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CNBC
a day ago
- Business
- CNBC
Best Stocks: Three healthcare names to ponder including a biotech back to levels not seen in a decade
(This is The Best Stocks in the Market , brought to you by Josh Brown and Sean Russo of Ritholtz Wealth Management.) Josh here — The healthcare sector has entered the chat. There are 12 healthcare names now on our Best Stocks list as of the end of last week. I'll show you a few of these set-ups below and then Sean's going to share some fundamentals for these healthcare firms. Sector Leaderboard As of 6/9/2025 morning, there are 114 names on The Best Stocks in the Market list Top Sector Ranking: Top Industries: Top 5 Best Stocks by Relative Strength: Sector Spotlight: Healthcare Josh — Alnylam Pharma (ALNY) just broke out above prior resistance at $300. There was company-specific news about new indications for one of their most important drugs that led to multiple price target raises on The Street. Alnylam is named for Alnilam, the brightest star in the Belt of Orion constellation, which ancient mariners used for navigation. The founders of the company believed their trailblazing work in the field of RNA interference (RNAi) would chart a brand new course of drug discovery and development by which the next generation of scientists would be guided. So far, so good as ALNY grew revenue to $2.25 billion in revenue last year and the company's market cap swelled to a respectable $40 billion. Wall Street's median price target is ten percent higher than today's price while the most bullish analyst, H.C. Wainwright, just published a target of $500 this past week. In Q1 2025, revenue surged by over 28% year-over-year to approximately $594 million, driven largely by the strength of the TTR franchise. Looking ahead, analysts project revenue growth of 24–33% through 2025–2026, supported by improving EPS and an expected annual revenue of $2.9 billion. The company also maintains a strong balance sheet, with around $223 million in free cash flow, a quick ratio of approximately 2.7×, and increasing support from major institutional investors who are adding to their positions. (data via Reuters) Sean — AMVUTTRA (vutrisiran) was recently FDA‑approved for cardiomyopathy, expanding its market from neuropathy, which is a major catalyst for the stock — it significantly expands its addressable market beyond its original use for polyneuropathy. This approval allows Alnylam to target patients with transthyretin amyloid cardiomyopathy (ATTR-CM), a much larger population than those with ATTR polyneuropathy. The drug's unique RNA interference mechanism and dosing schedule (quarterly or biannual injections) give it a competitive edge over existing therapies like Pfizer's Vyndaqel. This dual-indication approval not only boosts Alnylam's revenue potential but also strengthens its path toward profitability, making AMVUTTRA a key growth driver for the company and a pivotal reason for recent momentum. Josh — Allow for short-term consolidation in the $300 area, await the next catalyst. 50-day crossing over 200-day important signal that a new uptrend could be forming. Cardinal Health Josh — All three major Pharmaceutical Wholesalers made the list - McKesson (MCK) , Cencora (COR) and Cardinal Health (CAH) , only Cardinal looks good technically right now: CAH held its 50-day on a weekly closing basis during the April bloodbath, I'd use that area as a stop and update it each week. If the uptrend breaks, there's no reason to be long. Sean — CAH is a $37 billion wholesaler, sourcing and distributing branded, generic, and specialty pharmaceutical products to pharmacies, hospitals, and healthcare providers. All three names on our list, Cardinal, Cencora, and McKesson, hold well over 90% of the US pharmaceutical wholesale industry. CAH trades at an 18x forward PE and a 15x P/FCF - this thing is generating cash for investors. It has a 1.3% dividend yield and is growing earnings 8% this year, and is expected to grow its earnings 12% next year. Gilead Sciences Josh — Gilead (GILD) , as you can see in the chart above, is not done going up. This name has been on the list for most of the year so far. At the market lows this spring, it never violated its upward-sloping 