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4 Stocks to Buy Before the Next Big Bull Rally

Cooling inflationary pressures and the Fed’s indication of a slower pace of rate hikes ahead could generate a potential bull rally this month. So, we believe investors should load up on fundamentally strong stocks General Motors Company (GM), BorgWarner Inc. (BWA), Teva Pharmaceutical Industries Limited (TEVA), and Rambus Inc. (RMBS). Read more...

The Commerce Department reported that the core Personal Consumption Expenditures index rose 0.2% month-over-month in October, indicating that price increases might stabilize. Also, according to the latest job report, nonfarm payrolls increased by 263,000 for November, and average hourly earnings jumped 0.6% for the month, double the Dow Jones estimate.

Amid this, investors await another round of economic data as the Federal Reserve’s final rate-setting meeting this year approaches. The central bank has been aggressively raising interest rates since March to tame inflation.

However, Federal Reserve Chairman Jerome Powell indicated that smaller interest rate increases are likely ahead, boosting the anxious investors’ sentiments.

A less hawkish Federal Reserve and favorable inflation data could unleash a mega year-end rally. Moreover, December has proved to be a strong month for the stock market for several decades.

Given this backdrop, we think investors should scoop up shares of fundamentally strong stocks General Motors Company (GM), BorgWarner Inc. (BWA), Teva Pharmaceutical Industries Limited (TEVA), and Rambus Inc. (RMBS) before a potential bull market rally.

General Motors Company (GM)

General Motors Company designs, builds and sells trucks, crossovers, cars, and automobile parts and accessories worldwide. The company operates through GM North America; GM International; Cruise; and GM Financial segments.

On November 17, 2022, GM and Vale Canada Limited, a subsidiary of Vale S.A. (VALE), signed an agreement for the long-term supply of battery-grade nickel sulfate to enhance North American EV supply chains. This deal is expected to help GM reach its target of building 1 million EVs annually in North America in 2025.

Also, on November 16, 2022, GM and Nel Hydrogen US, a subsidiary of Nel ASA, entered into a joint development agreement. This agreement aims to merge GM’s fuel cell expertise and NEL’s deep knowledge of electrolyzers, forming cost-efficient renewable hydrogen sources.

On October 24, GM declared a fourth-quarter 2022 cash dividend on the company’s outstanding common stock of $0.09 per share, payable on December 15, 2022. The company pays an annual dividend of $0.36 which translates to a yield of 0.93% on the current market price.

In the third quarter ended September 30, 2022, GM’s total net sales increased 56.4% year-over-year to $41.88 billion. Its adjusted EBIT increased 46.7% year-over-year to $4.28 billion. The company’s net income attributable increased 38% year-over-year to $3.27 billion, while adjusted EPS came in at $2.25, representing an increase of 48% year-over-year.

The consensus EPS estimate of $1.67 for the fiscal fourth quarter ending December 2022 represents a 23.7% improvement year-over-year. Similarly, its consensus revenue estimate of $40.84 billion for the same quarter exhibits a 21.6% rise from its prior-year quarter. Additionally, GM has surpassed its consensus EPS estimates in three of the trailing four quarters, which is impressive.

GM declined marginally intraday to close its last trading session at $37.96.

GM’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

GM is also rated an A in Growth and a B in Value and Sentiment. It is ranked #18 among the 62 stocks in the Auto & Vehicle Manufacturers industry.

To see additional POWR Ratings for Momentum, Stability, and Quality for GM, click here.

BorgWarner Inc. (BWA)

BWA provides solutions for combustion, hybrid, and electric vehicles worldwide. The company operates through four segments: Air Management; E-Propulsion & Drivetrain; Fuel Injection; and Aftermarket.

On December 2, BWA announced that it had acquired Drivetek AG, a company that offers engineering and product development services for inverters, electric drive solutions, and power electronics, as well as a line of products that include specialized inverters for high-speed electrified turbomachinery.

Frédéric Lissalde, President and CEO of BorgWarner, said, “Bringing Drivetek’s talented team in house is an investment that grows our power electronics capabilities in auxiliary inverters, which we expect to accelerate the growth of our High Voltage eFan business.”

On November 16, BWA and Wolfspeed, Inc. (WOLF), the global leader in Silicon Carbide technology, announced a strategic partnership under which BWA is to invest $500 million in Wolfspeed’s financing transaction for a silicon carbide device capacity corridor.

