‘Remain fully invested:’ Evercore’s Emanuel names the stocks set to outperform

Evercore ISI’s Julian Emanuel says it’s time to buy “sector neutral” stocks with earnings momentum but lagging price momentum. He urged investors to remain “fully invested.” “The current market shares characteristics with past historical Momentum Markets 1995, 1999 and 2017…[the] relentless rally making it as dangerous to be underinvested as it is to be overexposed,” Emanuel said in notes sent to CNBC on Tuesday. But the rally may not continue until the end of the year. The senior managing director of equity, derivatives and quantitative strategy at the firm gave a year-end price target of 4,450 for the S & P 500 — representing around 2% downside from Monday’s close. His firm’s base case is for a recession to start in the fourth quarter of this year, he said. Names with earnings momentum Emanuel told CNBC on Tuesday that there’s a group of stocks whose earnings momentum is “superior to peers.” “We recommend remaining fully invested, shifting focus to a sector neutral quant screen of stocks whose EPS momentum is better than peers yet whose price momentum lags since the March inflection to Maximum Momentum,” he wrote in a July 23 note. “Such ‘Earnings Mo’ to Price Mo'” stocks could be expected to outperform as price momentum leaders ‘cool off,'” he wrote. Evercore gave these names an outperform rating: Information technology: Splunk , Workday Industrials: Deere & Co Energy: Cheniere Energy Healthcare: Alnylam Pharmaceuticals Communication services: Pinterest Utilities: Eversource Energy Future of cloud stocks Separately, Emanuel is bullish about the long-term future of cloud businesses, though he expects some choppiness for now. Revenue growth at cloud businesses slowed earlier this year, but the buzz around artificial intelligence raises the possibility of a boost. “When you think about the cloud, there has been reasons because of corporate slowdowns that it has been not as expected in recent quarters. And that choppiness is likely to continue given the probability of recession,” he told CNBC’s ” Squawk Box Asia .” But he said that the long-term story is “exceptionally robust,” thanks to an expected “productivity boost” from China. “But again, what happens in the long term has to be separated by what could happen in the short term, and to us a lot of these names do feel a bit overextended,” said Emanuel.