200-day moving average — didn't even pay it a visit. And just for fun, below is the "forever" chart back to the company's IPO. I am a believer that price has memory, but I'm not sure there are still a lot of shareholders hanging around here from the last time it traded near the $120 level a decade ago. That said, I wouldn't be surprised to see a battle at that old high as new shareholders buy from sellers who are just thrilled to be getting out break-even. That's what makes a market. Sean — Gilead Sciences (GILD) has been on a run. Its experimental HIV prevention shot, lenacapavir, showed near-complete effectiveness in trials and is expected to generate $2–4 billion in peak annual sales—potentially transforming the HIV prevention market. The company has also posted solid financial results, with 2024 revenue and earnings rising due to strong performance in its HIV, liver disease, and oncology franchises. Analysts have raised price targets across the board, reflecting increased confidence in the company's pipeline and execution. GILD has a meaningful run rate of free cash flow (~$9.6B) and a growing pipeline of drugs for the future. DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. INVESTING INVOLVES RISK. EXAMPLES OF ANALYSIS CONTAINED IN THIS ARTICLE ARE ONLY EXAMPLES. THE VIEWS AND OPINIONS EXPRESSED ARE THOSE OF THE CONTRIBUTORS AND DO NOT NECESSARILY REFLECT THE OFFICIAL POLICY OR POSITION OF RITHOLTZ WEALTH MANAGEMENT, LLC. JOSH BROWN IS THE CEO OF RITHOLTZ WEALTH MANAGEMENT AND MAY MAINTAIN A SECURITY POSITION IN THE SECURITIES DISCUSSED. ASSUMPTIONS MADE WITHIN THE ANALYSIS ARE NOT REFLECTIVE OF THE POSITION OF RITHOLTZ WEALTH MANAGEMENT, LLC" TO THE END OF OR OUR DISCLOSURE. Click here for the full disclaimer.
CNBC
5 days ago
- Business
- CNBC
Best Stocks: An 'AI wolf in sheep's clothing' with a great entry point for investors
(This is The Best Stocks in the Market , brought to you by Josh Brown and Sean Russo of Ritholtz Wealth Management.) Josh here — There will always be an agriculture cycle and companies in the agriculture space will always be, to some extent, beholden to it. In fact, companies in most sectors of the economy must contend with one cycle or another — commodities, interest rates, housing, capex, etc. But in the digital age, companies have found ways to annuitize their businesses and transcend this cyclicality. Converting traditional transaction-based business models into subscription or annually recurring revenue (ARR) business models has been one of the keys to the stock market's relentless rise over the last ten years. When companies begin to generate earnings growth reliably, the multiple investors are willing to pay on those earnings re-rates higher. This is why the market's multiple has trended higher over the last 20 years. On average, we are paying more for stocks on a price-to-earnings basis because the companies these stocks represent have gotten better at building predictable, reliable cash flow streams. In our Best Stocks in the Market column, we have written about Spotify and Netflix recently, both of which are great examples of what I'm referring to. One used to buy CDs or DVDs, paying for each product at the time of use, with the purveyors of movies and music awaiting our next purchase. Now we pay subscriptions and have access to as many songs or movies or TV shows as we want. Consumers love it and Wall Street does too. Annually recurring revenue models are all the rage (and the market capitalization) these days, even in unexpected places — like tractors and farming equipment. Today, Sean is going to tell you about Deere (DE) , a 188-year-old American stalwart that has set a goal for itself of converting 10% of its revenue to an ARR model by the year 2030. In 2024, the ag equipment giant did $51.7 billion in sales. Assuming it can get to its own stated target, the company would have approximately $5 billion or more of consistent top line revenue which The Street would gladly pay a premium for, just as it does with other companies in other industries. This is yet another example of how corporations are adapting to the new age of technology and capitalism. Best Stocks spotlight: Deere (DE) On the list since: 5/9/2025 Sean — Deere is the world's leading