Why the Stock Market Is Finally Rewarding Value Stocks
The S&P 500 (SPY) has actually fallen -2.13% over the past week. That’s not so good. But oddly the POWR Value portfolio actually rallied the exact opposite; +2.13%. How is that possible? Because the market is finally rewarding value stocks at this time after years and years of showering growth stocks with unsustainable premiums. This script will only continue to work IF the economy continues to expand keeping the bull market in place. That is why we will continue to focus on the economy in this week’s commentary to help us chart our investment course for the future. Read on below for more….
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(Please enjoy this updated version of my weekly commentary published April 15th, 2022 from the POWR Value newsletter).
All major economic reports that show what is currently happening in the economy remain strong. That includes the early April reports for everything from:
Government Employment: 426,000 jobs added +3.6% unemployment rate
Weekly Jobless Claims: Lowest readings since 1968 (not a typo)
ISM Services 56.5 with an even better 60.1 for New Orders
ISM Manufacturing 57.1
Retail Sales +0.5% MoM vs. +0.4% forecast
This is actually fantastic news. Unfortunately, many indicators of potential future weakness continue to be alarming.
That list starts with still raging inflation leading to a Hawkish Fed. The fear is that the Fed will go too far in tamping down the flames of inflation that they actually produce a recession with bear market in tow.
Also emerging at this time is a counterbalance that there are signs of peaking inflation. Meaning it is at its ugliest now and will improve going forward.
If this is true, then it lessens the need for Fed intervention…and thus lessens fears that they will overly remove accommodation…and thus lessens the odds of recession and bear market.
To say that these are confusing times is an understatement. The very proof of that is showing up in “off the charts” market volatility.
Yet indeed the bull vs. bear answer lies in continuing to monitor the economic situation. Just remember that it is harder to create a recession and bear market then you might imagine.
That is just economic fact proven by the stock market being in bull market mode 85-90% of the time in the past century.
The above understanding leads to a need to keep a bullish bias in place until the preponderance of the evidence points bearish. That is currently not the case.
The more the bearish whispers grow into a scream…the more defensive we will become.
Conversely, the more the bearish whispers fade away…the more aggressive we will become.
Portfolio Update
This is the first time I have seen this happen…but so glad it did. I am referring to our returns being the exact opposite of the market this past week:
-2.13% for S&P 500
+2.13% for POWR Value
Its easy to note the continued momentum of our 2 energy momentum plays for the outperformance. The good news doesn’t stop there. Don’t forget that our 2 latest picks are in the plus column since inception as the market sank.
But really it comes down to this…a rising rate environment punishes growth stocks and rewards value. Truly it is our time to shine!
Closing Comments
For as much as we all enjoyed the outperformance this week, lets remember that it’s still a volatile market with tons of sector rotation. That could mean that we end up on the wrong side of market action next week.
That is why we value investors need to display great patience at times like these to not overreact to things in the short run. Let’s keep our eyes fixed on the longer term horizon to help chart our course to continued outperformance.
What To Do Next?
If you’d like to see more top value stocks, then you should check out our free special report:
What makes these stocks great additions to any portfolio?
First, because they are all undervalued companies with exciting upside potential.
But even more important, is that they are all A rated Strong Buys according to our coveted POWR Ratings system. Yes, that same system where top-rated stocks have averaged a +31.10% annual return.
Click below now to see these 7 stellar value stocks with the right stuff to outperform in the coming months.
SPY shares closed at $437.79 on Friday, down $-5.52 (-1.25%). Year-to-date, SPY has declined -7.54%, versus a % rise in the benchmark S&P 500 index during the same period.
About the Author: Steve Reitmeister
Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks.
The S&P 500 (SPY) continues to retrace the spectacular 10% rally in March. Now, we have given back about 50% of these gains. In many ways, this type of back-and-forth price action can be frustrating, but it should be expected in range-bound markets. And, if we take a step back, the market action could be construed as healthy given the strong gains from March 2020 to January 2021. These gains could be digested in multiple ways. And many of these would be much more destructive than the current 8% decline or so from the top and months of choppy trading. At the same time, there have also been some opportunities that we have been able to capitalize upon. In today’s commentary, I want to share some reasons that I’m feeling more constructive about stocks and why we could be nearing the end of this corrective period. Then, I want to preview some moves I’m considering. Read on below to find out more….
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(Please enjoy this updated version of my weekly commentary published April 15th, 2022 from the POWR Stocks Under $10 newsletter).
First, let’s review the past week…
Over the past week, the S&P 500 is down about 2.5%. Another 25% of the March rally unwound like last week.
Interestingly, the Russell 2000 was an outperformer as it finished the week flat, while the Nasdaq 100 was down close to 4%.
What’s interesting is that after the initial drop lower, we basically traded sideways. Despite a close at the lows today, we remain slightly above Wednesday’s lows.
Resilience
This is the word that comes to mind when I think about the market and the economy.
There have been significant headwinds in the form of high inflation, a hawkish Fed, and geopolitical risk. Add to this, an overbought and overvalued stock market that was ripe for some sort of selling pressure to get back to a healthy equilibrium.
Something similar can be said for the economy. Yes, there is slowing, but I don’t see recession as being a possibility at the moment, especially with unemployment claims at close to historical lows.
