Down More Than 25% in 2021, Now is a Good Time to Scoop Up These 2 Large-Cap Stocks
The major market indexes rose for the second successive trading session yesterday after recent studies suggested that contraction of the COVID-19 omicron variant has a lower risk of requiring hospitalization....
The major market indexes rose for the second successive trading session yesterday after recent studies suggested that contraction of the COVID-19 omicron variant has a lower risk of requiring hospitalization. A positive earnings outlook has also bolstered investors as we enter 2022. So, we think it could be wise to bet on quality large-cap stocks China Life Insurance (LFC) and Activision Blizzard (ATVI). Although they are down more than 25% in price this year, we think they are well-positioned to generate significant returns in the near term. Let’s discuss.
The major stock markets closed in the green yesterday. The S&P 500 notched up another record close at 4,791.19, gaining 1.4%. The Dow Jones Industrial Average was up by 351.82 points to close at 36,302.38, while the Nasdaq Composite closed at 15,871.26, gaining 1.4%.
After starting the month on a pessimistic note, the indices have again started touching new highs after new studies suggested that the omicron variant is less likely to lead to hospitalization. It also found that the omicron variant is milder than the other COVID-19 variants. A solid economic recovery and earnings growth potential has also bolstered investors’ optimism. According to a Factset report, the S&P 500 is expected to report a record net profit margin of 12.8% in CY 2022.
Given this backdrop, we think it could be wise to add fundamentally sound large-cap stocks China Life Insurance Company Limited (LFC) and Activision Blizzard, Inc. (ATVI) to one’s portfolio. They have declined more than 25% in price year-to-date but are expected to rebound owing to their strong fundamentals and favorable growth prospects.
China Life Insurance Company Limited (LFC)
Headquartered in Beijing, China, LFC operates in life insurance, health insurance, accident insurance, and other business segments. The company offers individual and group life, annuity products, accident, and health insurance products. Also, it participates in third-party asset management, annuity funds, and health management businesses. It has a market capitalization of $105.27 billion.
For the six months ended June 30, 2021, LFC's revenue increased 6.5% year-over-year to RMB537.10 billion ($84.26 billion). The company’s gross written premium increased 3.5% year-over-year to RMB442.29 billion ($69.38 billion). In addition, its net profit came in at RMB40.97 billion ($6.42 billion), up 34.2% year-over-year.
Analysts expect LFC’s EPS and revenue for its fiscal 2021 to increase 23.2% and 42%, respectively, year-over-year to $1.67 and $97.97 billion. The stock declined 25% in price year-to-date to close yesterday’s trading session at $8.30.
LFC’s strong fundamentals are reflected in its POWR Ratings. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting. It has a B grade for Value.
Activision Blizzard, Inc. (ATVI)
With a market capitalization of $50.97 billion, ATVI in Santa Monica, Calif., develops and publishes interactive entertainment content and services across the U.S., Europe, the Middle East, Africa, and the Asia Pacific. The company operates through Activision Publishing, Inc., Blizzard Entertainment, Inc., and King Digital Entertainment.
On October 28, 2021, ATVI announced the acquisition of mobile game developer Digital Legends. The development studio joins ATVI’s growing list of wholly-owned, independent studio teams and will likely support the development of a new mobile title within the Call of Duty universe.
For the fiscal third quarter, ended September 30, 2021, ATVI’s net revenue increased 6.1% year-over-year to $2.07 billion. The company’s operating cash flow increased 165.8% year-over-year to $521 million. Also, its non-GAAP EPS came in at $0.89, up 1.1% year-over-year.
For the quarter ending December 31, 2021, ATVI’s EPS is expected to increase 9.9% year-over-year to $1.33. Its revenue for the quarter ending March 31, 2022, is expected to increase 6.8% year-over-year to $1.90 billion. Also, it has surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock has declined 29.5% in price year-to-date to close yesterday’s trading session at $65.45.
ATVI’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, equating to a Buy in our proprietary rating system.
It has a B grade for Value and Quality. It is ranked #5 of 23 stocks in the Entertainment – Toys & Video Games industry. Click here to see the ratings of ATVI for Growth, Momentum, Stability, and Sentiment.
LFC shares were trading at $8.34 per share on Tuesday morning, up $0.04 (+0.48%). Year-to-date, LFC has declined -21.23%, versus a 29.45% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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