Investors’ renewed optimism regarding the economic recovery, and the consequent stock market momentum, has led to sky-high valuations for several stocks, which in some cases is not justified considering those names’ growth prospects. In addition, because the central bank has acknowledged that price increases have been more rapid and persistent than it anticipated, some investors could be spooked. So, we believe it could be wise to bet on quality stocks, such as Oracle Corporation (NYSE:ORCL) and AstraZeneca Plc (NASDAQ:AZN), which look undervalued at their current price levels. Read on.With significant improvement in the employment rate and the overall economy, Fed Chairman Jerome Powell has announced the Fed’s plans to begin bond tapering later this month and has reaffirmed that the central bank will not rush to raise interest rates. This has led the major stock indices to edge higher to close at record highs on Wednesday.
However, in the face of rising inflation, which the Fed deems "transitory," it may be risky to invest in high-flying stocks, which have reached valuations that in some cases are not justified by their company’s growth prospects. This is because any market downturn could spell a significant price decline for these stocks. But it also could be an opportune time to bet on quality stocks that are trading at reasonable valuations. This year, value stocks have performed relatively well, as evidenced by the SPDR Portfolio S&P 500 Value ETF’s (SPYV) 19.7% returns year-to-date.
Despite performing well in recent months, shares of Oracle Corporation (ORCL) and AstraZeneca Plc (AZN) appear undervalued at their current price levels, given these companies’ growth attributes. So, we believe these stocks could be ideal bets now.