Silver Linings
I’m a contrarian by nature. It’s a blessing and a curse.
But, I do think it prevents my mind from being rigid and identifying risks in a strong tape and opportunities in a weak tape.
So, I can’t help but talk about 3 marginally positive developments that have taken place over the past week.
And, I believe these are significant enough to justify a more aggressively bullish stance on the markets.
The first is that Russia is moving the bulk of its forces away from Kyiv and into the disputed, Donbas region. This is a reflection that Russia is downsizing its ambitions from taking over the whole country to a smaller area with which it can ‘declare victory’.
Still, likely to be a lot of tragedy and bloodshed, but I do think this reduces the tail risk of a conflict that escalates into something larger with multiple actors getting involved.
Next is the inflation report. The market gapped up and then sold off during the day to finish red on the day. Yet, I believe the initial impulse was correct as the report finally showed relief in terms of some of the pandemic-driven categories.
But, these improvements were more than offset by higher food and energy prices.
For me, it was simply a sign that capitalism still works. Higher prices lead to more supply which leads to lower prices.
This process has been short-circuited by the pandemic and the supply chain issues which have persisted for much longer than I thought likely. But, I do think we are at an inflection point and should only see improvement from here going forward.
The final is the first wave of Q1 earnings reports. It’s less about what is specifically in the reports and more about what isn’t there – any sign of a slowdown that would lead investors to fear that earnings will decline in the coming year on an aggregate basis.
Yes, profit margins are down from a peak of 13.1% to 12.1% but this is far from disastrous and still on the high-end.
Next Moves
2022 has certainly been much more challenging than 2021 and 2020, but I think we’ve done a good job of navigating it, in terms of tapping the brakes and stepping on the accelerator when appropriate.
Based on the positive developments mentioned above, I think it makes sense to tactically increase our exposure.
Some of the areas that I find most intriguing are luxury spending, beaten-down retail stocks, and financials. I continue to like energy and metals but we already have exposure to these areas.
Further, these are close to their highs, while there are opportunities to buy stocks that are off by a more significant amount.
I’m enamored of several stocks on my watchlist, especially from a bottom-up perspective. I believe that they’ve been held back by the bearish market conditions, so any stability or recovery for the broad market could be the catalyst to unleash them higher.
Depending on how next week shapes up, it’s likely that we will be putting some of our cash to work.
What To Do Next?
If you’d like to see more top stocks under $10, then you should check out our free special report:
What gives these stocks the right stuff to become big winners?
First, because they are all low priced companies with explosive growth potential.
But even more important, is that they are all top Buy rated stocks according to our coveted POWR Ratings system and they excel in key areas of growth, sentiment and momentum.
Click below now to see these 3 exciting stocks which could double (or more!) in the year ahead.
SPY shares closed at $437.79 on Friday, down $-5.52 (-1.25%). Year-to-date, SPY has declined -7.54%, versus a % rise in the benchmark S&P 500 index during the same period.
About the Author: Jaimini Desai
Jaimini Desai has been a financial writer and reporter for nearly a decade. His goal is to help readers identify risks and opportunities in the markets. He is the Chief Growth Strategist for StockNews.com and the editor of the POWR Growth and POWR Stocks Under $10 newsletters. Learn more about Jaimini’s background, along with links to his most recent articles.
Nobody wants to pay more taxes. And yet everyone wants to generate more profit in the stock market (SPY)…which by extension leads to paying more taxes. What some would call a “high class problem”. So if you like the idea of finding more success in the stock market…and don’t mind paying out higher taxes on that additional income…then read the article below.
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No doubt your gut reaction to my headline about paying more taxes is a big…
HECK NO! (some of you may have used other 4 letter words)
That’s because none of us wants to give the government more of our hard earned money. However, that is a very short-sighted view.
What if I asked this question instead: Do you want to make more money?
This improved view of things creates a unanimous YES from the crowd making it palatable to pay more taxes because it stems from the benefit of having more money.
So let’s take that more enjoyable growth path today as it applies to investing in the stock market in 2022.
We all see the headline losses for the main indices. But really the pain is so much greater than that as it hides how many industries are in an outright bear market year to date such as:
-21.79% Building Materials
-24.65% Auto Parts
-24.92% Semiconductor Equipment
-27.13% Software- Application
-30.94% Trucking
-33.23% Residential Construction
Yet this is what happens when you apply traditional investing methods that don’t take into account the changing economic landscape such as high inflation and rising interest rates.
An appreciation of that would have folks go long on many of the commodity groups like:
+72.15% Coal
+72.00% Oil & Gas Drilling
+25.86% Gold
My point is that if you have stumbled this year with your investing approach, then you are certainly not alone. But doing the same thing and expecting a different result in the future is the very definition of insanity.
It’s time to change that now!
The key is to put as many advantages in your favor as possible to improve your odds of success. Perhaps like the 118 advantages found in our POWR Ratings model that has produced an average annual return of +31.10% going back to 1999.
Please remember that we hired a computer scientist who spent 5 years testing every fundamental and technical data point he could get his hands on. Of the thousands of factors he tested, only 118 of them individually pointed in the direction of stocks that would outperform.
