By Jacob Sonenshine

Losses in shares of the enormous companies that dominate their industries in the U.S. have gone far enough. It is time to buy many of them.

The S&P 500 has fallen 8% from the record closing level it hit in February, mainly because investors are worried that President Donald Trump's tariffs will lift the cost of imports, denting consumer demand by forcing companies to raise prices. That would hit corporate earnings.

Stocks' prices relative to the earnings companies are expected to produce in the near term have dropped to reflect the risk. The most expensive stocks, those with the highest price/earnings ratios, have been dragged lower, even though many of them aren't in businesses where there is a high risk that demand will be lost.

There is a laundry list of companies that have market capitalizations of more than $100 billion that look like buys. Data from Adam Parker, equity strategist at Trivariate Research, show that the ones in the top third in terms of sales growth forecast by analysts have outperformed the others since 2014. Those with low short interest, meaning companies with the lowest portion of their market capitalizations held as bets that prices will fall, have beaten the rest as well.

Simply put, companies that are growing and that have momentum with bulls, or optimists in the market, tend to outperform other large-cap stocks over long periods. Data from the past decade indicate that these stocks are also better positioned than shares of other large-caps, falling less even if the broader market tumbles further.

When the equal-weighted S&P 500, which reflects the true performance of the breadth of stocks on the index, drops more than 2% in a month, the best large-caps don't drop nearly as much, Parker's data show. As he pointed out in a research note Tuesday, some names that fit the bill include Visa, Mastercard, Oracle, and Netflix.

Another is Eli Lilly. Analysts expect sales for the $804 billion drug maker to grow 16% annually starting in 2026 to reach almost $93 billion by 2028, according to FactSet. They anticipate almost 20% growth for Lilly's GLP-1 drugs, which are expected to combine for almost $60 billion of total sales by 2028.

Analysts and industry research hubs expect spending on obesity treatments to reach more than $100 billion a year. Ely Lilly's products look positioned to capture much of it. Its Zepbound and Mounjaro have taken the most market share to date and are among the best treatments.

That could spur rapid earnings growth. Analysts expect profit margins to expand because the company has already gotten through a major increase in spending on areas such as research and development and manufacturing capacity. Earnings are expected to rise just over 23% annually over the coming three years.

That outlook looks likely to hold up. Expectations for Lilly's sales have risen this year regardless of concern about competition from the likes of Amgen and Gilead Sciences, which are developing their own obesity products. Lilly's sales and earnings both came in higher than expected in February.

That kind of growth should bring the stock higher. It trades at just over 34 times the earnings expected for the coming twelve months, down from almost 39 times before it got caught up in the market's drop. That is 65% above the S&P 500's 20.5 times, down from 88% after Lilly shares rallied at the start of March.

Salesforce, with a market cap of $268 billion, is also on the list. It is expected to generate 10% annual sales growth over three years, bringing the total to almost $54 billion by 2028.

The software company is converting its cloud-based solutions for customers' sales and marketing planning into artificial intelligence-based agents, which can save time and money for customers and nudge them to pay more for the offerings.

While the economy may slow down, it would take more than a mild hit to growth for companies to significantly pull back on long-term investments such as AI capabilities.

The growth should bring profits higher. Although Salesforce will ramp up its capital investments, many operating expenses won't grow as fast as revenue. Analysts expect profit margins to inch higher and earnings to rise 11% annually.

That all means the stock can gain. It trades at just under 25 times the EPS expected for the coming 12 months, below this year's peak of 32 times. The valuation represents a 20% premium to the S&P 500, versus 82% when Salesforce's multiple peaked this year.

These stocks are screaming buys.

Write to Jacob Sonenshine at jacob.sonenshine@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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March 20, 2025 14:17 ET (18:17 GMT)

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