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Comcast, Schwab, Alphabet: Big Investors Like What These Stocks Have to Offer

Published 03/14/2024, 09:19 AM
  • Institutional investors show conviction in undervalued stocks such as Comcast, Charles Schwab, and Alphabet.
  • Investing in undervalued stocks like these allows institutions to capitalize on market inefficiencies and diversify portfolios.
  • Tracking institutional inflows is a way of understanding a stock's potential to rise.
  • Comcast Corp (NASDAQ:CMCSA), Charles Schwab Corp (NYSE:SCHW), and Alphabet (NASDAQ:GOOGL) are among institutional-quality large-cap stocks that are currently undervalued.

    There are a few reasons why institutions continue showing conviction when it comes to stocks priced below where their intrinsic value indicates they should be trading.

    • They offer the potential for profit as market sentiment shifts and investors re-evaluate fundamental factors.
    • This creates an opportunity for investors who bought these stocks at lower prices to profit as their value increases.
    • Institutional investors have the resources and expertise to conduct thorough research and analysis, identifying undervalued assets that may currently be out of favor.
    • By investing in undervalued stocks, institutional investors can capitalize on market inefficiencies, diversify their portfolios, and achieve long-term growth or income objectives.

    Large-cap stocks like Comcast, Schwab, and Alphabet have the advantage of being components of indexes like the SPDR® S&P 500® ETF Trust (ASX:SPY), which generally ensures continued institutional buying.

    Comcast Stock: More Funds Buying Shares

    The number of funds owning Comcast stock has grown in the past two quarters; that's reflected in Comcast's one-year return of 25.59%. The Comcast chart shows 10 months of upside trade in the past year, a sign that institutions are jumping on board. That has the potential to send the stock's price higher.

    The stock is currently consolidating; watch for it to overcome resistance below $48.

    According to a February research note from Argus analyst Joseph Bonner, "Comcast's core cable business enjoys significant competitive advantages that we expect will endure for two decades or longer; that's why Morningstar awards Comcast a wide economic moat rating."

    Bonner added that he's expecting "modest growth but strong cash flows from Comcast for the foreseeable future. Our key assumption is that Comcast will hold on to its position as a dominant internet access provider—and that will provide a solid foundation upon which the company can build customer relationships and deliver pricing power."

    Wall Street expects Comcast to earn $4.28 a share this year, an increase of 8%. In 2025, that's expected to rise by another 8% to $4.63 a share.

    Institutions Piling into Schwab

    Charles Schwab's institutional ownership data shows that the rate of buying versus selling is wildly lopsided. In the past 12 months, 1,501 institutional buyers accounted for $68.51 billion in inflows, while 884 institutional sellers accounted for $12.22 billion in outflows.

    The Charles Schwab chart shows you how the stock has bounced around in the past year while gradually advancing to a 14.99% one-year return.

    Schwab earnings growth slowed among rising interest rates; clients moved billions out of Schwab sweep accounts, which pay low rates, to other types of outside accounts with higher yields.

    Wall Street expects Schwab earnings to begin growing again this year, although there's still uncertainty about interest rates, causing analyst to lower their growth forecasts.

    The Schwab analyst forecasts show a consensus view of "hold" on the stock. The consensus price target is $69.92, an upside of 4.42%.

    Alphabet: Undervalued Magnificent 7 Stock

    Communications services stocks lag most others on a one-month basis, as heavily-weighted sector component Alphabet is down 6.13% in that time.

    If you glance at the Alphabet chart, you'll see the stock consolidating below its January 29 high of $153.78. Alphabet stock, part of 2023's Magnificent 7 group of leaders, underperformed the Communication Services Select Sector SPDR® Fund (NYSE:XLC) in the past month.

    However, this is Google we're talking about. Yes, the company has had some recent missteps, including with its Gemini artificial intelligence-driven image generation feature.

    But Wall Street, and pretty much anybody with a pulse, understands that Alphabet still has room to grow. Analysts expect the company to earn $6.89 per share this year, an increase of 20%, while forecasting double-digit revenue growth in each of the next two quarters.

    When it comes to search, Google has established a significant competitive advantage.

    Institutional buyers seem to agree: Alphabet institutional ownership data show 3,151 institutional buyers accounting for $59.33 billion in inflows, while 2,557 Institutional sellers accounted for $53.53 billion in outflows in the last 12 months.

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