These 118 factors cover the gamut of investing from growth attributes to value to safety to fundamental strength to sentiment and yes momentum.
Just using 1 of these factors alone would help you pick more winning stocks. Now imagine the benefit of stacking all 118 factors your favor…that is how it has led to a return nearly 4X better than the S&P 500.
The next advantage is to put these tools in the hands of seasoned investors who will then hand pick the best trades for investors through our suite of market beating newsletter portfolios.
What to Do Next?
If you are struggling to keep your head above water in this trickly environment, then perhaps investigate strategies that are actually doing quite well in 2022.
Take for instance my Reitmeister Total Return Newsletter, where I use my 40 years of experience to seek out the best stocks and apply a dash of market timing when the need arises.
This newsletter portfolio is actually in positive territory in 2022 while most other investors are getting battered and bruised.
Then there is our POWR Options service that thrives in up and down markets by taking advantage of both Call and Put trades.
In just the last few months this service has closed an impressive 13 for 13 put trades at a profit—and has returned a market shattering +89.1% profit since November!
Let me make it even easier.
You can investigate all 7 of our winning services for investors at one time via a 30 day trial of our POWR Platinum service.
This unique bundle of 7 market beating services, gives you ALL the tools you need to thrive in both up and down markets, including:
POWR Growth– Jaimini Desai harnesses the Top 10 Growth Stocks strategy and its +48.22% average annual return.
Reitmeister Total Return– Led by 40 year investment veteran Steve Reitmeister, with focus on market outlook to help direct stock and ETF selection.
POWR Trends– In depth commentaries and top picks from the most exciting growth trends from EV to Space Exploration to Internet of Things to Genomics and more.
POWR Value– Steve Reitmeister hand picks the best value stocks by utilizing the Top 10 Value Stocks strategy with +37.99% average annual returns.
POWR Ratings Premium – Giving full access to our coveted POWR Ratings for over 5,300 stocks and 2,000 ETFs.
POWR Options– Harness the POWR Ratings through options trading to enjoy higher rewards and lower risk. Service is led by options guru, Tim Biggam enjoying a +89.1% return since launching in November 2021.
POWR Stocks Under $10– Based on our most powerful stock picking strategy, with market shattering +61.63% average annual returns.
For just $1 you can get a 30 day no-risk trial to all 7 of these services, including actionable insights on how to succeed in the current market environment and specific advice on what to buy, when to buy…and just as importantly what to avoid.
So don’t sit on the sidelines waiting to see what will happen next, when you could be profiting today!
Get started with your trial now and start beating the market the rest of the year.
SPY shares . Year-to-date, SPY has declined -7.54%, versus a % rise in the benchmark S&P 500 index during the same period.
About the Author: Steve Reitmeister
Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks.
The shares of real estate investment trust (REIT) VICI Properties (VICI) have been gaining in price lately amid investors hunt for safe-haven bets given surging inflation. However, given its high payout ratio, will the stock be a sustainable hedge against the turbulent macroeconomic environment? Keep reading to learn our view.
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Real estate investment trust (REIT) VICI Properties Inc. (VICI) in Las Vegas owns one of the largest portfolios of market-leading gaming, hospitality, and entertainment destinations, including the world-renowned Caesars Palace. The company’s national, geographically diverse portfolio consists of 28 gaming facilities that comprise more than 62 million square feet and features approximately 25,000 hotel rooms and more than 250 restaurants, bars, nightclubs, and sportsbooks.
REITs are known to provide natural protection against inflation because real estate rents and values tend to increase in tandem with general prices. Furthermore, many leases are tied to inflation, thus, supporting REIT’s dividend growth and providing a reliable income stream even during inflationary periods. With the Consumer Price Index rising 8.5% in March, representing the most heated inflation since December 1981, investors have been looking for safe-haven bets, which has helped VICI’s shares to gain 6.3% in price over the past month.
However, the stock has slumped 3.6% over the past six months and 4.3% year-to-date to close yesterday’s trading session at $28.83.
Here is what could shape VICI’s performance in the near term:
Bottom Line Declined in its Last Reported Quarter
For its fiscal fourth quarter, ended Dec. 31, 2021, VICI’s total revenues increased 2.7% year-over-year to $383.15 million. However, its net income declined 2.3% from its year-ago value to $283.80 million, while its net income per share decreased 17% year-over-year to $0.44. Its FFO and FFO per share came in at $281.48 million and $0.44, respectively, compared to $288.01 million and $0.53 in the prior-year quarter. Its AFFO was $278.88 million, up 10.8% from the prior-year quarter. But its AFFO per share declined 4.3% year-over-year to $0.44.
Mixed Expectations
Analysts expect 13.3% year-over-year growth in the company’s revenue in the quarter ending March 31, 2022, and 30.6% in the current quarter, ending June 30, 2022. Also, VICI’s revenues are expected to increase 50.2% year-over-year to $2.27 billion in the current year. However, the Street expects the company’s EPS to come in at $0.42 in the about to be reported quarter, ending March 31, 2022, indicating a 16% decline from its year-ago value. Also, its EPS is expected to decrease 7.4% in the current quarter but increase 12.5% in the current year.
