Eli Lily and Alphabet are two companies that look solid technically and fundamentally despite the recent pullback in the major stock indices.
Eli Lily and Company (LLY) stock is up nearly four times as much as the S&P 500 this year (showing relative strength) and is currently forming a nice entry pattern. It is also seeing exceptional growth in its corporate earnings/profits.
Alphabet Inc. (GOOG) barely pulled back during the recent decline in the major stock indices and has bounced right back to near all-time highs showing relative strength. It too is expected to steadily grow earnings helping to bolster the stock price going forward.
Cory Mitchell, an analyst with Trading.biz, said, “Focus on stocks showing relative strength. That means the stock is performing better than most other stocks or the major indices in percentage terms over various time frames such as the last 3, 6, and/or 12 months.
When a company also has strong fundamentals and is growing its earnings consistently year after year, or is expected to, that is a bonus for short-term trades and a requirement for my longer-term stock trades.
“For short-term trades, price momentum is reason enough for a trade, but over the longer-term, I want to invest in solidly profitable companies that are growing their earnings as that helps fuel stock prices higher over the long run.”
Alphabet and Eli Lily fit these criteria, with strong stock performance and fundamentals. Here are some summary statistics, and a chart of the two stocks since the start of the year.
Eli Lily and Company (LLY)
- Up 29% year to date, versus SPDR S&P 500 ETF (SPY) which is up 7.31%. LLY is up 95% over the last year versus 24% for SPY.
- Earnings per share (EPS) is expected to grow an average of 51% per year over the next five years.
- Increase revenue every year since 2018.
- EPS has increased an average of 17.5% yearly over the last five years.
After a strong rally at the start of the year, the price has been moving sideways since mid-February. In the last few days, it has turned higher off the bottom of that range which could be used as an entry as the price heads back toward the of the range for a possible upside breakout and the next leg higher in the uptrend.
Alphabet Inc (GOOG)
- Up 15% year to date, versus SPDR S&P 500 ETF (SPY) which is up 7.31%. GOOG is up 51% over the last year versus 24% for SPY.
- Earnings per share (EPS) is expected to grow an average of 18% per year over the next five years.
- Increase revenue every year since 2014.
- EPS has increased an average of 23.8% yearly over the last five years.
The stock has been moving choppily higher since the start of 2023. With the stock near all-time highs, waiting for a pullback to enter is an option but could mean missing out if it keeps moving up. If a pullback occurs, 10% to 15% off prior highs has been a decent entry point over the last 1.5 years.
Nothing is certain in the stock market. Plan out trades and investments before taking them, including why and where you will exit profitable trades, and when you will cut losses if the price drops.
