Renowned billionaire stock picker Ken Fisher is making headlines once again with his unapologetic stance on the Federal Reserve, which he has openly criticized as ‘idiotic.’ Fisher, founder of Fisher Investments, advises investors not to hang on every word coming from the Fed.
Fisher points out the Fed’s unpredictable track record, highlighting the September minutes that warned of prolonged higher interest rates. However, he reminds investors that the Fed often changes its tune. He recalls how, in May 2022, Fed Chairman Jerome Powell dismissed the idea of a 75 basis point interest rate hike, only to initiate three consecutive hikes the following month.
While the Fed’s actions aimed to control surging inflation, Fisher had foreseen this scenario, having previously explained that inflation would gradually recede. As anticipated, inflation has started to wane, and Fisher believes it will continue to do so while the bull market continues its upward trajectory.
According to Fisher, the Fed’s target of a 2% annual inflation rate is still on track, though it may not be reflected in the current numbers. He likens the recent stock market dip post-July to previous market hiccups in December and late winter, albeit slightly more substantial and extended. In his view, each of these downturns paves the way for the next leg up in the bull market.
With a bullish outlook on the market, Fisher, whose net worth is approximately $7.1 billion, is keen on a couple of stocks poised to benefit from the market’s resurgence. We’ve analyzed two of his top picks using TipRanks’ database to gauge expert sentiment.
- ServiceNow (NOW)
Fisher is heavily invested in the software sector, particularly in ServiceNow, a cloud-based platform renowned for its comprehensive suite of software solutions that streamline and automate various business processes. ServiceNow excels in IT service management (ITSM), empowering organizations to efficiently address IT issues, incidents, and requests. It also offers robust tools for IT operations management (ITOM), providing insights into IT infrastructure and performance optimization. Beyond IT, the platform extends its capabilities to departments like HR, customer service, and security operations.
ServiceNow has reaped the rewards of the 2023 bull market, with shares appreciating by 45% year-to-date. In the last reported quarter (2Q23), the company reported a 23% YoY revenue increase to $2.15 billion, surpassing Street expectations by $20 million. Adjusted EPS of $2.37 also outperformed consensus estimates by $0.32.
Fisher remains optimistic about the stock, with a holding of 1,370,996 shares worth $770 million. Despite concerns about decelerating growth due to rising interest rates, HSBC analyst Stephen Bersey is confident in ServiceNow’s trajectory. Bersey anticipates a turnover increase of 23.2% to $8.92 billion in 2023, driven by strong demand for the company’s services. He expects ServiceNow to approach a revenue run-rate of $3 billion by Q4 FY23, reaching $11.1 billion in revenue for 2024, with a growth rate of 24.4% per annum.
Bersey maintains a Buy rating on ServiceNow, with a price target of $704, implying 25% upside potential in the next 12 months. The consensus rating is a Strong Buy, with all but one analyst recommending a Buy. The average price target of $642.40 suggests a 14% gain over the next year.
- Union Pacific (UNP)
Moving away from the tech sector, Fisher is also heavily invested in Union Pacific, a prominent American transportation and railroad company with a history dating back to 1862. The company plays a vital role in the transportation of goods, connecting the eastern and western parts of the United States through an extensive network of railroads. Union Pacific serves various industries, including agriculture, energy, industrial commodities, and consumer goods, contributing to economic growth and connectivity in the US.
While Union Pacific is essential to North America’s infrastructure, it reported Q2 results that missed expectations, with a 5% YoY drop in revenue to $5.96 billion and an EPS of $2.57 that missed forecasts by $0.20. The appointment of a new CEO, Jim Vena, brought some consolation to investors.
Fisher has a significant stake in the company, owning 5,657,912 UNP shares worth $1.17 billion. RBC analyst Walter Spracklin is confident in Union Pacific’s prospects under Vena’s leadership. He expects operational improvement despite volume challenges and believes that UNP’s competitive advantages, including access to Mexico and the US Gulf Coast’s chemicals sector, will fuel long-term growth.
Spracklin rates UNP shares as Outperform (Buy), with a price target of $282, indicating a potential 36% increase in the coming year. The consensus rating is a Moderate Buy, with 13 Buy and 8 Hold recommendations. The average price target of $246.41 implies a ~19% return, with the added benefit of a 2.5% dividend yield.
