9 top stocks to add to your portfolio now, according to market-beating strategists
- The S&P 500 has stagnated since breaking through to record highs in mid-May.
- Strategists have noted that market breadth has weakened significantly lately.
- Here are nine stocks for investors to add now, according to BMO Capital Markets.
The record market rally has stalled in recent weeks, just as skeptics of stocks became believers.
After months of warning that the S&P 500 was on shaky footing, strategy chief Brian Belski of BMO Capital Markets abandoned his glass-half-empty view on May 15. His year-end price target for the index is 5,600, tied with UBS for the highest mark among major Wall Street firms.
US stocks have been stuck in quicksand ever since, as the S&P 500 hasn't moved by 1% in a session after it broke through to 5,300 in mid-May. Such a breather is normal and arguably healthy, considering that the index just logged a typical year's worth of gains in five months.
But investors aren't wrong to feel antsy, even with tailwinds like higher earnings and falling inflation. Ed Clissold, the chief US strategist at Ned Davis Research, cited those catalysts as reasons to be bullish, but he's still concerned about market breadth and near-term momentum. Strategist David Lundgren shared similar sentiment a few weeks earlier, just as stocks peaked.
9 stocks to put in your portfolio now
Although the market's path forward is murky with the pivotal US election season coming up, investors shouldn't fret.
A team of BMO strategists headlined by Belski unveiled their latest US strategy portfolios in a June 3 note. The Montreal-based firm has three such baskets — the US dividend growth, US SMID-cap, and US tactical equity portfolios — all of which had beaten their benchmarks in the last 12 months, as of May. However, only the latter two groups got new additions this month.
The US SMID-cap basket, which includes small and medium-sized companies, rose 2.7% in May, which was nearly 2 percentage points behind the S&P 1000 due to lackluster performance among stocks in the consumer discretionary, industrials, and information technology sectors. Still, the portfolio is beating its benchmark by 2.1% in 2024 and 4.3% in the last year.
For reference, the US tactical equity portfolio surged 4.9% last month, roughly in line with the S&P 500, and has outperformed by 0.9% this year and 2.8% in the last 12 months. Strong showings from mega-cap growth stocks like Alphabet, Microsoft, Netflix, and Nvidia lifted the basket, Belski noted, though its technology holdings still lagged behind the sector's gain.
BMO refreshed its model portfolios to give stock-pickers an upper hand in the coming months.
Below are the nine new names in BMO's US SMID-cap and US tactical equity model portfolios listed alphabetically, along with their tickers, market caps, groups, and BMO's descriptions of their businesses and the reasoning behind adding each stock to the basket.
Ticker: CRTO
Market cap: $2.2B
Group: US SMID-cap
Business description: "Criteo is a global commerce media company that enables marketers and media owners to drive better commerce outcomes. The company enables the growth of brands, retailers, and media owners by providing best-in-class marketing and monetization services and infrastructure on the open Internet."
Reasoning: "We are adding Criteo to our US SMID-cap portfolio as the company is well-positioned against a large $42 billion retail media opportunity. Management has executed well and should see meaningful growth opportunities from retail media and performance media moving forward."
Source: BMO Capital Markets
Ticker: NWS
Market cap: $15.8B
Group: US SMID-cap
Business description: "News Corp. is [a] diversified media and information services company, which engages in the business of creating and distributing authoritative and engaging content and other products and services to consumers and businesses. It operates through the following segments: digital real estate services, subscription video services, Dow Jones, book publishing, news media, and other."
Reasoning: "We are adding News Corp. to our US SMID-cap portfolio based on its solid position as a major publishing company, growing digital business/diversification of revenues, OpenAI partnership, and improving balance sheet. We also believe the company will benefit from increased advertising ahead of the 2024 Paris Olympic games."
Source: BMO Capital Markets
Ticker: RDDT
Market cap: $8.9B
Group: US SMID-Cap
Business description: "Reddit, Inc. operates an entertainment, social networking, and news website where registered community members can submit content. It provides online news services where users can select and rank web content. The firm also offers a personalized filter on the day's story, using previous votes to determine what new things the user might like to read."
Reasoning: "We are adding Reddit to our US SMID-cap portfolio based on high revenue growth, positive advertising trends, and potential new revenue from Microsoft-backed OpenAI partnership, which we expect will benefit the company long-term."
Source: BMO Capital Markets
Ticker: RBRK
Market cap: $5.6B
Group: US SMID-Cap
Business description: "Rubrik offers a cloud-native SaaS platform that helps organizations backup, recover, and secure data across public clouds, private clouds, and on-premises. The platform consists of its core backup and recovery solution and supplemental data security products that can be layered on top. The company's customer base primarily consists of large to mid-sized enterprises."
Reasoning: "We are adding Rubrik to our US SMID-cap portfolio based on its position as a leading data-security vendor that can uniquely fill the gap between backup and security markets. We think Rubrik can sustain low- to mid-20% y/y ARR growth over the next few years as both data volumes and security threats grow and take advantage of the fast-growing total addressable infrastructure security market."
Source: BMO Capital Markets
Ticker: TTWO
Market cap: $28.4B
Group: US SMID-Cap
Business description: "Take-Two is a leading developer and publisher of interactive entertainment software. The company owns or controls several important brands, including Grand Theft Auto, Red Dead Redemption, BioShock, and Max Payne."
Reasoning: "We are adding Take Two Technologies to our US SMID-cap portfolio based on as the company is heading towards an inflection point marked by significant booking increases and profitability as Grand Theft Auto VI could sell 30 million units in its launch window in 2025. The company has a robust library of the best-reviewed franchises in the industry, including owned IP (GTA, Red Dead) and licensed IP (NBA 2K). M&A speculation should support the stock."
Source: BMO Capital Markets
Ticker: TTD
Market cap: $46.2B
Group: US SMID-Cap
Business description: "Trade Desk offers a self-service, cloud-based ad-buying platform that allows advertisers and ad agencies to plan, manage, optimize, and measure data-driven digital advertising campaigns."
Reasoning: "We are adding Trade Desk to our US SMID-cap portfolio based on the significant Greenfield opportunity for the company as global advertising budgets mix-shift to ads bought and sold digitally. Trade Desk is well-positioned to capture traditional TV ad budgets as they shift towards connected TVs (CTV), and we see a large synergistic opportunity in retail media."
Source: BMO Capital Markets
Ticker: DASH
Market cap: $45.3B
Group: US Tactical Equity
Business description: N/A
Reasoning: "We are removing DoorDash from US SMID-cap to add to US tactical equity, reflecting its larger market capitalization and our conviction in the name."
Source: BMO Capital Markets
Ticker: PLTR
Market cap: $48.9B
Group: US Tactical Equity
Business description: "Palantir Technologies, Inc. engages in the business of building and deploying software platforms that serve as the central operating systems for its customers. It operates under the commercial and government segments. The commercial segment focuses on customers working in non-government industries. The government segment is involved in providing services to customers that are the United States government and non-United States government agencies."
Reasoning: "We are adding Palantir to our US tactical equity portfolio based on its reputation and scalability of the AI platform (AIP), capability to serve government and business clients, its growing total addressable market (TAM), and solid balance sheet."
Source: BMO Capital Markets
Ticker: SPOT
Market cap: $63.9B
Group: US Tactical Equity
Business description: N/A
Reasoning: "We are removing Spotify from US SMID-cap to add to US tactical equity, reflecting its larger market capitalization and our conviction in the name."
Source: BMO Capital Markets