Mixed Valuation
In terms of trailing-12-month Price/Sales, VICI is currently trading at 10.57x, which is 60.5% higher than the 6.58x industry average. Also, its 23.60 trailing-12-month Price/Cash Flow ratio is 38.2% higher than the 17.08 industry average.
However, VICI’s trailing-12-month P/FFO is 9.5% lower than the 17.13x industry average, and its P/AFFO is 19.5% lower than the 19.28x industry average.
POWR Ratings Reflect Uncertainty
VICI has an overall C rating, which translates to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has a grade of C for Value, which is consistent with its mixed valuation.
VICI also has a C grade for Stability, in sync with its beta of 1.13.
Of the 19 stocks in the REITs – Hotelindustry, VICI is ranked #4.
Beyond what I have stated above, one can also view VICI’s grades for Quality, Growth, Momentum, and Sentiment here.
View the top-rated stocks in the REITs – Hotel industry here.
Bottom Line
VICI has been surging in price of late due to renewed investor attention amid rising inflation. However, its EPS declined in its last reported quarter, and analysts expect a further decline in the about to be reported quarters. Furthermore, its payout ratio is 78.4%, which questions the sustainability of its dividend payment as it consumes the majority of the company’s earnings. Thus, I think it could be wise to wait for an improvement in VICI’s bottom line before investing in the stock.
How Does VICI Properties Inc. (VICI) Stack Up Against its Peers?
While VICI has an overall POWR Rating of C, one might want to consider looking at its industry peer, Megaworld Corporation (MGAWY), which has a B (Buy) rating.
VICI shares rose $0.10 (+0.35%) in premarket trading Thursday. Year-to-date, VICI has declined -2.99%, versus a -6.37% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
The yield curve is no longer inverted, but inflation continues to rage higher as proven by the 11.2% reading for PPI today. However, this is a growing chorus of market commentators who see signs of “peak inflation” which means lower inflation ahead and potentially an all clear signal for the stock market (SPY). If only it were that easy. So let’s discuss what we know at this time leading to the best investment strategies to navigate these choppy waters in the weeks and months ahead.
The market consolidation and sector rotation stays in place. With that is range bound trading…but don’t confuse that for calm markets. We still endure violent volatility day to day and group by group.
2 trends continue to pay the bills: Energy and rising rate trades. We have aggressively overweighted each and enjoying the rewards as our portfolio is in positive territory on the year. But that doesn’t mean that everything is rainbows and lollipops.
So let’s dig in with the latest information to appreciate future market direction including the growing narrative that we are reaching “peak inflation”.
Market Commentary
Last week’s commentary (Bear Market Scare?: The Inverted Yield Curve) is a vital starting point for this week’s conversation. So make sure that you read it first and then move on with the additional insights below.
The first thing to point out is that the yield curve is still not inverted at this moment. In fact, the spread has widened nicely since the beginning of the month: 2.365% for 2 year vs. 2.703% for 10 year.
Next is the ideas confirmed in the FOMC Minutes from last week pointing out their aggressive plans to unwind more and more of their $9 Trillion (yes, Trillion) balance sheet of positions. And they will do that $90 billion a month for the foreseeable future.
This increased supply of Treasury bonds sold by the Fed will require higher rates to entice new buyers to snap them up given the state of inflation. And thus the inverted yield curve scare will fade more and more into the distance as the Fed releases more and more bonds into the market and longer term Treasury rates go higher and higher. This is clearly a positive for our 2 direct trades on higher rates and for the regional banks (3 tickers reserved for Reitmeister Total Return members…learn more about these trades here >).
So the idea that there is a recession warning out there from an inverted yield curve is becoming less and less valid. But indeed inflation is still high as proven by the CPI and PPI reports this week.
Now let’s transition to the related topic of peak inflation. There is now a growing number of Market Strategist claiming that inflation is likely topping out and thus heading lower in the future.
That was hard to see in the 11.2% year over year reading for PPI this morning. However, the economists who focus on these topics point to there being an artificial dip in prices last spring/summer that is making inflation look obscenely high now that will fade away. And when it does, then we will see rates moderate.
Just as you are breathing a sigh of relief, unfortunately, the next hoop to jump through is the GREAT HOPE that the Fed sees these signals clearly and does not overly remove accommodation (raise rates) and thus harm the economy. Yes, it is true that the Fed has a poor track record on this front. But since these folks are indeed students of history…then likely they have learned lessons from the past that will hopefully lead to better decisions this time around.
Hope is not a strategy which explains why investors are stuck between the highs of the year and the lows. The more proof that the Fed gets it right, and the economy continues to roll higher, the sooner stocks will break higher.
Conversely, if there are growing signs of economic damage from high inflation, then the more likely stocks will revisit the recent lows…and maybe lower.
Sorry that the pathway is not clearer…but economics is a soft science. Meaning its inexact. And thus its correlation to the future of stock prices is also not clear.
That is why we are leaning into the trends that are paying the bills (energy and rising rates trades). Staying away from industries harmed by higher rates and higher energy prices (home building, autos, trucking etc). And altogether staying nimble to move our portfolio more aggressive or conservative as will be necessary.
What To Do Next?
Discover my “Lucky 13 Trades” inside the Reitmeister Total Return portfolio that are perfect for this hectic market environment.
