There could be more upside ahead for Club holdings Disney (DIS) and Wells Fargo (WFC). Both stocks have gotten off to strong starts this year, but remain reasonably priced and well liked by Wall Street analysts. That’s the finding of a screen we conducted on Jim Cramer’s Charitable Trust, the portfolio we use for the Club. Here’s what we looked for, using data compiled by FactSet: Year-to-date gains of 10% or more, based on Thursday’s close. This means the stocks have comfortably outperformed the S & P 500, which climbed 6.3% over the same period. Have a buy or overweight rating from at least two-thirds of the analysts who cover the company, a sign Wall Street is optimistic about the future. Have 10% upside or more to analyst community’s average price target, based on Thursday’s close. This is another way to assess Wall Street’s future expectations for the stock. Have a price-to-earnings-growth (PEG) ratio at, or below, the S & P 500’s PEG ratio. This suggests a stock is trading at a relative value given its projected earnings growth. The PEG ratio is a way analyze a stock’s value, offering another layer of considerations compared with the traditional price-to-earnings ratio. Unlike the commonly cited P/E ratio, the PEG ratio allows investors to incorporate estimated earnings growth into their analyses, instead of considering just the absolute level of projected future earnings. Essentially, it helps investors determine whether they’re paying too much today for a company’s estimated growth. A lower PEG ratio is considered better. That’s why we wanted to find Club stocks with a PEG ratio below the S & P 500’s PEG ratio of 1.64. Disney (DIS) DIS YTD mountain Disney’s year-to-date stock performance. Analysts who rate the stock a buy or overweight: 83% Average price target: $126.4 per share, implying 14.5% upside from Thursday’s close. PEG ratio: 1.1 We agree with Wall Street and like Disney (DIS) here. Investors are starting to believe in the Disney story again, following a rough two years that saw the stock fall 14.5% and 44% in 2021 and 2022, respectively. Through Thursday’s close, Disney shares climbed 27% year to date. And, as captured by our screen, Disney is still trading at a relatively fair price considering the earnings growth it could unlock once its money-losing streaming division no longer drags down the company’s overall profitability. In a CNBC interview Thursday , Bob Iger, who returned as Disney CEO in November after a two-year retirement, reiterated the pledge that Disney+ will be profitable by the end of fiscal year 2024. The media and entertainment giant is currently in the second quarter of its fiscal 2023. Wells Fargo WFC YTD mountain Wells Fargo’s year-to-date stock performance. Analysts who rate the stock a buy or overweight: 79% Average price target: $54.4 per share, implying 12.2% upside from Thursday’s close. PEG ratio: 0.7 The rally in Wells Fargo shares to start the year has flown a bit under the radar, advancing about 15% so far in 2023. It’s been an encouraging near-term move higher, and the bank is still worth owning over the longer term as its multiyear turnaround plays out. In December, one of Wells Fargo’s biggest remaining regulatory overhangs tied to past scandals was lifted . That’s good news for the part of our thesis predicated on regulators eventually lifting Wells Fargo’s asset cap, which effectively constrains its ability to issue new loans. More recently, Wells Fargo issued full-year expanse guidance below expectations, delivering on the part of our thesis focused on cost control to boost profitability. Bottom line While these two Club holdings have done well to start 2023, the valuation of each hasn’t become stretched considering the earnings growth that is projected in the future. As of Thursday’s close, both stocks were trading below their average price-to-earnings ratio over the past five years. We have a 1 rating on both Wells Fargo and Disney, meaning we’d be buyers at current prices. (Jim Cramer’s Charitable Trust is long WFC and DIS. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
A masked family walks past Cinderella Castle in the Magic Kingdom, at Walt Disney World in Lake Buena Vista, Fla.
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There could be more upside ahead for Club holdings Disney (DIS) and Wells Fargo (WFC). Both stocks have gotten off to strong starts this year, but remain reasonably priced and well liked by Wall Street analysts.
