Winners And Losers Reveal The Markets Flavor This Year: Nvidia Is Up, Pfizer Is Down

You can tell a lot about the stock market this year by looking at the winners and losers among the biggest stocks in the country. Of the 167 stocks with a market value of $100 billion or more this year:

Nvidia (NVDA), up 83%.

Meta (Meta) platforms rose 71%.

Tesla (TSLA) rose 55%.

The worst results:

Pfizer DFP , down 21%

Bank of America male , down 19%.

Conoco Phillips the police , down 16%.

the unknown

As is often the case, I am kinder to underdogs. Let's start with Bank of America. Driven by the bankruptcies of Signature Bank and Silicon Value Bank, bank stocks fell sharply. Bank of America stock trades at less than nine times earnings. The average multiplier for the past decade was 14.

It sounds like an opportunity to buy a good company in bad news, and I like to do that. But banks are hurting because short-term interest rates have risen above long-term rates. Banks provide "short-term loans" (through deposits) and "long-term loans" (mortgage and business loans). So I think it makes sense for investors to take space now and gradually expand over the next six to twelve months.

I love the energy sector and am very bullish on ConocoPhillips, the third largest US energy company by market capitalization. After this year's decline, ConocoPhillips shares trade at less than seven times earnings. Their normal multiplier is around 10.

For Pfizer, I think it's very attractive around $40, compared to around $60 during the Covid pandemic. Pfizer was one of three American pharmaceutical companies to develop a vaccine to prevent Covid-19. This makes Paxlovid the main treatment for this disease.

The pandemic appears to be slowing down, so Pfizer will lose an important source of revenue. But for me the stock is cheap enough to make up for it. Despite the stock's impressive 36% return, the stock trades at just seven times earnings. The average multiplier for the past decade was 17.

High quality and high price

Stocks that have risen this year are very expensive growth stocks. Most of these stocks are tech stocks recovering from the brutal 2022 crash that tech stocks suffered.

Investors love these stocks because they expect the company's earnings to be much higher in five to six years than they are now. But the present value of dollar earnings falls five to six years from now as interest rates rise, and the Federal Reserve raises rates again in 2022.

When investors expect the Federal Reserve to stop raising interest rates, these stocks rise. This happened in January and March.

In January, investors thought the Fed would ease as inflation appeared to be falling. He fell, but only a little.

This month, investors assumed that failure would force the Fed to lift the brakes on the economy. It is not yet clear whether this will happen. Optimists cheered that the Fed raised interest rates by a quarter point in March, instead of half a point as previously feared.

Nvidia has been a major semiconductor manufacturer for over a decade. It always seems to have the right chips for the latest and most advanced applications. Shares tripled in 2016 and doubled or improved in 2020 and 2021. Last year it fell by 50%.

I think Nvidia stock is valued at 153 times earnings and 60 times analyst estimates for the year ending January 2024.

Owned by Facebook, Instagram and WhatsApp, Meta Platforms has set an impressive 10-year growth record. It increases its turnover by 36% every year and its profit by about 69% per year. But over the past year, revenue growth has slowed to less than 5% and revenues have fallen.

Meta stocks earning 24 times earnings are more expensive than common stocks (earning 18 times earnings). But the company laid off 11,000 workers in November and announced this month that it would cut another 10,000 jobs.

The total cuts represent a quarter of its workforce. Some people like this cost reduction. I don't think layoffs are a sign of weakness rather than strength.

As for Tesla, I am a fan of their cars and have long been skeptical of their stock – a big mistake in the past. A 52x earnings valuation is too rich for my blood.

Disclosure: I personally own Pfizer and its clients. Some of my clients own ConocoPhillips, Nvidia or Tesla.

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