Note this newsletter service firmly beat the market last year. And actually in positive territory in 2022 as most other investors are enduring heavy losses.
How is that possible?
The clue is right there in the name: Reitmeister Total Return
Meaning this service was built to find positive returns in all market environments. Not just when the bull is running full steam ahead. Heck, anyone can profit in that environment.
Yet when stocks are trending sideways, or even worse, heading lower…then you need to employ a different set of strategies to be successful.
Come discover what 40 years of investing experience can do you for you.
Plus get immediate access to my full portfolio including the current “Lucky 13 Trades” that are primed to excel in this unique market environment. (This includes 3 little known investments that actually profit from rising rates).
Steve Reitmeister…but everyone calls me Reity (pronounced “Righty”) CEO, Stock News Network and Editor, Reitmeister Total Return
SPY shares fell $0.23 (-0.05%) in after-hours trading Wednesday. Year-to-date, SPY has declined -6.37%, versus a % rise in the benchmark S&P 500 index during the same period.
About the Author: Steve Reitmeister
Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks.
Grab These 5 Large-Cap Stocks Before They Jump 40%, According to Wall Street
As the stock market is expected to remain highly volatile in the coming months, large-cap stocks should be looked at for their ability to dodge market fluctuations and deliver steady returns. Analysts expect fundamentally-sound large-cap stocks Meta (FB), Alibaba Group (BABA), AstraZeneca (AZN), Applied Materials (AMAT), and Salesforce.com (CRM) to rally more than 40% in the near term.
As these factors are expected to keep the market volatile in the near term, large-cap stocks should gain significant investor attention because of their ability to generate stable returns irrespective of the market conditions. Moreover, the ongoing efforts toaddress supply chain issues and increased focus on enhancing domestic production should benefit large-cap stocks more than their smaller counterparts in the coming months. Investors’ interest in this space is evident from the SPDR S&P 500 Trust ETF’s (SPY) 4.7% returns over the past month.
Despite the possibility of continuing market weakness, Wall Street analysts expect broad market reach and solid growth attributes to allow large-cap stocks Meta Platforms, Inc. (FB), Alibaba Group Holding Limited (BABA), AstraZeneca PLC (AZN), Applied Materials, Inc. (AMAT), and Salesforce.com, inc. (CRM) to deliver more than 40% returns in the coming months.
With a $590.78 billion market capitalization, FB develops social media applications to connect through mobile devices, personal computers, virtual reality headsets, and in-home devices worldwide. The company operates through two segments ─ Family of Apps (FoA); and Reality Labs (RL). Its products include Facebook, Instagram, Messenger, WhatsApp, and Oculus.
On April 7, 2022, FB’s financial arm, Meta Financial Technologies, announcedplans to create its own virtual currency or an in-app token for the metaverse, nicknamed “Zuck Bucks”, as part of a suite of products designed to reduce the platforms’ dependence on advertising, while revitalizing its user base. The company has plans to integrate NFTs into its social media apps like “social tokens” or “reputation tokens”, which could be used as rewards by users, and “creator coins” for influencers on Instagram. In May, the company will launch a pilot initiative to allow users to upload and share NFTs on Facebook. FB should witness an expanding user base in the coming months.
For its fiscal 2021 fourth quarter ended December 31, 2021, FB’s revenue increased 20% year-over-year to $33.67 billion. As of December 31, 2021, the company had $16.60 billion incash and cash equivalents.
The company surpassed Street EPS estimates in three of the trailing four quarters. The consensus revenue estimate of $132.20 billion for fiscal 2022 ending December 31, 2022, indicates a 12.1% year-over-year improvement. The company’s EPS is expected to grow at an 18.5% rate per annum over the next five years.
FB’s revenue and total assets have grown at CAGRs of 28.3% and 19.5%, respectively, over the past three years. The stock has gained 15.4% over the past month and closed yesterday’s trading session at $216.46.
Of the 46 Wall Street analysts that have rated the stock, 32 have rated it a Buy, while 13 rated it a Hold. Analysts expect the stock to hit $325.60 in the near term, representing a50.4% upside potential.
Based in China, BABA provides technology infrastructure and marketing reach to merchants, brands, retailers, and other businesses to engage with their users and customers internationally. The company operates through China commerce; International commerce; Local consumer services; Cainiao; Cloud; Digital media and entertainment; and Innovation initiatives and other segments. It has a market capitalization of $278.84 billion.
On November 16, 2021, BABA’s Alibaba Cloud fully migrated all of BABA’s systems and operations onto the cloud ahead of its 11.11 Global Shopping Festival, which was seen to have reduced computing resources by 50% for every 10,000 transactions compared to last year. Computing efficiency was also greatly improved with a boost of 20% in technology deployment efficiency and 30% in CPU resource utilization. This offering of ‘green computing power’ will help merchants make online shopping more engaging and enable BABA to meet the rising demand for a low-carbon digital transition.
BABA’s sales for its fiscal 2021 third quarter ended December 31, 2021, increased 9.7% year-over-year to $38.07 billion. As of December 31, 2021, the company had $46 billion in cash and cash equivalents.