manufacturer of agricultural and construction equipment. The brand is synonymous with reliability, quality, and a deeply rooted connection to American industrialism. Its iconic green and yellow color scheme is recognized by many people, without having used or experienced their products at all. The company officially started using the iconic green and yellow color combination around 1910. The green and yellow colors serve a larger purpose than branding — the green helps machinery blend into agricultural fields, reducing the visual impact on the landscape and the yellow provides contrast for when operators are looking for their machinery. Every detail is thought about through the lens of the operator. DE is incredibly focused on innovation and quality. In 1837, John Deere (a blacksmith in Illinois) developed the first commercially successful steel plow. Deere's innovation dramatically increased farming efficiency and helped fuel agricultural expansion in the United States. In 2025, they're still pushing the boundaries of agriculture. Today, 50% of operating earnings come from Production and Precision Agriculture — their largest and most profitable segment, focused on transforming farming into a tech-focused, data-driven operation. AI of agriculture DE has a fleet of IoT devices and they are all connected to the John Deere Operations Center — a cloud-based farm management platform that optimizes operations through data-driven insights. DE is tracking data, gathering insights, and deploying machinery in a smarter and efficient way in real time, saving farmers time and money — it's the AI of agriculture. Via Quartr, tariffs are expected to have a pretax impact of over $500 million in fiscal 2025, with roughly $400 million of that falling in the second half, adding some headwinds to margins. However, the company is taking actions to mitigate these impacts through supply chain adjustments and targeted pricing adjustments for 2026 and beyond. As of their last earnings call, the U.S. represented 79% of its complete goods and 76% of its components. Tariffs will impact DE, but not in a meaningfully detrimental way. John Deere is an industrial company, but they've built a cloud-based, AI-capable software as a service platform within it. DEs Production and Precision segment is forecasting 15.5%-17% operating margins for 2025. The company is expecting 18% EPS growth in the next year. DE trades at a 25x trailing PE and a 23x forward PE. The company has a competent and experienced management team, an exciting growth story, a defensible moat, and a reasonable valuation. On a technical basis — DE is reflecting strength. Over the last 3 years, DE has touched its 200-week moving average once on a weekly closing basis: Looking at the 1-year chart earlier in the article, the rising 200-day moving average is serving as strong support. DE is an AI-wolf in sheep's clothing. At first glance, the tariff narrative may seem like a headwind for DE. But look a little deeper, and it's clear the company continues to innovate with the same spirit it had in the late 1800s. Risk management Josh — This one is simple to me. As you can see in the one-year chart above, DE buyers have respected the 200-day moving average since November. There was a false breakdown below it this April during the tariff announcement that was cleaned up relatively quickly. I would trail a position here with a rolling stop just below the 200-day. The stock has cooled off from its high in early May but the uptrend is intact and an RSI reading in the 50s is a better entry point than when the stock was making fresh highs and RSI was pushing 75. This is my kind of set-up. DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. INVESTING INVOLVES RISK. EXAMPLES OF ANALYSIS CONTAINED IN THIS ARTICLE ARE ONLY EXAMPLES. THE VIEWS AND OPINIONS EXPRESSED ARE THOSE OF THE CONTRIBUTORS AND DO NOT NECESSARILY REFLECT THE OFFICIAL POLICY OR POSITION OF RITHOLTZ WEALTH MANAGEMENT, LLC. JOSH BROWN IS THE CEO OF RITHOLTZ WEALTH MANAGEMENT AND MAY MAINTAIN A SECURITY POSITION IN THE SECURITIES DISCUSSED. ASSUMPTIONS MADE WITHIN THE ANALYSIS ARE NOT REFLECTIVE OF THE POSITION OF RITHOLTZ WEALTH MANAGEMENT, LLC" TO THE END OF OR OUR DISCLOSURE. Click here for the full disclaimer.
