Barron's named stocks that avoided a drawdown during the recent selloff amid investor excitement over overheated valuations of AI companies. The publication included securities that not only did not fall from October 28 to November 20, but also subsequently added at least 5%. The selection did not include companies with a price/earnings ratio above 20, which, for example, excluded Google's parent company Alphabet from the list.

Who was included in Barron's selection

- Topping the list was Western Digital, one of the world's largest makers of storage devices. Its shares rose 12% during the selloff and another 13% after the S&P 500 hit a November low. Since the beginning of the year, Western Digital's market value has soared 260% on the back of the AI boom, but Wall Street believes the company's stock has upside potential of another 13%. At the same time, their price/earnings ratio is 13.1, which makes them attractive to investors, emphasizes Barron's. More than 75% of analysts advise to buy Western Digital securities.

- Western Digital is followed on the list by Newmont, one of the world's largest gold miners. After a sharp fall in mid-October, gold is steadily rising in price, which plays to the company's advantage and supports its profits, Barron's notes. Newmont's stock is up 144% since the beginning of the year and now trades at about 13 times current earnings. The average consensus of Wall Street analysts suggests that the company's market capitalization could grow by another 17% or so, with 23 out of 29 analysts recommending a "buy" on the stock.

- Pharmaceutical company Merck also managed to avoid the worst part of the sell-off and rose during the recovery. Merck's price-to-earnings multiple is 14.8. Since the beginning of the year, its market value is up only 5.5%. By comparison, the main U.S. stock index, the S&P 500, has added more than 16% over the same period. The opinion of Wall Street analysts on the company's shares is almost equally divided: 16 advise investors to "buy" them, while 13 take a neutral position with a Hold rating. There are no recommendations to sell. The average target price coincides with the current quotation level.

In addition, Barron's also listed the securities of another medical company, Centene, diesel engine manufacturer Cummins, solar panel maker First Solar and hospital chain Universal Health Services.

Context

Recent weeks have been a test for the market, with investors nervous about overheated valuations of artificial intelligence-related companies, Barron's writes. From the end of October to November 20, the S&P 500 index sagged by 5%, but then almost completely compensated for the fall.

Now, after a major sell-off amid hopes of a Fed rate cut in December, the S&P 500 posted its best weekly performance in Thanksgiving week since 2012, Barron's notes. But concerns around the AI bubble haven't gone anywhere: Wall Street is still trying to figure out who will prevail in the chip leadership race, and investors continue to look for ways to protect their portfolios if the current recovery stalls.

This article was AI-translated and verified by a human editor

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