Given the impressive performance of the S&P 500 SPX, which has risen over 8% since the beginning of the year, stock pickers worldwide are now faced with the task of identifying those hidden gems in the market.
“In the current climate, it is evident that not everyone will come out on top. Therefore, the significance of carefully choosing stocks is increasing,” Based in Madrid Nicole Sophie Gómez Adenis, a portfolio manager at Mapfre Asset Management, shares insights with MarketWatch in an interview.
She equips herself with her university studies in physics and financial mathematics, utilising quantitative analysis for that pursuit.
I’m seeking out companies with strong growth projections that may be overlooked by the market. According to her, prices are not being affected as expected.
According to her, many companies that exhibit such behaviour are actively investing in technologies and AI. According to Adenis, while not actively seeking out AI companies, they often come across other overlooked companies that have AI processes and technologies in their backgrounds.
However, she emphasises the importance of investors being able to discern the true extent of a company’s involvement in AI, as many companies are currently eager to highlight their AI exposure. It is crucial for companies to prioritise identifying the problem they aim to solve. Investing in AI techniques is often a more effective approach compared to traditional methods.
Key quantitative factors that she considers are the estimates made by analysts regarding company fundamentals such as revenue, profit, and earnings. When prospects appear promising, but the stock is underperforming, it may suggest poor governance or vulnerability to an unstable economy. Utilising quantitative processes can provide a clearer perspective on companies, as they can identify sensitivities to various factors that may impact the business.
According to the firm, GXO Logistics GXO, -0.49% is a company they find appealing due to its attractive valuations and growth prospects. The company, with a client roster that boasts Apple and Nike, offers services in order fulfilment, e-commerce, and supply chain expansion. They leverage cutting-edge technologies such as AI, robotics, and predictive analysis to deliver exceptional results.
This company has a strong advantage due to its long-term investment in technology. According to her, it is a trailblazer when it comes to investing in technology for warehouses. Based on our analysis, we believe that it has a strong potential to outperform its competitors in the logistics industry.
GXO was created as a spinoff of XPO and started trading in 2021. The company’s shares have experienced a 16% decline since the beginning of 2024.
Another company she highlights is Micron Technology, a memory-chip maker and data storage solutions group. Their shares have seen a significant increase of almost 40% this year and have recently been upgraded by Baird.
With the advent of artificial intelligence, the need for memory and data storage has become increasingly crucial. “Micron would be the partner you need,” she suggested. If you need to train and test large models, utilising Micron solutions is essential for AI machine learning and generative AI.
According to her, Micron’s share performance has a long way to go before it can catch up to AI chipmaker Nvidia. The firm is not currently investing in Nvidia, and acknowledges that it may have missed out on a potential opportunity. However, it now considers the shares to be too expensive in relation to its expectations for the company’s future performance.
Her latest selection is a fresh addition to her portfolio, the athleisure company Lululemon, which she describes as a rising star in the sportswear industry.
She mentioned that the company offers a wide range of technical athletic apparel for different activities such as yoga, running, dancing, and training. Additionally, they also provide lifestyle apparel, accessories, and personal care products. The company is experiencing rapid growth, with a strong emphasis on innovation and the development of new products. Additionally, they are leveraging AI technology to enhance the search experience on their online store.
Shares have experienced a significant decline of 32% this year due to concerns surrounding activewear demand, the general health of consumers, and changing trends. She mentioned that the company’s valuations are quite appealing, although they may be influenced by their involvement with China. She mentions that Lululemon, with its expansion, is not solely relying on U.S. customers.
Regarding U.S. stocks in general, the manager remains optimistic: “We have confidence in the strength of the U.S. economy and its advantageous position for future trends compared to other markets,” she expressed.
She acknowledges that U.S. valuations are currently elevated and highlights the numerous risks on the horizon, including the upcoming U.S. elections, ongoing inflation concerns, escalating sovereign debt levels, and geopolitical tensions worldwide.
“We have a positive outlook on U.S. equities, but we have also decided to purchase volatility as a form of inexpensive insurance,” she mentioned.
The Market
S&P 500 futures ES00, -0.15% are slipping after the index snapped a four-session win streak, with tech NQ00, -0.16% set to lead the way south. The 10-year Treasury yield BX:TMUBMUSD10Y is back up over 4.5%, and oil prices CL.1, 0.70% are higher. U.K. bond yields BX:TMBMKGB-10Y and the pound GBPUSD, 0.10% are falling after the Bank of England held rates, but with two voters wanting a cut.
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