CNBC
02-06-2025
- Business
- CNBC
Best Stocks: This momentum play seeing huge investor accumulation is on the verge of another breakout
(This is The Best Stocks in the Market , brought to you by Josh Brown and Sean Russo of Ritholtz Wealth Management.) Josh here - The S & P 500 index has fought all the way to breakeven for 2025, but there's one investment style that's blowing the doors off the rest of the stock market. If you guessed "momentum" you got it right. What's probably very frustrating for all the value investors, the minimum volatility investors, the high dividend investors and other professionals is that momentum was also the best performing factor in 2024, up more than 32% last year. Momentum was the top performing factor in 2015, 2017 and 2020. It was the second best in 2018 and has compounded at 12.7% returns for the last ten years. What does this mean for the portfolio manager who eschews the momentum factor for some other style? One more year of apologies to the end investor who wonders why everyone else is having more fun than he is. Markets are aggravating like that sometimes. On paper, a year with this much volatility and uncertainty might make the casual observer surmise that defense would be the move and momentum would be too risky. If only it were that simple. It turns out that some of the most exciting momentum stocks of 2025 are also among the names that would also be considered traditionally defensive. Take JPMorgan Chase and Walmart , for example — they're not often associated with the momentum trade, and yet they are the number two and three largest holdings in the most popular momentum stock index ETF at the moment. Go figure. For this week's update, Sean took a look at some of the names that appear on both our Best Stocks in the Market list as well as the Momentum factor index to see where we're overlapping. Right now we're overlapping a lot. There are over 40 names on the Best Stocks list that are also momentum winners this year. Take, for example, this absolute juggernaut of a company — Visa (VISA) — currently a constituent of both: Look at that springboard off the 200-day during the trade war panic of early April, you couldn't have asked for a better sign of accumulation. Visa is a Best Stock right now that looks to be on the verge of another breakout above its February all-time high. It's been a big winner ever since it was added to the Dow Jones Industrial Average back in 2013. Both long- and short-term players have been rewarded. I'll let Sean take it from here on the momentum factor and some leaderboards for the Best Stocks list. Why momentum investing works Sean — Factors are characteristics or attributes of securities that help explain their risk and return. You can slice and dice these attributes anyway you want to create a "factor," but the most popular and well-researched ones include value, momentum, size, quality, yield and volatility. These factors are used in both academic research and practical portfolio construction to identify patterns in asset performance. One of the most powerful drivers of stock market returns historically has been momentum. Momentum is a factor based on the idea that assets that have performed well in the recent past tend to continue performing into the future, and vice versa for underperformers. It's rooted in behavioral finance—investors often chase winners and avoid losers, creating a self-reinforcing cycle that pushes trending assets further in the same direction. Momentum strategies typically rank stocks by recent returns (usually over 6 to 12 months). The momentum factor fits well with our analysis as it adheres to the same central theme that technical analysis does - price is the final arbiter of what is right or wrong . Whatever is happening in the world right now has been priced in or is getting priced in as you read this article. Markets are far from efficient every moment of the day, but the current price reflects what buyers and sellers believe is fair. When a stock's price is going up, there's a good reason for it (unless you're a meme stock). Those reasons tend to be bullish for longer than people expect. An