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The Russell 1000 Growth Index has climbed down from its year-to-date highs, which Citi believes has set up a “buy growth on a pullback” opportunity. The broader growth leadership index is up 25% in 2023 on a total return basis and peaked at 34% on July 19. Since then, the index has pulled back more than 6%, with significant underlying single-stock dispersion, according to strategist Scott Chronert. Almost two-thirds of the stocks in the index have fallen 10% or more from their 2023 highs, with one-third of the names more than 20% below their year-to-date peaks. “The implication is that there has been more single-stock pressure under the surface than index price action would suggest,” Chronert wrote in a note from Friday. “Essentially, we think there is an attractive medium-term setup for Growth as we should have a decent margin of safety for fundamentals.” Citi screened for growth names to consider on a pullback. The stocks below met the following criteria: A buy rating from the firm. At least 75% of market cap assigned to growth-style per Russell. Down 10% or more from year-to-date highs (after March 31). Consensus free cash flow per share estimates above March 31 levels. FY5 free cash flow per share greater than or equal to market-implied estimates. Take a look at some of the names on the list and where analysts see the stocks headed next. Defense and aerospace company Lockheed Martin is down 18% from its 2023 high in April. In contrast, the company’s free cash flow per share consensus estimate has risen nearly $5 since the end of March. The company has struggled with supplier issues for its aircraft and reduced its full-year delivery forecast for F-35 jets earlier in the month. Shares have fallen 15% year to date. Although image-sharing company Pinterest has had a modest rally following its recent investor day, shares are still down 14% from their year-to-date highs. The stock is still up 8.8% in 2023. The company’s management is forecasting revenue expansion of about 8% this year after a slowdown in 2022 and 2023. The full-year free cash flow per share estimate has gained $2.03 since the end of the first quarter. Chipmakers Nvidia and KLA also made the list. Nvidia, which has surged more than 188% year to date, is now down 18% from its highest level in late August. While Nvidia’s monumental year-to-date rally may have some suspecting the stock is overbought, its average price target suggests shares could rally an additional 47.7% from Friday’s close. Nearly 95% of analysts covering the stock rate it a buy. Dutch-based KLA, meanwhile, has declined 14% from its 2023 peak. The stock is still more than 20% higher for the year. — CNBC’s Michael Bloom contributed to this report.
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ReportWire
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