The broad market is decidedly down for the past few weeks. But not all stocks have been swept up in this bearish tide: A handful of names have bucked the larger trend and delivered sizeable gains over the course of the last quarter. When this happens, there is usually a clearly bullish reason for the disparity.
However, this does not necessarily mean that there is more of the same kind of optimism on the cards for these tickers this time around.
With that as a backdrop, here’s a closer look at the three best-performing large-cap stocks in the market over the past three months, followed by some thoughts on their foreseeable futures.
The hottest of the hot
Most of the time, the major stocks in the market tend to be related. However, that is not the case this time. In fact, the most popular large-cap stocks right now are distinctly different from one another.
constellation energy (CEG -1.19%) is he least the best of the best, almost 58% in the last quarter.
This type of move makes sense for those unfamiliar with the company. Oil and gas prices are still near sky-high levels, making the business of drilling and refining these fossil fuels lucrative. Except Constellation isn’t in the oil and gas drilling business. It is a utility company far removed from fossil fuels. Constellation Energy is the largest producer of carbon-free energy in the US, in fact, relying on a collection of nuclear, wind, solar, natural gas and even hydroelectric power facilities to generate 32,400 megawatts of electricity.
And that’s a big deal given two recently enacted federal laws. That is, in June, President Biden issued an executive order that, in the short term, will boost the supply of foreign-made solar panels for US solar companies, but ultimately improve production in the long run. much-needed national panel. The other is the passage in August of the Inflation Reduction Act, which offers significant tax credits to almost all participants in the solar energy industry. While the benefit to Constellation Energy is not immediate, it will be significant; the market only has a vision of the future.
wolfspeed (WOLF -2.97%) is doing slightly better than Constellation Energy, up 60% in the last quarter.
It’s not a household name, though there’s a good chance you or someone in your household is using one of their products in one way or another. Wolfspeed manufactures specialty semiconductors for technology companies that need complex, high-power RF chip solutions, and is the sole supplier to each of those markets. In particular, the electric vehicle industry needs its technology, which helps support revenue growth of 42% for the fiscal year ending in June. While still in the red, last quarter’s loss was much smaller than expected.
Finally, first solar (FSLR -2.74%) is outpacing all the other big names, rallying more than 100% over the last quarter, largely for the same underlying reasons that Constellation Energy stock did. First Solar, however, may be better positioned than Constellation to take advantage of a more immediate opportunity. Except… read on.
To buy or not to buy?
Their backstories are compelling and their brute strength is almost intoxicating. However, simply blindly connecting with this optimism is not necessarily the right move. There is always more to the story, and all stock selection must be done on a case-by-case basis.
Take Constellation Energy, for example. There’s no denying that it’s more prepared for the future of electricity than most of its peers, on track to be 100% carbon-free by 2040. Yet it’s still just a utility, trapped in an industry that is known for everything but growth. It’s also an expensive ticker by utility stock standards thanks to its recent surge, priced at more than 19 times projected earnings per share next year. While it’s a well-founded company, now is not the time to nibble on the stock.
That is not the case with Wolfspeed.
This chip maker isn’t everyone’s proverbial cup of tea. As well as remaining unprofitable and a bit obscure, it’s also small and narrow in focus. The stock is also very close to trading at the analyst consensus target of $119.45, seemingly leaving little room for profit.
However, this is one of those cases where it really pays to step back and look at the big picture.
Look, it’s very much an electric vehicle game, so much so that it’s committing $1.4 billion, just to get started, to build what will eventually be the world’s largest silicon carbide facility. The thing is, it’s not just the material that electric vehicles need, but it’s also increasingly used in energy storage, charging stations, and aerospace and defense manufacturers. To this end, analysts expect current year’s top line growth to mirror last year’s pace, with another 42% growth rate projected for the next fiscal year. That should bring the company out of the red, with analysts modeling a bottom line of $1.74 per share for its next fiscal year (it’s currently in the first quarter of fiscal 2023). That’s huge.
Perhaps best of all, while the last three months have risen, Wolfspeed shares remain relatively affordable. The stock is still down from last November’s peak, and has still only been touched on test highs a few times this year.
As for First Solar, it’s an exciting prospect, to be sure, but not exactly right now.
The amount of home electricity produced by solar power is expected to grow from around 5% today to 20% by 2050, according to the US Energy Information Administration, and just the next five of those years could be downright explosives. An outlook from the Solar Energy Industries Association and Wood Mackenzie suggests that the country’s combined solar power production capacity should increase from 129 gigawatts today to 336 gigawatts in 2027. In this sense, after this year’s pause linked to logistical challenges, analysts expect First Solar will report 25% revenue growth in 2023. That’s just the beginning, though. The company is also looking to invest up to $1.2 billion in new production facilities. It will increase its current production by more than 50% from 2025, maximizing its share of the organic growth of the solar market.
However, this broader-picture bullish backdrop won’t curb the current volatility in solar stocks, and First Solar’s recent rally leaves it too ripe for profit-taking. That’s why it’s a name to just add to your watch list for now, and hope for a better entry point.