It’s been nearly two years since the Federal Reserve indicated it was abandoning over a decade of easy-money policies that ultimately helped fuel major stock market gains during the Covid-19 pandemic. In late 2021, the U.S. central bank pivoted and embarked on a fight to squash inflation— and investors were forced to adopt a new playbook suited for an era when monetary policymakers would be trying to slow the U.S. economy, not grease its wheels with ultra-low interest rates. The new paradigm led to carnage on Wall Street, as the stock market tumbled into a bear market in 2022. Despite better fortunes so far this year , the major U.S. equity benchmarks have yet to eclipse their old highs, which were set before the Fed raised interest rates for the first time in more than three years, in March 2022. The central bank has since hiked rates 10 additional times, bringing the federal funds rate to between 5.25% and 5.5%. The Dow Jones Industrial Average and S & P 500 ‘s record closes came in early January 2022, while the tech-heavy Nasdaq Composite ‘s all-time peak was reached in November 2021. But the market’s reversal this year has helped lift a number of Club stocks to fresh highs — including Nvidia (NVDA), Microsoft (MSFT), Eli Lilly (LLY), Linde (LIN) and Broadcom (AVGO) in the month of November alone. Other Club holdings haven’t been so fortunate, including a group of 10 companies that set record highs in 2021 — the final year of the extraordinary Covid bull market — and have yet to return to those levels. So, in that context, here’s a stock-by-stock look at what needs to go right for a new all-time high to be made for each of those ten names. AMZN mountain 2021-01-01 Amazon’s stock performance since the start of 2021. Record high: $186.57 per share on July 8, 2021 Percentage gain needed for new record: 28.51% P/E multiple at record: 57.62 Current P/E: 42.1 Amazon (AMZN) has recouped a good chunk of its bear-market losses and is on the right track to eventually take out its 2021 apex. To do so, the Seattle-based tech giant must continue its efforts to boost margins on the retail side of its business, which could include further efficiency gains in its sprawling logistics network and lower spending on certain money-losing endeavors , such as its devices unit. The other key piece to the puzzle is Amazon Web Services, its cloud-computing division and longtime cash cow. A reacceleration in the revenue growth rate at AWS would be a boon to the entire enterprise, helping boost earnings per share. Salesforce CRM mountain 2021-01-01 Salesforce’s stock performance since the start of 2021. Record high: $309.96 on Nov. 8, 2021 Percentage gain needed for new record: 40.11% P/E multiple at record: 67.85 Current P/E: 24.3 Salesforce (CRM) is a much more profitable company today than what it was in November 2021. The enterprise software maker posted an adjusted operating margin of 31.6% in its most recent quarter, compared with 18.7% in the fiscal year ended January 2022. A sustained focus on its bottom line is crucial for its stock to return to nearly $310 per share, but other developments are likely needed including proof that the company’s artificial intelligence investments are delivering material financial benefits. More broadly, Salesforce and its software-as-a-service peers would benefit from an improvement in the business climate. For more than a year, amid higher interest rates and elevated economic uncertainty, Salesforce’s customers have been more cautious in their spending on software deals, weighing on topline growth. We’ll get an update on all these themes Nov. 30, when Salesforce is set to report fiscal 2024 third-quarter results. Danaher DHR mountain 2021-01-01 Danaher’s stock performance since the start of 2021. Record high: $332.43 on Sept. 3, 2021 Percentage gain needed for new record: 59.99% P/E multiple at record: 34.41 Current P/E: 26.0 Danaher (DHR) will likely need multiple years of sustainable growth before its stock price returns to its 2021 peak, which coincided with a hard-to-replicate surge in spending on the development of Covid vaccines and therapies, as well as testing for the virus. That translated into booming orders at Danaher’s bioprocessing division. In the two years prior to the start of the pandemic Danaher earned a combined $7.93 per share. In 2020 and 2021, that jumped 83% to $14.50 in total. But lately, the bioprocessing unit has suffered as customers work through inventory stockpiles, leading to fewer new orders. The company said last month the troubled business unit should see a rebound in 2024. That is encouraging, but that trajectory needs to be sustained for more than just a few quarters in order for Danaher’s stock to climb within spitting distance of its old highs. To be sure, the company’s long-term track record on delivering for investors is quite good. Disney DIS mountain 2021-01-01 Disney’s stock performance since 2021. Record high: $201.91 on March 8, 2021 Percentage gain needed for new record: 114.46% P/E multiple at record: 63.2 Current P/E: 20.4 Walt Disney (DIS) is another stock on this list that realistically may have trouble setting a fresh all-time high any time soon — but that doesn’t mean the stock will fail to realize material upside. It’s simply a recognition that its jaunt to nearly $202 per share came amid what later was recognized as an alleged market manipulation scheme that impacted trading in U.S. legacy media stocks, primarily what is now Paramount Global (PARA) and Warner Bros Discovery (WBD). At that time, Disney’s stock also was trading on subscriber-growth projections for its unprofitable streaming division. Not only have those subscriber forecasts been revised lower, but once the Fed pivot ensued in late 2021, investors no longer rewarded money-losing businesses like before. Present-day profits reigned supreme. Taken together, we don’t look at $202 per share as a near-term target for Disney. However, we maintain our belief that CEO Bob Iger’s turnaround efforts are capable of delivering a higher Disney stock price a year from