Don’t be fooled, Ken Fisher says – this bull market has legs. Here are 2 stocks he’s using to bet on a bounce

The best investors will often tell you that one vital ingredient for stock market success is an overlooked and underappreciated one: patience.

With this year’s bull market appearing to stall, billionaire stock picker Ken Fisher reminds investors that it’s a quality needed to weather the more difficult periods, which are also a natural component of any bull market.

“Volatility isn’t a flaw in this bull market. It is a feature of all bull markets, which proverbially climb a ‘Wall of Worry,’” the Fisher Investments founder recently said. “The bull market born last October should keep delivering worthy returns, but sporadically. Reaping them requires patience, which can be difficult for some.”

But sticking with it is Fisher’s advice: “Don’t be fooled – this bull market has legs, and it is crucial you don’t get scared of it now.”

Fisher has decades of stock market success behind him and has a net worth of $7.1 billion, so he most definitely knows what he’s talking about here. For investors looking to get ahead in the market, it’s worth finding out which stocks he’s patiently counting on to bring the goods once the upward curve resumes.

We’ve started this process and have taken a look at a pair of equities that make up a meaningful chunk of Fisher’s portfolio – both holdings exceed $1 billion in value. But it’s not only Fisher showing big faith in these names; according to the TipRanks database, the analyst consensus rates both as Strong Buys. Let’s see what makes them so.

Charles Schwab (SCHW)

Fisher holds a big position in one of the most prominent companies in the investing world. Charles Schwab is a brokerage firm that has played a pivotal role in shaping the landscape of online investing and financial services. Founded in 1971 by Charles R. Schwab, it has grown to become one of the largest and most respected financial institutions in the US.

The company offers a wide range of services, including stock and bond trading, mutual funds, exchange-traded funds (ETFs), retirement accounts, and wealth management services. Charles Schwab provides a user-friendly and technologically advanced platform for investors and was a pioneer in introducing online trading, which revolutionized the way individuals manage their investments. With a market cap over $106 billion, the company is the U.S.’s biggest publicly traded investment services firm, with ~$8 trillion in client assets.

That said, 2023 has been no easy ride, especially earlier in the year when the stock got caught up in the fallout of several prominent bank collapses. The shares went through an almost 40% drop between January and early March. The stock has bounced back a bit since, aided by a better-than-expected Q2 print.  

While revenue fell by 8.4% year-over-year to $4.66 billion, the figure exceeded Street expectations by $50 million. Likewise, adj. EPS of $0.75 beat the consensus estimate by $0.04.

Meanwhile, Fisher must have sensed the pullback offers an opportunity to load up. He bought 1,302,697 shares in Q2, upping his SCHW stake by 8%. His total holdings now stand at more than 18 million shares, currently worth ~$1.04 billion.

Assessing the company’s prospects, Piper Sandler analyst Patrick Moley thinks the future looks bright for this financial giant.

“While eBrokers typically fall out of investor favor at the end of rate hiking cycles, the unprecedented pace of rate hikes this cycle provides a unique opportunity for NIM expansion and earnings growth even if the Fed starts cutting,” Moley explained. “In our view, SCHW remains a ’24/’25 story as (1) a return of deposit growth, (2) the paydown of temporary ST funding, (3) NIM expansion, and (4) the realization of AMTD integration synergies and incremental expense saves converge to produce strong earnings power and an attractive valuation for LT investors into this industry leading financial services franchise.”

As such, Moley rates SCHW shares as Overweight (i.e., Buy), with an $86 price target, indicating potential for ~49% growth over the coming year. (To watch Moley’s track record, click here)

Most on the Street agree with Moley’s take. Based on 13 Buys, 2 Holds and 1 Sell, the stock claims a Strong Buy consensus rating. At $73.80, the average target points to 12-month upside of 28%. (See SCHW stock forecast)

Intuitive Surgical (ISRG)

Patience might be one quality investors should adhere to, but diversification is often seen as another. And in that sense, it is fitting that the next Fisher-backed stock we’ll look at is of an entirely different hue. Fisher holds 4,444,151 shares of medical device maker Intuitive Surgical. These command a market value of more than $1.32 billion.

In one way, Intuitive Surgical is similar to Charles Schwab above – it is also a pioneer in its field. It is a healthcare tech company that has revolutionized the field of minimally invasive surgery. The Sunnyvale, California-based firm is best known for its da Vinci Surgical System, a groundbreaking robotic surgical platform. The da Vinci System enables surgeons to perform complex surgical procedures with enhanced precision, dexterity, and control through minimally invasive techniques. This innovative technology has found applications in various medical specialties, including urology, gynecology, general surgery, and cardiothoracic surgery, making it a vital tool in modern healthcare.

Its usage is on the up, too. In the most recently reported quarter, for 2Q23, worldwide da Vinci procedures increased by around 22% compared to the same period last year while the company placed 331 systems, vs. the 279 placed in 2Q22. As of the end of the quarter, the installed base stood at 8,042 systems, representing a 13% year-over-year uptick.

These activities led to outperformance in both the top and bottom lines. Q2 revenue climbed by 15.8% year-over-year to $1.76 billion, edging ahead of Street expectations by $20 million, while adjusted EPS of $1.42 beat the forecast by $0.09.

Piper Sandler analyst Adam Maeder has been keeping a tab on ISRG’s progress and he points out a specific opportunity that might be somewhat underappreciated.

“We recently took a renewed look at the China opportunity for Intuitive, which we believe is quite sizable in the coming years,” the 5-star analyst noted. “Not only will ISRG likely place a substantial amount of systems under the new quota, da Vincis in China are some of the highest utilized systems in the world—which should also bode well for procedure growth. Our math suggests that system placements from the new quota coupled with robust procedure volume from a growing install base should result in nicely accretive growth in 2023-2027. We believe ISRG’s China revenue could more-than-double from ~ $300M in 2023 (our estimate) to roughly $650M in 2027. While the Street views China to be an important growth contributor, we do not believe models are fully incorporating the magnitude of this potential growth lever.”

These comments underpin Maeder’s Overweight (i.e. Buy) rating while his $385 price target implies shares will appreciate by ~30% over the next year. (To watch Maeder’s track record, click here)

Turning now to the rest of the Street, most other analysts are on the same page. With 12 Buys and 2 Holds assigned in the last three months, the word on the Street is that ISRG is a Strong Buy. Additionally, the $377.14 average price target brings the upside potential to ~27%. (See ISRG stock forecast)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.