The history books show that the 9 months beginning October of a midterm election year prove to be the most consistently profitable spell in the stock market. Given the stock market gains recorded in the 9 months since last October, that trend played out again as expected.
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It’s a period billionaire Ken Fisher has termed the ‘midterm miracle.’ The nice thing about that timeframe, says Fisher, is that it is usually followed by another strong period, albeit not quite as fruitful. Fisher has a term for this too, calling it the ‘gridlock gravy.’
Why is that, then? “The legislative quiet that follows midterms – whether it’s the president’s enemies who have regained control of Congress, or it’s Congress getting split between two parties – zaps uncertainty around new, controversial laws that always create winners and losers,” explained the Fisher Investments founder. “Political squawking remains, but big bills go nowhere. Political risk aversion falls, juicing stocks.”
“As inflation wanes slowly but surely, and as slow growth defies recession fears, gridlock will help keep us in positive territory well into 2024,” Fisher summed up.
So, what stocks does Fisher, whose net worth is valued at ~$6.9 billion, think have more juice in them right now? Using the TipRanks database we have gotten the lowdown on two equities he has been busy adding to his portfolio in recent times. And turns out it’s not only Fisher who thinks these stocks are worth a punt; both are rated as Strong Buys by the analyst consensus. Let’s find out why.
UnitedHealth Group (UNH)
For our first Fisher-backed name we’ll start with a healthcare giant. UnitedHealth is a renowned and diversified healthcare organization that offers a wide array of services and solutions to individuals, employers, and government organizations.
The company boasts a substantial presence both nationally and globally and is composed of two primary business segments: UnitedHealthcare and Optum. UnitedHealthcare is a major health insurance provider that offers a range of health coverage options for individuals, families, and businesses. This segment is responsible for the majority of revenues. Optum, on the other hand, focuses on delivering innovative healthcare solutions, technology-enabled services, and data analytics to optimize healthcare delivery and improve outcomes.
This is a huge operation, with the company being one the world’s top 10 firms in terms of revenue and the largest healthcare firm revenue-wise, generating $324 billion last year.
UnitedHealth is on track to exceed that this year. In the most recently reported quarter, for 2Q23, the top-line reached $92.9 billion, for a 15.6% year-over-year increase whilst beating the forecasts by $1.94 billion. There was a bottom-line beat too, as adj. EPS of $6.14 exceeded the consensus estimate by 16 cents.
Moreover, looking ahead, the company narrowed the range of its full year adjusted net earnings outlook from the prior $24.50–$25.00 to $24.70 to $25.00 per share, compared to consensus at $24.7.
UnitedHealth has impressed the likes of Ken Fisher, with his firm purchasing 1,548,224 shares in Q2. The purchase brings the total holding to 1,561,174 shares, with a value of nearly $800 million.
Mirroring Fisher’s confidence, Raymond James analyst John Ransom thinks the latest print offers evidence of UNH’s strong execution.
“Even amid a challenging utilization backdrop, UNH managed to grind out another beat and raise quarter, albeit with the help of the trio of investment income, cost improvements, and buybacks. We believe UNH effectively reset expectations in June, and conservative 2024 bids offer potential upside, while limiting downside if medical cost trends remain hot,” the 5-star analyst explained.
Quantifying his stance, Ransom rates the UNH a Strong Buy along with a $630 price target. The implication for investors? Upside of 24% from current levels. (To watch Ransom’s track record, click here)
Of the 18 UNH analyst reviews submitted over the past 3 months, 2 remain on the sidelines while all the rest are positive, making the consensus view here a Strong Buy. Going by the $571.53 average target, a year from now, shares will be changing hands for ~12% premium. (See UnitedHealth stock forecast)
BlackRock, Inc. (BLK)
From one industry behemoth to another. BlackRock is an American multinational investment firm, and in fact, with more than $9.4 trillion in assets under management (AUM), is the world’s largest asset manager.
With its vast array of investment offerings and financial services, BlackRock operates on a global scale, boasting 70 offices in 30 countries, and customers in 100 countries, serving institutional investors, corporations, governments, and individual investors. The company is renowned for its expertise in risk management, innovative investment strategies, and its utilization of technology to enhance its financial services, with many big financial institutions utilizing its Aladdin software to keep track of their investment portfolios.
This finance giant generated revenue of $4.46 billion in Q2, and although that represented a 1% year-over-drop primarily due to stock market movements, the figure met Street expectations. At the other end of the scale, adj. EPS of $9.28 fared better than the $8.42 anticipated on Wall Street. In the quarter, assets under management rose to $9.43 trillion, an $831 billion increase since the end of 2022.
The company also repurchased shares worth $375 million during the quarter, a move investors always like to see.
One of those investors is Ken Fisher, who upped his BLK stake by 6% in the quarter, with the addition of 92,560 shares. His total holdings now stand at 1,934,985 shares, worth more than $1.33 billion at the current price.
BlackRock also has a fan in Morgan Stanley’s Michael Cyprys, who highlights the various reasons investors should get behind this name.
“BLK’s breadth of capabilities, unrivaled distribution prowess and top brand uniquely position the firm to capture key growth zones over the next several years in fixed income, cash mgmt, private markets and Aladdin technology. This should result in the firm’s $9 trillion of AUM today expanding to $10 trillion in the next few quarters, and surpassing $15 trillion in 5-years,” the analyst opined.
“BLK’s scale, diversification, disciplined investments made across market cycles and efficient operations with focus on expenses should support continued organic growth and margin expansion. We also see opportunities for inorganic growth to drive upside, should BLK capitalize on dislocation to accelerate growth, similar to how they’ve executed in the past (e.g., BLK’s $15.2b transformational acquisition of BGI during 2009),” Cyprys went on to add.
These comments underpin Cyprys’ Overweight (i.e., Buy) rating on BLK, while his $888 price target offers potential share appreciation of 28% for the coming year. (To watch Cyprys’ track record, click here)
Elsewhere on Wall Street, the stock garners an additional 8 Buys and 1 Hold, all culminating in a Strong Buy consensus rating. The forecast calls for 12-month returns of 18%, considering the average target clocks in at $817.5. (See BlackRock stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