Analysts expect BABA’s revenue to improve 12.6% year-over-year to $150.53 billion for fiscal 2023 ending March 31, 2023. The company’s EPS is expected to grow at a 16.9% rate per annum over the next five years.
Over the past three years, BABA’s revenue and total assets have grown at CAGRs of 34.3% and 24.3%, respectively. BABA has gained 17.1% over the past month and ended yesterday’s trading session at $101.55.
Among 17 Wall Street analysts rating the stock, 16 have rated it a Buy. BABA’s average price target of $174.12 represents a71.5% upside potential.
With a market capitalization of $213.79 billion, AZN is a Cambridge-based biopharmaceutical company that focuses on the discovery, development, and commercialization of prescription medicines in the areas of oncology, cardiovascular, renal, and metabolism, respiratory, infection, neuroscience, and autoimmunity worldwide. The company serves primary care and specialty care physicians through distributors and local representative offices.
On March 29, 2021, AZN’s Ondexxya received approval from the Japanese Ministry of Health, Labor, and Welfare after rapidly reversing the anticoagulant effect of FXa inhibitors apixaban, rivaroxaban, or edoxaban in patients experiencing an uncontrolled bleed during the ANNEXA-4 Phase III clinical trial. Ondexxya received approval by the US FDA under the accelerated approval pathway in May 2018 and conditional approval by the European Commission in April 2019. This should allow Ondexxya to gain more market reach in the coming months.
For its fiscal 2021 fourth quarter ended December 31, 2021, AZN’s total revenue increased 62.1% year-over-year to $12.01 billion. The company’s gross profit came in at $7.39 billion, indicating a 25% year-over-year improvement. It had $6.33 billion in cash and cash equivalents as of December 31, 2021.
Analysts expect the company’s EPS to grow 67.2% from the prior-year period to $4.43 for fiscal 2022, ending December 31, 2022. It surpassed the consensus EPS estimates in three of the trailing four quarters. The consensus revenue estimate of $43.38 billion for the same fiscal year indicates a 15.9% year-over-year improvement. AZN’s EPS is expected to grow at a 15.7% rate per annum over the next five years.
Over the past three years, AZN’s revenue and total assets have grown at CAGRs of 19.2% and 20.2%, respectively. The stock has gained 17.1% over the past month and closed yesterday’s trading session at $70.63.
Of the three Wall Street analysts rating the stock, two have rated it a Buy, while one rated it a Hold. Analysts expect the stock to hit $101 in the near term, representing a43% upside potential.
With a $103.37 billion market capitalization, AMAT provides material engineering solutions for semiconductor chips to electronic manufacturers of flat panel displays, solar photovoltaic cells, and modules. The company also supplies equipment to produce coatings for flexible electronics, packaging, and other applications.
On December 23, 2021, AMAT and the Institute of Microelectronics (IME), a research institute of Singapore’s Agency for Science, Technology, and Research (A*STAR), announced a new phase of their research collaboration at the Center of Excellence in Advanced Packaging in Singapore. As chipmakers and systems companies demand heterogeneous design and advanced packaging solutions, the offering of heterogeneous chip integration with hybrid bonding technology and other emerging technologies will help meet the demand for reduced wiring distances, increased I/O density, improved power efficiency, and greater efficiency system performance.
AMAT’s net sales for the fiscal 2022 first quarter ended January 30, 2022, increased 21.5% year-over-year to $6.27 billion. The company’s non-GAAP gross profit came in at $2.97 billion, indicating a 25.2% year-over-year improvement. Its non-GAAP operating income came in at $1.99 billion, up 32.7% from the prior-year period. While its non-GAAP net income increased 32.3% year-over-year to $1.70 billion, its non-GAAP EPS grew 36% to $1.89. As of January 30, 2022, the company had $5.26 billion in cash and cash equivalents.
Analysts expect AMAT’s EPS to improve 18.9% year-over-year to $8.13 for its fiscal 2022, ending October 31, 2022. It surpassed Street EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $26.55 billion for the same fiscal year represents a 15.1% rise from the prior-year period. The company’s EPS is expected to grow at a 16.5% rate per annum over the next five years.
Over the past three years, AMAT’s revenue and total assets have grown at CAGRs of 14.2% and 10.4%, respectively. AMAT has lost 6% over the past month and ended yesterday’s trading session at $116.24.
Of the 15 Wall Street analysts rating the stock, 11 have rated it a Buy, while four rated it a Hold. The average price target of $176.64 represents a52% upside potential.
With a $195.55 billion market capitalization, CRM provides enterprise cloud computing solutions that focus on customer relationship management to businesses and industries worldwide. Its solutions include sales force automation, customer service and support, marketing automation, digital commerce, community management, analytics, and a cloud platform for building custom applications.
On April 5, 2022, Bose Corporation, a premium audio equipment manufacturing company, announced the deployment of CRM’s Salesforce Customer 360 to expand its robust direct-to-consumer business by providing personalized and tailored experiences. Specifically, Bose will deploy CRM’s Commerce Cloud to accelerate revenue growth and drive digital sales, MuleSoft to connect Bose’s back-end systems, and Einstein to drive hyper-personalization across channels. This should further nurture CRM’s partnership with Bose in the long term.
