The benchmark S&P 500 index has spent the summer coiled in a tight range just below its “short-term moving averages,” currently down over 3% from its June high.
Beneath this surface-level stillness, an aggressive sector rotation is underway across the US stock market.
Institutional capital is flowing out of technology and into healthcare and financials, both of which are up double digits since June.
What this means is that investors are not abandoning stocks – but are repositioning into “earnings-driven” names. Here are two that particularly stand out.
Eli Lilly (LLY)
Eli Lilly stock represents a prime beneficiary of capital moving into healthcare.
After spending seven months pinned beneath a strong $1,200 resistance, LLY finally had a technical breakout this month.
It is currently in the midst of completing a throwback pattern, digesting gains within a rather tight, downward-sloping flag resting directly above prior resistance.
LLY shares sit comfortably above their short- and long-term moving averages (MA) stacked in a bullish alignment (21-day above 50-day above 200-day), while the LLY/SPY relative strength ratio trends toward record levels.
Eli Lilly’s forward price-to-earnings (P/E) multiple at about 34x sure is premium, but it’s justified by fundamental GLP-1 driven momentum, including a projected 31% increase in revenue and a 43% increase in earnings per share (EPS) this year.
The aforementioned technical and financial strength is keeping Wall Street analysts positive on Eli Lilly.
The consensus rating on the pharma giant sits at Strong Buy currently – with price objectives going as high as $1,600, indicating potential upside of more than 33% from current levels.
A 0.57% dividend yield on LLY makes it even more attractive as a long-term holding.
Enova International (ENVA)
Within financials, Enova stock offers a “high-growth” fundamental profile paired with valuation discipline.
This tech-enabled lender behind CashNetUSA, NetCredit, and OnDeck is currently consolidating near 52-week highs following a steep summer advance.
ENVA shares are digesting their gains in a tight “pennant pattern” characterized by robust volume accumulation on up days and multi-month highs in its relative strength ratio against the broad market.
Technically, the firm’s share price sits handily above key moving averages (MAs), indicating bulls remain firmly in control across multiple timeframes.
Moreover, Enova’s fundamentals remain compelling as well: the company grew its bottom line by 33% in the latest reported quarter and is currently trading at just over 13x forward earnings.
Projected revenue growth of 18% and 22% over the next two fiscal years, paired with EPS growth expectations of 33% and 20%, reflect resilient credit conditions.
Wall Street analysts currently rate Enova International at Strong Buy – with price objectives going as high as $300, indicating potential upside of roughly 23% from here.
Unlike Eli Lilly & Co, however, Enova does not currently pay a dividend.
The post These 2 stocks are worth watching amidst ongoing stock market rotation appeared first on Invezz
