Investing.com -- Amid the ongoing U.S. stock market selloff, Bernstein analysts suggested in a note Tuesday that now may be a rare opportunity to buy high-quality stocks at a discount.
According to Bernstein, "factor rotations have been well underway this year," as the S&P 500 dropped 3.1% and the Nasdaq Composite declined 3.5% in the past week alone.
The selloff has led to "large swings away from momentum and growth factors and toward valuation metrics, dividend yield, and ROE."
Given rising fears of a growth slowdown or recession, analysts believe that quality exposure with consideration of valuations will be key.
Bernstein’s Quality on Sale model identifies high-quality stocks that have sold off in the short term.
They note that historically, these stocks have bounced back by 2-3% over the next three months and outperformed by 5-7% in down markets.
"Quality stocks outperform when investors are risk averse," Bernstein noted, adding that its Risk Aversion Signal (RAS) is approaching a risk-off threshold, creating a favorable environment for quality stocks.
Among the current high-quality stocks that meet Bernstein’s Quality on Sale criteria are:
-
DexCom (NASDAQ:DXCM)
-
Insulet (NASDAQ:PODD)
-
Lululemon (NASDAQ:LULU) Athletica
-
Applied Materials
-
Chipotle (NYSE:CMG) Mexican Grill
-
Meta (NASDAQ:META) Platforms
-
Nvidia (NASDAQ:NVDA)
-
Netflix (NASDAQ:NFLX)
-
Microsoft (NASDAQ:MSFT)
Bernstein concludes that while quality stocks are "rarely cheap," market declines offer opportunistic entry points for long-term investors.
This content was originally published on Investing.com
