Interactive Investor

Most-popular US stocks and earnings outlook

14th October 2019 16:20

Myron Jobson from interactive investor

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With US results season underway and gathering speed, here are the stocks you've been buying.

But the pressure is rising on companies to exhibit strong revenues and profits. October can be a notoriously bumpy month in stock market terms, so any weakness in company numbers – perceived or actual – will be seized upon.

The most bought stock over the period spanning from 1 July to 30 September 2019 (Q3) on interactive investor, the UK's second largest investment platform, was tech giant Amazon (NASDAQ:AMZN), ahead of automotive and energy company Tesla and Microsoft in second and third positions respectively.

Semi-conductor firm Advanced Micro Devices (NASDAQ:AMD) took fourth position and Beyond Meat, the Los Angeles-based producer of plant-based meat substitutes which was founded only a decade ago, completes the top five - reflecting increased interest and demand for meat free products.

Richard Hunter, Head of Markets, interactive investor, said: "An important contributor to last year’s strong US performance was President Trump's implemented tax windfall. This in turn resulted in some relatively modest performances in the first half of this year – strong growth can be tough to sustain, especially if you factor in trade tensions and geo political uncertainty. 

"So where does this leave us now? In all, Q2 saw mixed fortunes for some of the leading US technology firms - an example of which was the starkly different reactions to updates provided by Netflix, whose results are expected this week, and Microsoft (results expected on 23 October). 

"By way of reminder, Microsoft (NASDAQ:MSFT) showed that it had revived its fortunes, with its move to build on its cloud server business paying off handsomely. This well-run tech company gives investors exposure to parts of the economy and industry catalysts that are difficult to find elsewhere. For many investors it remains a must-own stock.

"Netflix (NASDAQ:NFLX), on the other hand, provided disappointing subscriber growth numbers and, despite revenues and profits beating expectations, the shares were marked down sharply in Q2. As such, and with the growing threat of other streaming services from the likes of Walt Disney (NYSE:DIS) (results expected 7 November), which launches its own version Disney Plus in November, Amazon Prime (Amazon's results are expected 24 October) and also of course Apple TV+ (Apple's results are due on 30 October), subscriber growth will be a critical factor in establishing whether the third quarter was a successful one for Netflix."

Outlook for US stocks

Hunter adds: "More broadly, the market consensus is that the earnings recession is likely to continue, with the estimated earnings decline for the S&P 500 being 3.7%, which would mark a period of underperformance not seen since late 2015/early 2016. Earnings revisions and guidance have also recently been pared back, which means positive earnings surprises will be necessary from a large percentage of those companies reporting in order to maintain momentum.

"There have also been some concerns that the ongoing trade spat with China is finally starting to wash through in terms of lowered revenues. 

"Previous warnings had come from the likes of Apple (NASDAQ:AAPL), General Motors (NYSE:GM) and Ford (NYSE:F), all of whom bemoaned extremely difficult trading conditions in China, and more recently the FedEx Corporation issued a gloomy update in which its management almost entirely attributed its poor performance to global macro deterioration – long since a concern for investors as tariffs between the world's two largest economies threaten to derail economic progress globally.

"Normally a move from an economy being in late-cycle to end-cycle is represented by a move towards defensive stocks and away from cyclicals – and this has been a recent trend in terms of sector movements. Clearly the recent Federal reserve rate cut was also aimed at intercepting the possibility of recession, although it remains to be seen whether the move was adequate."

View the US earnings calendar here.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article. 

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