American International Group and Tenet Healthcare are among this week's top stocks to watch, along with Williams Cos., Southern Copper and Morgan Stanley.
Tenet stock and the other leaders to watch are showing relative price strength as the stock market heads south into a correction. Several on the list are near buy points. However, in the current environment investors should focus on building watchlists of resilient names, those most likely to act as possible leaders in the next market rally.
In addition, SCCO stock earned a spot on the IBD 50 list.
All five stocks have strong or improving relative strength lines. And AIG and Tenet stock have RS lines making new highs. A rising RS line means that a stock is outperforming the S&P 500 index. It is the blue line in the charts shown.
Just because a stock is holding relatively well so far doesn't mean it will continue to do so.
Stock Market Correction: Watch The RS Line
The relative strength line is a quick way to spot comparative winners in any market — up or down.
The Relative Strength At New High stocks list is a great place to look for quality names with strong RS lines. IBD's stock research platform MarketSmith has a screening tool that identifies stocks with RS lines making new highs.
In addition, the best growth stocks have an IBD Composite Rating of 90 or better, out of a best-possible 99.
All the stocks to watch this week meet that bar. SCCO stock leads with a perfect Composite Rating of 99. It's followed by AIG stock with a 98, Williams with a 97, Morgan Stanley with an 89, and Tenet stock with an 85. The Composite Rating combines five separate proprietary IBD ratings, based on key fundamental and technical criteria, into one easy-to-use score.
The insurance giant fell 7.4% to 57.32 last week, backing away from the top of a cup-shaped base. Despite the drop, AIG stock is holding above the 50-day line. It now has a handle on its cup base, giving a 62.35 buy point.
The RS line for AIG stock made a new high before pulling back just a bit, according to MarketSmith chart analysis.
The life and property insurance provider shows a superior IBD Relative Strength Rating of 92. That means it has outperformed 92% of all stocks over the past 12 months. AIG also shows an EPS Rating of 92.
In the first three quarters of 2021, AIG earnings growth ranged between 20% and 855%, as it rebounded from the pandemic. The insurer's 2020 earnings almost halved due to Covid-19 pressures.
In all of 2021, Wall Street expects AIG earnings to grow 88%, and a further 13% in 2022, according to FactSet.
Tenet Healthcare Stock
THC stock dropped 6.3% to 75.97 last week, falling further below an 83.79 entry. Tenet stock undercut the 50-day line on Friday, but is holding in a 10-week consolidation.
The RS line for THC stock is making a new high, a positive sign as the broader market wilts.
Tenet Healthcare has a 95 RS Rating and a 98 EPS Rating.
Over the past three quarters, Tenet earnings growth ranged from 1.6% to 211%. Analysts expect Tenet earnings to fall 21% in all of 2021, then to rebound to a 5% gain in 2022, FactSet says.
The Dallas-based company's still grappling with Covid's impact on operations. It saw cases accelerate due to the delta variant in Q3 "with a peak in such cases in late August 2021," according to its October earnings release. That was before the omicron variant reared its head.
Williams stock lost 1.8% to 29.76 last week, forging a handle in its cup base, at least on a weekly chart. That gives it a 29.94 handle entry.
The RS line for Williams stock is lackluster but improving in this young year.
The oil and gas firm has an 89 RS Rating and an 86 EPS Rating.
Over the first three quarters of 2021, Williams earnings growth ranged from 8% to nearly 36%. Analysts expect Williams earnings to rise 9% in all of 2021, and a further 9% in 2022, FactSet says.
Shares of Southern Copper shed 2.3% last week to 66.96, just dipping below a 67 buy point from a cup base that goes back to October. It should be noted that the base formed below the 200-day line, a negative sign, though SCCO stock is now back above that support level.
Southern Copper stock has been pausing over the past several days. While slightly too low to be a proper handle, that could offer an early entry for SCCO stock in the larger consolidation going back to last May.
The RS line for SCCO stock is trending up after a sharp decline in the past year.
The copper miner bears a 73 RS Rating but a 95 EPS Rating.
Over the first three quarters of 2021, Southern Copper earnings grew between 72% and 256%. Analysts expect Williams earnings to more than double in all of 2021, then slide 15% in 2022, FactSet says.
In the short term, Southern Copper faces concerns about Chinese copper consumption due to real estate troubles and power shortages. But infrastructure spending in the U.S. and globally should support demand for copper and other metals it produces in coming years and decades.
Morgan Stanley Stock
MS stock fell 1% to 98.86. In the prior week, Morgan Stanley stock failed a breakout past a 106.05 buy point.
The RS line for Morgan Stanley stock rose in the past year. It's starting to turn up again after a recent slide. Morgan Stanley outperformed other financials last week, especially archrival Goldman Sachs, which gapped lower on weak earnings.
Last week Morgan Stanley trumped earnings views while falling short of revenue estimates for the fourth quarter.
Over the first three quarters of 2021, Morgan Stanley earnings ranged from a gain of 28% to a decline of 7%. Analysts expect Morgan Stanley earnings to fall 7% in 2022, then rebound 11% in 2023, FactSet says.
Morgan Stanley touts a "better business mix and profitability" as it shifts more to wealth management, in part via acquisitions such as E-Trade and Eaton Vance. But trading revenues are a weak spot, expected to decline across equites and fixed income in 2022.
The investment bank has an 88 RS Rating and 85 EPS Rating.
Find Aparna Narayanan on Twitter at @IBD_Aparna.