For its fiscal year 2022 fourth quarter ended January 31, 2022, CRM’s total revenues increased 25.9% year-over-year to $7.33 billion. The company’s gross profit came in at $5.31 billion, representing a 22.5% rise from the prior-year period. CRM’s non-GAAP income from operations came in at $1.10 billion for the quarter, representing a 7.7% year-over-year improvement. It had $5.46 billion in cash and cash equivalents as of January 31, 2022.
The consensus EPS estimate of $32.08 billion for fiscal 2023 ending January 31, 2023, indicates a 21.1% year-over-year improvement. AMAT surpassed Street EPS estimates in each of the trailing four quarters, which is impressive. The company’s EPS is expected to grow at a 15.1% rate per annum over the next five years.
CRM’s revenue and total assets have grown at CAGRs of 25.9% and 45.8%, respectively, over the past three years. The stock has lost 1.2% over the past month and ended yesterday’s trading session at $195.45.
Of the 27 Wall Street analysts rating the stock, 23 have rated it a Buy, while four rated it a Hold. Analysts expect the stock to hit $300.46 in the near term, representing a53.7% upside potential.
FB shares were trading at $214.38 per share on Tuesday afternoon, down $2.08 (-0.96%). Year-to-date, FB has declined -36.26%, versus a -7.29% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
How the Inverted Yield Curve Could Impact the Market This Week
In last week’s commentary we spoke about the big bounce of the S&P 500 (SPY) that got us back in the mix of all the key trend lines (50/100/200 day moving averages). And likely we would be stuck in a trading range around those levels for a while as investors sort out if things are bullish enough to head higher…or if indeed Russia/Ukraine + Inflation + Inverted Yield Curve + Hawkish Fed = time for bear to come out of hibernation. The sum total of this is the emergence of a consolidation period with a heavy dose of sector rotation. Again, last week we talked about the nature of those environments and how to work through them. This week we will dive into the vital topic of inverted yield curve that I first discussed in the Reitmeister Total Return commentary on Tuesday 4/5. From there I will provide updates on rates and the economy. Read on below for more….
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(Please enjoy this updated version of my weekly commentary published April 8th, 2022 from the POWR Value newsletter).
The inverted yield curve is not inverted as of this moment. In fact, it was only inverted for 2 days. And even when it was inverted…there were big questions marks about its veracity.
There is no need to reinvent the wheel on this as I spelled it out pretty clearly in the 4/5/22 Reitmeister Total Return commentary. Here are the key sections followed including some important updates:
“Fears of an inverted yield curve are making headlines. And yes, it is a scary thought that all modern recessions have been foreshadowed by this event. Unfortunately, recessions and bear markets go hand in hand which explains all the investor hand wringing and gnashing of teeth.
What represents an inverted yield curve? Lots of BS articles talking about a lot of relationships that are meaningless. The true yield inversion is when the long term Treasury bond rates (10 year) are lower than short term rates (2 year).
Technically speaking this inversion first appeared on April 1st when the 2 year Treasury sprinted to 2.44% vs. only 2.39% for the 10 year. The inversion remained in place on 4/4. However, today, April 5th, the 10 year Treasury leapt ahead to 2.54% with the inversion coming off the table for the time being. (Monitor all Treasury rates on daily basis here).
(4/8/22 POWR Value Update: Today we find the 10 year striding up to 2.70% which is creating a bigger spread with the 2.51% for the 2 year…this spread should only increase as the Fed takes more steps to help return the market to natural forces. More about that to come.)
Note there is great disagreement about how long the inversion needs to remain in place to truly become a recession warning. But most would agree that 2 days does not an inversion make. Unfortunately, this race is far from over with plenty of time for an extended, and meaningful, inversion to come on the scene which is why investors are on edge.
Why does a lasting inversion so often point to recession and bear market?
The interpretation of this event is that investors are predicting that the economy will contract (like a recession) in the future…and that is why rates are lower in the long run than they are in the short run.
Now the reality check…
Currently inflation is running hot and it should go lower in the future. That could make it invert now and normalize later without a recession and bear market.
More vital to this discussion, the government artificially dominates the long term bond market thanks to years of exorbitant quantitative easing (QE). This means the government has perverted the long term rates by having such outrageously high demand that it keeps rates lower than they would be if created by natural market forces.
Natural market forces = When the Fed buys NO bonds which is the historical norm
The point being is that I don’t actually believe the yield curve inverted because of fears of a looming recession. It inverted for the 2 benign reasons noted above.
I am not the only one with this view. Here is a recent clip from PIMCO fund manager Erin Browne:
“There’s reason to believe that this time around, yield curve inversion may not be as good of an indicator as it has been in the past, particularly given the enormous amount of quantitative easing undertaken by global central banks.”
Let’s remember that PIMCO is a dominant player in the bond market. So when they speak on the subject…it’s good to listen.
That is where I stand now. But here comes the sad truth…a recession could indeed be in our future.
That’s because high inflation has been a precursor to that many times in the past. Also sadly true that the Fed historically has overreacted to these situations by removing too much accommodation thus harming the economy. Therefore, it is wise to not just blindly ignore what is going on at this pivotal time.
