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Banking giant JPMorgan points out that jobless claims recently jumped 10% above their preceding three-month average. And every time in history that has happened, the economy eventually entered into a recession.
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“There have been no false signals with this indicator,” says the bank’s analyst Mislav Matejka in a note to investors. “Unlike the shape of the yield curve, or the money supply, which are leading indicators, this one is more coincident.”
But here’s the good news for investors: JPMorgan says that whenever this indicator goes off, the S&P 500 returns an average of 11% over the subsequent 12 months.
With that in mind, here’s a look at three stocks JPMorgan finds particularly attractive right now.
Apple (AAPL)
No one who spends $1,600 for a fully decked-out iPhone 13 Pro Max would call it a steal. But consumers love splurging on Apple products anyway.
Earlier last year, management revealed that the company’s active installed base of hardware has surpassed 1.65 billion devices, including over 1 billion iPhones.
While competitors offer cheaper devices, millions of users don’t want to live outside of the Apple ecosystem. The ecosystem acts as an economic moat, allowing the company to earn oversized profits.
It also means that as inflation spikes, Apple can pass higher costs to its global consumer base without worrying too much about a drop in sales volume.
Apple will be hosting an event on Sept. 7 — many expect the company to unveil the iPhone 14 lineup then.
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JPMorgan analyst Samik Chatterjee has an ‘overweight’ rating on Apple and a price target of $200 — around 26% above the current levels.
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Nvidia (NVDA)
As a leading designer of graphics cards, Nvidia shares have had a solid bull run over the past decade. But that rally came to an abrupt end in November 2021. Since reaching a peak of $346 in late November, the stock has fallen by more than 55%.
Nvidia’s plunge is substantial even when compared to other beaten-down stocks in the semiconductor sector.
Nvidia’s business is still on the right track, making it a particularly intriguing contrarian idea. The chipmaker generated $6.70 billion of revenue in its fiscal Q2. The amount represented a 3% increase year over year.
Revenue from data center increased 61% year over year to $3.81 billion.
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JPMorgan analyst Harlan Sur recently lowered the price target on Nvidia from $230 to $220. However, Sur maintained an ‘overweight’ rating on the shares and the new price target still implies a potential upside of 46%.
Snowflake (SNOW)
Many consider big data to be the next big thing. And that’s where Snowflake shines.
The cloud-based data warehousing company, founded in 2012, serves thousands of customers across a wide range of industries, including 506 of the 2021 Forbes Global 2000.
Momentum is strong in Snowflake’s business. In the three months ended July 31, revenue surged 83% year over year to $497.2 million. Notably, net revenue retention rate clocked in at a solid 171%.
The company continued to score large customer wins. It now has 246 customers with trailing 12-month product revenue of more than $1 million, compared to 116 such customers a year ago.
JPMorgan analyst Mark Murphy has an ‘overweight’ rating on Snowflake and recently raised his price target to $210 — roughly 16% above where the stock sits today.
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Jing is an investment reporter for Moneywise. He is an avid advocate of investing for passive income. Despite the ups and downs he’s been through with the markets, Jing believes that you can generate a steadily increasing income stream by investing in high quality companies.