Under the multi-year agreement, BWA will be entitled to purchase up to $650 million of devices annually. This agreement should help ensure that BWA will have a reliable supply of high-quality silicon carbide devices, which are significant to the company’s inverter growth plans.

On November 9, BWA declared a quarterly cash dividend of $0.17 per share of common stock, payable on December 15, 2022. Its annual dividend of $0.68 yields 1.65% on prevailing prices.

BWA’s net sales came in at $4.06 billion for the fiscal third quarter ending September 30, representing an 18.9% year-over-year growth. Its gross profit rose 24% from the same quarter last year to $806 million, while adjusted operating income grew 30.4% from the prior-year quarter to $ 438 million. The company’s adjusted EPS increased 55% from the prior-year period to $1.24.

The consensus EPS and revenue estimates of $4.39 and $15.57 billion for the current fiscal year ending December 2022 indicate a 5.9% and 5% year-over-year rise, respectively. The company has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in each of the trailing four quarters.

The stock has gained 7.6% over the past month to close the last trading session at $41.18.

It is no surprise that BWA has an overall rating of A, which equates to a Strong Buy in our POWR Ratings system.

It also has an A grade for Growth and a B grade for Value, Sentiment, and Quality. In the B-rated Auto Parts industry, it is ranked #5 of 63 stocks.

Beyond what we’ve stated above, we have also given BWA grades for Momentum and Stability. Get all BWA ratings here.

Teva Pharmaceutical Industries Limited (TEVA)

TEVA is a pharmaceutical company based in Israel. The company operates through three segments: North America; Europe; and International Markets.

On November 14, TEVA announced a new collaboration with Rimidi, a leading clinical management platform, and HealthSnap, a leading full-service Virtual Care Management Platform for chronic disease management.

This intends to give more consumers access to TEVA’s Digihaler® system, a digital health platform designed to enable patients to have more informed treatment discussions with their healthcare providers through personalized care.

For the third quarter of fiscal 2022 ended September 30, TEVA’s revenue came in at $3.60 million, while its operating income came in at $419 million. The company’s non-GAAP net income attributable to TEVA increased 1.1% year-over-year to $658 million.

Analysts expect TEVA’s EPS for the first quarter ending March 2023 to be $0.57, indicating a 3.5% year-over-year growth. Additionally, TEVA has topped consensus EPS estimates in three of the trailing four quarters, which is impressive.

The stock has gained 5.5% over the past year, closing the last trading session at $8.45.

TEVA’s solid prospects are reflected in its overall rating of B, which equates to a Buy in our POWR Ratings system.

It has a grade A for Growth and Value. TEVA is ranked #31 of 161 stocks in the Medical – Pharmaceuticals industry.

Click here to see the additional ratings for TEVA’s Momentum, Stability, Sentiment, and Quality.

Rambus Inc. (RMBS)

RMBS offers semiconductor products internationally. The company provides DDR memory interface chips to module manufacturers and OEMs, silicon IP that protects data in advanced applications, and physical interface and digital controller IP to offer industry-leading, integrated memory and interconnect subsystems.

On October 31, RMBS announced the extension of its comprehensive patent license agreement with the world leader Samsung Electronics for an additional ten years.

Luc Seraphin, President and CEO of RMBS, said, “This extension enables deeper collaboration to deliver even greater value to the industry, and we are excited to continue working with such an innovative industry leader.”

For the fiscal third quarter that ended September 2022, RMBS’ total revenue increased 38% year-over-year to $112.20 million. Its operating income came in at $16.90 million, up 259.6% from the prior-year quarter, while its net cash provided by operating activities increased 73.9% year-over-year to $80 million in the same period.

RMBS’ EPS and revenue estimates of $0.17 and $151.94 million for the fiscal fourth quarter ending December 2022 indicate a 247.7% and 21.1% year-over-year rise, respectively.

RMBS has gained 50.9% over the past three months to close its last trading session at $37.23.

The company’s promising prospects are reflected in its POWR Ratings. The stock has an overall B rating, equating to a Buy in our proprietary rating system.

RMBS has a Growth grade of A and a Sentiment and Quality grade of B. It is ranked #18 of the 93 stocks in the Semiconductor & Wireless Chip industry.

In addition to the POWR Rating grades we’ve stated above, one can see RMBS ratings for Value, Momentum, and Stability here.

GM shares rose $0.25 (+0.66%) in premarket trading Thursday. Year-to-date, GM has declined -34.53%, versus a -15.74% rise in the benchmark S&P 500 index during the same period.

About the Author: Kritika Sarmah

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.


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