overwhelming majority of buyers in a stock is not a bad thing! It means the underlying fundamentals of the stock are set to improve, and the market is recognizing that reality! Our list of stocks is built around this idea - higher prices are telling us a story. Through all of the negative headlines, sentiment, and gloom thus far in 2025, momentum is surprisingly the best-performing factor YTD: Momentum is also notoriously volatile. It can experience sharp reversals, especially during market regime shifts, similar to what we experienced in April. Notice above, momentum was the second worst performer at the market bottom in early April. Below is the iShares MSCI USA Momentum Factor ETF (MTUM) , one of the largest momentum ETFs out there: It's outperforming the unassailable S & P 500 by 11% this year. And that's not a one-off occurrence. It's outperforming the S & P 500 on an annualized basis over the past year, 3 years, 10 years, and since inception (it's underperforming over the past 5 years on an annualized basis). There are currently 43 stocks on our list that also appear in the MTUM ETF. A couple of the big names that appear on our list and the MTUM ETF: AVGO , V , NFLX , COST , and PLTR . This year, we went from a majority of utility stocks on the list, to now a majority of industrials and tech. The dynamic nature of momentum is what makes it a high-performing strategy. It is rules-based, systematic, and adaptive. By relying on price trends rather than forecasts, momentum captures the strength of what's working now, for fundamental reasons. Here's where our list lands in terms of sector and industry exposure, as well as the 5 names with the highest RSI readings: Inside the Best Stocks As of 6/2/2025 morning, there are 112 names on The Best Stocks in the Market list Top Sector Ranking: Top Industries: Top 5 Best Stocks by Relative Strength: DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. INVESTING INVOLVES RISK. EXAMPLES OF ANALYSIS CONTAINED IN THIS ARTICLE ARE ONLY EXAMPLES. THE VIEWS AND OPINIONS EXPRESSED ARE THOSE OF THE CONTRIBUTORS AND DO NOT NECESSARILY REFLECT THE OFFICIAL POLICY OR POSITION OF RITHOLTZ WEALTH MANAGEMENT, LLC. JOSH BROWN IS THE CEO OF RITHOLTZ WEALTH MANAGEMENT AND MAY MAINTAIN A SECURITY POSITION IN THE SECURITIES DISCUSSED. ASSUMPTIONS MADE WITHIN THE ANALYSIS ARE NOT REFLECTIVE OF THE POSITION OF RITHOLTZ WEALTH MANAGEMENT, LLC" TO THE END OF OR OUR DISCLOSURE. Click here for the full disclaimer.
CNBC
29-05-2025
- Business
- CNBC
Best stocks: Why this dining stock is hitting highs, even though Josh Brown never eats at Olive Garden
(This is The Best Stocks in the Market , brought to you by Josh Brown and Sean Russo of Ritholtz Wealth Management.) Josh here — One of the things I've learned to do over the years is to stop thinking about investment opportunities purely through the lens of my own taste or experiences. I may not always be representative of the attitudes and desires of the bulk of the population. Nowhere is this more true than when it comes to consumer discretionary stocks and especially within the restaurant group. Darden Restaurants (DRI) owns eleven major dining brands, including the Capital Grille, Ruth's Chris, Yard House, Eddie V's, Longhorn Steakhouse and Seasons 52. Most people know Darden as the former owner of the Red Lobster chain (no longer part of the company) and the current owner of their flagship chain, The Olive Garden. I live in Nassau County, Long Island, home to the highest concentration of incredible Italian restaurants anywhere in America outside of Brooklyn and Manhattan. I'm a fifteen minute drive away from Cippolini in Manhasset, Il Mulino and 388 in Roslyn, Chris and Tony's in Syosset or, if I want to play a home game, Matteo's or Bella Notte in Bellmore. Suffice it to say, I'm not ever eating at an Olive Garden. But most people don't live where I live or have the same choices that I have. Most people don't even know the difference or what they're missing. For most people, The Olive Garden is a good night out, close enough to home, and at a reasonable price. That's probably why the stock price looks like this