now. Emerson Electric EMR mountain 2021-01-01 Emerson Electric’s stock performance since the start of 2021. Record high: $105.70 on Sept. 2, 2021 Percentage gain needed for new record: 18.4% P/E multiple at record: 23.57 Current P/E: 17.0 Emerson Electric (EMR) also is a much-different enterprise now than it was in 2021, as the company has worked to reshuffle its business units and become a pure-play automation firm. Its stock has recently come close to its old high — trading just over $100 per share in September of this year. For Emerson Electric shares to go even higher, management needs to demonstrate its portfolio adjustments are working as intended, particularly its recent acquisition of National Instruments . It’s unclear whether we’ll own Emerson Electric by the time that happens, though. Our intention has been to sell the rest of this position into strength, and redeploy the funds into investment opportunities we view more positively. However, that approach is fluid Monday after after CEO Lal Karsanbhai bought nearly $900,000 worth of stock in the company , according to a regulatory filing. In general, executives buying stock in open-market transactions like Karsanbhai just did is an encouraging sign . Alphabet GOOGL mountain 2021-01-01 Alphabet’s stock price since the start of 2021. Record high: $149.84 on Nov. 18, 2021 Percentage gain needed for new record: 10.74% P/E multiple at record: 26.71 Current P/E: 20.6 Similar to Amazon, Alphabet (GOOGL) appears to be on its way to taking out its 2021 high after rallying nearly 80% from its recent lows in late 2022. In fact, the stock only needs to climb another 10.74% to establish a new pinnacle. For the stock to get there, the digital advertising market needs to continue to rebound following a weak 2022, while operating margins at Alphabet’s Google Cloud division need to expand further. Additionally, any signs that Alphabet’s AI investments are paying off would be well-received by the market. Honeywell International HON mountain 2021-01-01 Honeywell International’s stock performance since the start of 2021. Record high: $234.18 on Aug. 11, 2021 Percentage gain needed for new record: 22.47% P/E multiple at record: 26.73 Current P/E: 19.4 For Honeywell International (HON) to return to more than $234 per share, the industrial conglomerate needs all of its business units to be in growth mode. That hasn’t been the case lately, though. Instead, the company’s aerospace division has been the star of the show while its other three divisions – Honeywell Building Technologies; Performance Materials and Technologies; and Safety and Productivity Solutions – have largely been underwhelming due to end-market challenges for each. At this point, though, the setup is there for a 2024 rebound for its lagging segments and durable strength in aerospace, which supports our continued investment in the company. Meta Platforms META mountain 2021-01-01 Meta Platforms’ stock performance since the start of 2021. Record high: $382.18 on Sept. 7, 2021 Percentage gain needed for new record: 14.07% P/E multiple at record: 24.67 Current P/E: 19.5 Like Alphabet, the next leg higher for Meta Platforms (META) shares depends in large part on the digital ad market recovery. If that persists, the Instagram and Facebook parent is well-positioned for earnings growth because its “year of efficiency” in 2023 has created a company with a leaner cost structure. In general, that should mean as Meta’s revenue increases, more dollars will flow to its bottom line. These initiatives came after the social media giant’s tanked last year on concerns about a lack of cost discipline at the company. Another catalyst that could push Meta’s stock price higher is narrowing losses in its Reality Labs division – home to the company’s metaverse ambitions. That could materialize a few ways, such as sales of Meta’s Quest headsets picking up or management deciding to spend less on the division all together. Starbucks SBUX mountain 2021-01-01 Starbucks’ stock performance since the start of 2021. Record high: $126.06 on July 26, 2021 Percentage gain needed for new record: 19.41% P/E multiple at record: 35.84 Current P/E: 25.0 Starbucks (SBUX) is traveling down the road toward to a new high – in fact, it was close to arriving at that destination in May, when the stock traded at nearly $115 per share. After veering off course throughout the summer, amid investor concerns about the coffee chain’s business in China, Starbucks is back on track. As long as CEO Laxman Narasimhan charges ahead on the company’s reinvention plan – which is intended to simultaneously drive sales growth and margin expansion – a new record high for the stock is attainable. Improvements in the Chinese economy wouldn’t hurt, too. Stanley Black & Decker SWK mountain 2021-01-01 Stanley Black & Decker’s stock performance since the start of 2021. Record high: $220.69 Percentage gain needed for new record: 140.51% P/E multiple at record: 19.33 Current P/E: 22.4 Similar to Danaher’s all-time high arriving amid unusually strong end-market demand, Stanley Black & Decker (SWK) saw its stock price lifted to nearly $221 per share by one of the hottest housing markets this generation. Earnings soared to $10.48 per share in 2021. The stock would later fall to earth, dragged down by a nasty cocktail of fading demand as the housing boom rationalized, excess inventory and supply-chain snarls. Overall macroeconomic concerns added to the downward pressure. Last year, the company’s per-share earnings were down by more than 50%. However, the DeWalt parent’s turnaround story – the reason we took a stake in the company earlier this year – has been on display in back-to-back quarterly reports . (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) 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.
It’s been nearly two years since the Federal Reserve indicated it was abandoning over a decade of easy-money policies that ultimately helped fuel major stock market gains during the Covid-19 pandemic.
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