Looking for growth? It's here, 2 stocks you could finally own

The FED has started to hint its new dovish stance to the markets, with the possibility of up to six rate cuts coming to you in 2024. What this means for markets, well, that could take longer than you intend to stay and read on the best strategies out there, so stick with that: the best strategies.

Because rates will be coming down next year, or so the FED says, bond yields and financing rates will also be coming down. In fact, the 10-year treasury yield has already declined from its previous 5.0% high to be below 4.0% today. With cheaper money, investors and markets naturally take a different stance on 'riskier' stocks.

So look, while stocks like Chewy NYSE: CHWY and Air China OTCMKTS: AIRYY were easy to pass on due to their lack of track record and other perceived risks, where names like Costco NASDAQ: COST seemed infinitely safer (trust it, the price action shows); today might be different, and markets are already falling in love with these underrated names.

No thank you, otherwise

That is probably what most investors replied to brokers and analysts trying to talk some sense into them, namely when pitching why Chewy and Air China are not as bad as they were thought to be in recent times. They are more 'defensive' than you think, meaning they are relatively immune to the business cycle.

Think about it: chewy sells pet goods and essentials like food, medicine, and grooming services. If you are a pet owner - or know one - it would be hard to imagine a recessionary environment that would cause you - or the pet owner - to skip buying pet food for months at a time.

Yet, Chewy has been trading as if it belonged to the consumer discretionary sector, which is infinitely more cyclical than the staples sector. But anyway, markets are finally beginning to realize this underrated name's upside potential.

As for Air China, it can be a bit more cyclical and less essential than Chewy, but business travel is still a vital function for the Asian economy today. Within airline stock groups, Air China has also earned the market's love for reasons that will become obvious in just a bit. 

So because Chewy is a younger company and considered discretionary tech spending, investors used to pass it by. Air China is, well, in China! And every Chinese stock has had its share of bearish momentum during 2023, but that could be over soon.

Suddenly bullish 

Alright, time for the note-taking; here's where you can take something away to think about if you make a decision; let it be an educated decision. Breaking down the consumer products sector, mixed with stapes and e-commerce platforms, where does Chewy stand?

Looking at the forward price-to-earnings ratio, which is the market's way to slap a value on the next twelve months of earnings for a business, the sector's average comes out to be 19.5x. Chewy trades today at 33.7x, a 73.3% premium to the rest of the space!

The word premium is typically associated with better service or quality, right? Well, the same applies to stock valuations, within reason. Markets must be expecting something out of Chewy in the future to beat the sector; otherwise, why would they overpay?

Well, that 'something' can be found in analyst earnings projections for the next twelve months, which lands on a 21.01% expected advance, which is also above the industry's average 11.1% growth in EPS. The company's latest financial quarter shows significant advances to fulfill these predictions.

Knowing what you know now, it should be no surprise that these same analysts have slapped a price target of $32.4 a share for Chewy stock. If these targets are to be proven right, the stock needs to rally by 36.8% from today's prices. Is that enough growth for you?

Tough act to follow, but not for Air China. The airline industry trades at an average forward P/E of 5.6x, and an 18.8x multiple will place the Chinese airline at a 237.0% premium to the industry; all you need to do now is check that the earnings growth justifies this price tag.

Airlines aren't exciting, so an average EPS growth of 11.2% for the next twelve months is nothing to write home about. Still, Air China's 119.3% projected growth definitely is. The price tag is justified!

By the way, revenues grew by 150.6% over the past twelve months, according to the latest quarterly presentation; that's definitely champion-level growth for an airline.

Let the market realize for itself, which it is doing now, that these stocks are harmless and actually do carry crazy upside based on logical fundamental reasons.