with the company hitting our Best Stocks in the Market list this week: They do a great job serving their customers and maintaining the chain's brand equity in a race-to-the-bottom sector where most of their competitors are relying on gimmicks and discounts. Last year, Olive Garden did $3.83 billion in sales earning over $800 million in profit for the company. Darden's systemwide sales are projected to top $12.1 billion this year, with a juicy 2.6% dividend, an authorized stock buyback and a healthy earnings per share number of around $9.50. I also want to say that if you find yourself near a shopping mall or a strange downtown area and you're not 100% sure where to go for lunch or dinner, Capital Grille will never let you down. Get the NY Strip with the au poivre sauce or the ribeye with the cajun rub and it'll be a "lights out" experience for you. You can't go wrong. Fortunately, for the shareholders of Darden, my opinions about their other chains don't mean anything. Their audience of diners are voting with their wallets and the share price is reflecting this. Sean's going to go a little deeper into the technicals and fundamentals while I figure out what's for lunch. Best Stock Spotlight: Darden (DRI) On the list since: 5/27/2025 Sean: Darden is the largest restaurant operator in the U.S., representing 3% to 4% market share — this comes out to about 2,000 company-operated restaurants in the U.S., according to YCharts. Olive Garden represents 44% of the company's revenue, Longhorn Steakhouse is 25% of revenue, fine dining is 11% of revenue, and the rest of the brands make up the last 20%. This is a geographically and economically diversified restaurant chain. It caters to most people along the income spectrum, which is a key diversifier for a restaurant business. Darden has improved segment profit margins across its major brands. Olive Garden's segment profit margin increased from 22.5% to 23.0% YoY in the latest quarter, driven from lower costs of goods sold. A number of brands are seeing positive sales and cost efficiency savings. Leaning into the company's growth capabilities, DRI rolled out its first-party delivery service through various partnerships which has expanded sales channels and improved guest experience, and these improvements are showing up on the top and bottom lines. Over the past 5 years, DRI has compounded revenue at a 6% annual clip. More impressively, they have grown EPS at a 12% clip annually during that same period, and the growth doesn't stop there. EPS is expected to grow 9% annually over the next two years. Darden's long-term chart is up and to the right. This stock has bounced off its 200-day moving average only twice on a weekly basis, going back 5 years: And this year, it's stuck especially close to its 50 day moving average (see one year chart in Josh's commentary). DRI has a 63 Relative Strength Index— not too hot, not too cold. It's about 6% above its 50-day moving average and 19% above its 200-day moving average, solidly in an uptrend which is what we like to see. It's hitting new 52 week highs and all-time highs in what has been a challenging macro environment. Risk Management Josh: Traders want to eyeball the level just below $200 for a change in the short-term trend. That neatly coincides with where the 50-day moving average is keying off of. Investors can use $180 as their line in the sand. Darden reports before the open on Friday, June 20. On each of the last four earnings reports, investors bought the news that day. Good luck and have a great weekend. DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. INVESTING INVOLVES RISK. EXAMPLES OF ANALYSIS CONTAINED IN THIS ARTICLE ARE ONLY EXAMPLES. THE VIEWS AND OPINIONS EXPRESSED ARE THOSE OF THE CONTRIBUTORS AND DO NOT NECESSARILY REFLECT THE OFFICIAL POLICY OR POSITION OF RITHOLTZ WEALTH MANAGEMENT, LLC. JOSH BROWN IS THE CEO OF RITHOLTZ WEALTH MANAGEMENT AND MAY MAINTAIN A SECURITY POSITION IN THE SECURITIES DISCUSSED. ASSUMPTIONS MADE WITHIN THE ANALYSIS ARE NOT REFLECTIVE OF THE POSITION OF RITHOLTZ WEALTH MANAGEMENT, LLC" TO THE END OF OR OUR DISCLOSURE. Click here for the full disclaimer.
