earnings yield and free cash flow yield. Capital One has also been buying back shares and pays a hearty 2.4% dividend. The company reported under-consensus earnings last month, but Credit Suisse reiterated its Outperform rating on the stock, citing strong card loan growth and purchase volume in the report. Shares are up about 7% for the year, and InvestingPro’s fair value calculations give the stock plenty more upside ahead.
Over at David Einhorn’s Greenlight Capital - which was up some 37% last year - the investor has doubled his stake in Tenet Healthcare (NYSE: THC ) to $84.8 million, or 4.6% of his portfolio. Tenet’s profitability health is top-notch thanks to the hospital operator’s cushy margins and returns, and it just recently crushed Q1 earnings and revenue estimates while also ratcheting up guidance for the full year. All of this supports Tenet’s solid 3.12 InvestingPro health score, and the company is also aggressively buying back shares. Brokerages overwhelmingly rate the stock a buy, looking for a more-than-20% share climb. And InvestingPro fair value gives the stock more than 30% upside, even after its 40% surge since the start of the year.
Meanwhile, activist investor Bill Ackman of Pershing Square (NYSE: SQ ) Management still maintains his longtime Hilton (NYSE: HLT ) stake, having picked up a few more shares for a $1.31 billion investment, or 12.8% of his portfolio. The hotel operator sports a lofty 3.09 InvestingPro financial health score, in large part thanks to its strong showing in profitability and earnings growth. Analyst targets give plenty of room for upside, and Barclays (LON: BARC ) just upgraded it to Overweight, calling it a “best-in-class lodging C-corp” with “outstanding” expansion of its hotel portfolio, or net unit growth. Shares are up nearly 10% year to date.
Chipotle Mexican Grill
Chipotle (NYSE: CMG ) is another long-running Bill Ackman investment, and as of Q1 amounted to $1.76 billion, or a whopping 17.2% of his portfolio. The fast-casual restaurateur commands an outstanding 3.37 InvestingPro financial health score, undergirded by fantastic profitability and growth vs. its peers. It also flew past Q1 earnings estimates last month, in response to which Credit Suisse said it continues “to have high conviction in this rare compounding growth story,” while TD Cowen said the stock remains a top 3 pick at the research firm. Shares are up some 50% for the year.
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