Wealth manager Brian Vendig is bullish on stocks this year, and says there are opportunities for investors outside of 2023’s headline-makers. “We believe stocks have a chance to appreciate because earnings outlooks for this year are expansionary and we are past the slowdown in earnings that we observed for the majority of last year,” Vendig, president of MJP Wealth Advisors, wrote in notes to CNBC. “There are many areas of the market that did not significantly participate in the returns last year — such as healthcare, industrials, materials, financials and consumer staples — and that creates opportunities for investors.” After a bumper 2023, equity markets have had a strong year to date, with the S & P 500 benchmark crossing 5,000 and Europe’s Stoxx 600 index hitting an all-time high last month. Looking for pockets of opportunities across sectors, Vendig said he is staying “evenly weighted between value and growth stocks, [while not forgetting] about mid-cap and small-cap stocks.” Three stocks on his radar right now are Super Micro Computer , Palo Alto Networks and PepsiCo . Super Micro Computer Vendig said Super Micro Computer was his choice to ride “the wave of the AI frenzy.” The Nasdaq -listed company makes AI systems and graphics processing unit servers, and has benefited from the hype around AI-poster child Nvidia in recent weeks. “This stock has traded in lockstep with Nvidia because Nvidia chips are typically housed in Super Micro servers,” Vendig explained. Super Micro Computer’s shares jumped 246% in 2023 — just outperforming Nvidia’s 238% jump. The company has continued its winning streak this year, with shares up around 255% year to date, compared to Nvidia’s 70% rise. Super Micro Computer shares closed up more than 18% on Monday after the company was selected to join the S & P 500 . However, Vendig said that, based on its recent run, “we think it’s prudent to take some profits here.” “Super Micro is also very susceptible to any changes in demand for their servers. There’s going to be more and more competition coming into this space. There may be a more attractive entry point with Super Micro later this year,” Vendig said. He said that although it is not necessarily a stock he wants to buy right now, “I think it’s something that is part of a greater trend that’s happening in the market place, because investors are thinking this is a once-in-a-lifetime opportunity to invest in AI.” Of the 16 analysts covering the stock, 11 give it a buy or overweight rating, 4 have a hold rating and 1 has a sell rating, according to FactSet data. Analysts’ average price target for the stock is $795.04, giving it around 21% potential downside. Palo Alto Networks The wealth manager also likes cybersecurity company Palo Alto Networks. The company recently announced a change in its suite of software services and how it will engage its customers. While this could impact short-term revenue billings, Vendig believes it could prove beneficial in the long term. “The strategic change in optimization of software services for customers could weigh on the stock over the next 12 to 18 months. However, the benefit would be that the company creates a stickier relationship with its customers that it can leverage for further growth,” he added. Over the last 12 months, shares of the Palo Alto Networks are up around 50% According to Factset data, of 49 analysts, 33 give the stock a buy or overweight rating, 15 have a hold rating and 1 has an underweight rating. Their average price target is $334.61, giving it around 16% potential upside. PepsiCo Vendig picked food and beverage giant PepsiCo as a value stock “outside of the megacap technology companies that have durable fundamentals and pricing power.” The company has come under some pressure recently amid fears of weaker demand for its snacks as weight-loss drugs and healthier living come into the spotlight. Its shares also edged down after quarterly revenue slid for the first time in nearly four years. Vendig remains bullish, however, noting that Pepsi “has made investments to expand their beverage and snack offerings into health and wellness-focused products that command less exposure to impacts from [weight-loss drug] Ozempic that should help to support future growth.” He also noted the company’s “strong fundamentals, reasonable valuations from a forward P/E and a 3% dividend.” Over the last 12 months, shares of the company are down around 5%. Of the 22 analysts covering the stock, 11 give it a buy or overweight rating, 10 have hold ratings and 1 has a sell rating. The average price target for PepsiCo is $186.77, according to FactSet data, giving it potential upside of around 14%.
This story originally appeared on CNBC