CNBC
27-05-2025
- Business
- CNBC
Best Stock: A former high flyer that's coming back into favor because of improving fundamentals
(This is The Best Stocks in the Market , brought to you by Josh Brown and Sean Russo of Ritholtz Wealth Management.) Josh: This week we saw a few new names hit the Best Stocks in the Market list, including a former high-flier that's now come back into favor. Remember the Snowflake (SNOW) IPO? It was a big deal. At the time it came public in September 2020, investors were clamoring for cloud computing stocks and the whole tech sector was red hot. SNOW debuted with the largest IPO in history, raising $3.36 billion. And, if you can believe it, the stock turned out to have been underpriced. Shares were sold to the public at $120, but ultimately got as high as $300 on the first day of trading. The company had a valuation of $75 billion right out of the gate, a multiple of approximately 75 times its projected full-year revenues. Fun fact — it's the first time I can remember seeing Berkshire Hathaway on the holders list of a hot new issue (Warren Buffett's firm sold its whole position out a long time ago). If you thought that was the top, you hadn't seen anything yet. By Thanksgiving the following year, Snowflake hit its all-time high of $401.89 per share. That was the top of the post-pandemic tech rally. From there, a collapse of over 70% to an all-time low of $107 in September 2024. Shareholders who had held from the IPO for the next four years were now looking at unrealized losses after all that volatility. But then a funny thing happened. The CEO stepped back and took the chairman's role while promoting internally to bring the company's head of AI into the C-Suite and onto the board of directors. The company put together a few quarters in a row of 25% growth and has begun surprising The Street to the upside. Sean's going to share some more of the details below. This is a stock that's still 50% below its all-time high, but is now a double off of the lows and climbing. In my experience, institutions don't mind paying up for a growth company as the story improves. Snowflake's biggest drawback for most professionals has been its long and winding path to full-year profitability. Best stocks stats As of 5/27/2025 morning, there are 106 names on The Best Stocks in the Market list. Top sector ranking: Top 5 Best Stocks by Relative Strength: New addition: Snowflake Sean: SNOW was added to our Best Stocks in the Market list last week following a great earnings report. SNOW is classified as "IT Services" below, but software and software-related names are the strongest stocks in the market right now: The IGV (iShares Expanded Tech-Software Sector ETF) is up 2% in total return YTD and up 20% the past year, nearly doubling the performance of the Nasdaq 100 over the past year. Snowflake is a cloud-based data platform that enables organizations to store, manage, and analyze large volumes of data seamlessly across multiple cloud environments. You can't do anything useful in AI if your data isn't clean, organized and unified. Snowflake helps companies optimize their data for machine learning, model-training and other stuff. SNOW went public in September of 2020, right before we experienced the largest tech bubble since the dot-com implosion in 2001. It's had a difficult couple of years if you look at the chart since its inception: As a trader, it's not the prettiest chart. But if it can maintain support around the $190 level, which has been an important level of resistance for the stock going back to 2022, there's some room for the bulls to push this higher. Looking at the chart below since inception, on a weekly basis the stock has been in a down trend, but after this latest earnings beat, both moving averages are beginning to flatten, showing possible support for an uptrend: As an investor, the stock has not been rewarding, but the fundamentals are improving. During last week's earnings call, SNOW beat on the top and bottom lines, with revenue growing 4%, EBIT (earnings before interest and taxes, also known as operating earnings) growing 74%, and EPS growing 13%, all YoY. (Data via Quartr.) SNOW now has 606 companies paying them over $1 million dollars in revenue each, a figure which is up 27% year over year. Gross margins have expanded from 59% in 2021 to 67% today, bringing the company closer to its profitability goals. SNOW's net revenue retention rate hit 124% for the quarter, which is a great sign. A net revenue retention rate of 124% means that, on average, a company's existing customers are spending 24% more, even after accounting for customer churn, downgrades, cancellations, etc. In simpler terms, if you started the year with customers paying $100, by the end of that year, the same group is paying you $124 without adding any new customers. It means existing customers are growing in value to the business. SNOW is not profitable on an operating basis, but with the growth and scale they are achieving, profitability on an operating and net income basis is on the horizon, which would mean higher stock prices with it. Risk Management Josh: Below, I'm zooming in on the last 100 days or so because SNOW has run right back up to its February highs. It's just had a parabolic move higher after reporting great results. Ideally if I'm a trader, I'm waiting for an entry on a low volume pullback into the 190s. I'd use $175 - $180 as my line in the sand. That area should hold as support. If it doesn't, the setup didn't work. Longer-term investors can give it a wider berth and let the flat-lining 200-day (now at $160) turn up a bit. I'd be using that as a stop, checking it on a weekly closing basis each Friday. I was going to end this by saying "Stay Frosty" but then I'd have to slam my own fingers in a desk drawer just to distract from the cringe. And nobody wants that. Good luck out there, Sean and I will return later in the week. DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . 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