- September was rough for stocks, as US equities endured their worst selling in 18 months.
- Many investors are growing worried that a larger sell-off or “correction” isn’t far off.
- RBC says its top 30 stock picks could provide substantial upside in the 4th quarter and beyond.
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Investors have been getting nervous, and they have the power to make some of their own fears come true.
After a few unsteady weeks, stocks just went through their worst sell-off since the market hit its low point during the first stages of the pandemic 18 months ago.
The benchmark S&P 500 index fell 4.8% in September, and is down a bit more than 5% from the all-time high it set early in the month. By historic standards, that’s not a huge decline, but more and more experts say it might not be over.
So now the question is if that decline will calm investors’ nerves, or just encourage them to wonder if more bad news and more selling is around the corner.
It might help that RBC’s leading researchers are updating their top stock ideas to mark the beginning of the fourth quarter of the year. The latest changes mean its Top 30 list has a major overweight position on energy, and a smaller overweight on bank stocks.
“Our US Equity Strategy team has overweight positioning views on the Financials, Energy and Technology sectors, balancing value/cyclical and growth exposure,” wrote Global Head of Research Graeme Pearson, Head of US Research Mark Odendahl, Head of Canadian & APAC Research André‐Philippe Hardy and Head of European Research Michael Hall.
The group added Amazon to replace Home Depot, swapped AIG in for Arch Capital, put UnitedHealth in place of Humana, and put in Alexandria Real Estate Equities while removing Americold Realty Trust. Financial information service firm S&P Global was also added while energy pipeline company Enterprise Products was taken out.
While RBC is calling these its best ideas for the fourth quarter, its analysts say the stocks all offer upside of at least 13% over the next year, while the top two picks are projected to more than double in price.
The stocks are organized from lowest to highest based on RBC’s total expected return for the stocks over the next 12 months. That return is comprised of stock price appreciation and dividends where applicable. The upside figures were calculated as of the close of trading on September 30.
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