Mounting geopolitical tensions and a closely contested presidential election may contribute to increased market volatility in the upcoming weeks. However, according to Trivariate Research, high-quality growth stocks may offer a potential hedge for investors against future uncertainties. Historically, October is a volatile month for stocks, and recent market movements have reflected this trend. Earlier in the week, the Dow Jones Industrial Average reached a new milestone by closing above 43,000 for the first time, while the S&P 500 also set a new record. Despite this, all three major stock indices fell on Tuesday, before rebounding on Wednesday, with the Dow reaching another all-time high. This volatility coincides with the start of earnings season, during which 79% of the 50 S&P 500 companies that have reported so far have surpassed analysts’ consensus estimates.
In a recent research note, Adam Parker, founder and CEO of Trivariate Research and former chief U.S. equity strategist at Morgan Stanley, stated that the market appears to have come full circle. According to Parker, investing in growth stocks has become more attractive, requiring less presumption in predicting market uncertainties than value investing. Parker presented a list of high-quality large-cap growth stocks characterized by lower volatility, with betas ranging from 0.8 to 1.2 as of October 11.
Among the health-care stocks identified by Trivariate, Eli Lilly has experienced significant gains, increasing by over 57% this year. Additionally, its shares have risen by more than 3% this month. Earlier this month, Eli Lilly announced plans to invest $4.5 billion in creating a center dedicated to discovering new manufacturing methods for more efficient production. This week, the company disclosed a $364 million investment to explore the potential of obesity drugs in reducing joblessness in the U.K. The outlook on Wall Street is predominantly positive, with 23 out of 28 analysts assigning a strong buy or buy rating to Eli Lilly, and the remaining five holding a neutral stance. The consensus price target of $1,010 suggests an upside of over 10% from Wednesday’s closing price.
In the consumer discretionary sector, Flutter Entertainment was highlighted in Trivariate’s list. The owner of FanDuel has seen its shares rise by more than 27% in 2024. Flutter’s stock surged late last month after the company authorized a $5 billion share buyback and projected total revenue of approximately $21 billion by 2027.
Conversely, Adobe has faced challenges, with its stock down nearly 16% this year and more than 11% in the past month. Shares plummeted over 8% following the release of weaker-than-expected earnings and a lower revenue forecast for the current quarter. Despite this, the market sentiment remains predominantly optimistic, with 31 out of 40 analysts rating Adobe as a buy, and an average price target of $624, indicating a 24% potential upside from Wednesday’s closing price.
Additionally, Trivariate identified wholesale retailer Costco and hotel chain Hilton as robust growth stocks. Both companies have outpaced the broader market this year, with Costco advancing by over 34% and Hilton by 30%.