So even though I like the odds that this inversion is not real for the reasons given…I am still on vigilant lookout for any economic indicators that point to looming recession and correlated bear market. Because if I did see increasing odds of that happening then I would flip the script on our portfolio given that the average bear market comes with a 34% decline from peak to value.
Step 1 = sell ALL stocks (cuz even the best of them will still go down…maybe just less than average)
Step 2 = Buy inverse ETFs to profit from declining stock prices.
Step 3 = Buy bonds a month or two later (as a recession takes hold the Fed will begin to lower rates and bond values go up)
Step 4 = Take profits on inverse ETFs and start bottom fishing because when the bounce comes it will catch most by surprise. Better to be a notch too early than a notch too late.
(4/8/22 POWR Value Update: The above game plan is for active traders, but it not necessarily what we will do in the POWR Value newsletter. That is because the mission of this newsletter is to stay invested in the best value stocks rain or shine.
In fact, as it is written now the charter of this service won’t allow me to have less than 80% of the money invested in stocks. And that’s because timing the market is easier said than done.
The point being is if I truly feel a bear market is coming, then I will share the above strategy with you. But the construct of the POWR Value service will likely be 80% invested and 20% cash. But of the stocks we invest in they will be much more defensive in nature and thus more resilient to market downside.
Long story short, my hands may be tied in what I can show in the POWR Value service, but via the commentary you will get my unabashed opinions on where the market stands and what is likely to come next).
Let’s not get ahead of ourselves. The above steps are what we will do “if and when” signs point to much greater likelihood of recession and bear market.
Now let’s review the signs from the recent slate of key economic reports to see what they tell us:
Both the ADP and Government employment reports from last week showed impressive job gains north of 400,000. Note that anything above 150,000 jobs added a month should equate to a lowering of the unemployment rate.
Indeed, that did go lower this time around to 3.6% from 3.8%. This means we are nearly back to the same robust employment levels as seen pre-Covid.
Then on Friday we got served up a healthy 57.1 reading for ISM Manufacturing. Most impressive of which is the improving employment reading which bodes well for future hiring. However, if there is a point of concern it would be the 53.8 showing for New Orders.
Yes, anything above 50 points to future expansion. But that reading has spent most of the last couple years between 57 and 62.
Granted those are unsustainably high levels. Yet falling from 61.5 last month to 53.8 this month does make one pause to consider if this is the first sign of future slowing. And thus we will continue to watch the results closely going forward.
Gladly the ISM Services report this morning pointed to nothing but positives. The overall reading rose from 56.5 last month to 58.3. The Employment reading leapt from a scary 48.5 to impressive 54.0. And most importantly, the forward looking New Orders component rose from 56.1 to 60.1.
(4/8/22 POWR Value Update: Jobless Claims was the only meaty economic data point this week and that was a shockingly good 166K which is the lowest reading since 1968 (not a typo). This vital part of the economy is showing no signs of slowing).
Net-net the positives far outweigh the negatives at this time which is why we have not quickly retreated back to the recent lows under 4,200.
On the other hand, with such an ample bounce taking place over the past month investors likely do not have the stomach to go much higher at this moment.
And perhaps that will not take place until more people are convinced that the yield curve inversion was a false reading with the economy and corporate earnings chugging along at a healthy pace.
This would be the catalyst behind the next bull rally to test the previous highs…and hopefully new highs.
This bullish outcome is still the most likely in my book. Unfortunately the bearish argument has merit. Thus, we need to continually examine the evidence and recalculate the odds of recession to chart our path forward.
For now you should expect range bound trading plus nasty volatility to be the norm until the market participants reach greater consensus on the bull vs. bear argument.
(End of 4/5/22 Reitmeister Total Return commentary)
The last paragraph has proven itself to be very true. That being a lot of volatile trading around the key trend lines:
4,427 = 50 Day Moving Average
4,493 = 200 Day Moving Average
4,534 = 100 Day Moving Average
At this stage investors will await what they hear from Corporate America as Q1 earnings season beings soon. It’s not so much what happened this past quarter that matters. It will be much more about their guidance for the future.
If negative, with earnings estimates commonly getting trimmed for key companies, then expect more market downside to follow.
However, if the flipside happens, and we get a clean bill of health for the future, then expect stocks to break above these key trend lines and move ever closer to the previous highs around 4,800.
What To Do Next?
If you’d like to see more top value stocks, then you should check out our free special report:
What makes these stocks great additions to any portfolio?
First, because they are all undervalued companies with exciting upside potential.
But even more important, is that they are all A rated Strong Buys according to our coveted POWR Ratings system. Yes, that same system where top-rated stocks have averaged a +31.10% annual return.
Click below now to see these 7 stellar value stocks with the right stuff to outperform in the coming months.
SPY shares closed at $447.57 on Friday, down $-1.20 (-0.27%). Year-to-date, SPY has declined -5.47%, versus a % rise in the benchmark S&P 500 index during the same period.
About the Author: Steve Reitmeister
Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks.
Technical Analysis Doesn’t Need to Be Overly Technical to Be Effective
The advent of algorithms has made technical analysis even more important in today’s market environment. This is especially true on shorter-term trades. Fundamentals are important in the long run, but technicals are vital for the near term. I discuss this concept below and how to apply this important precept to consistently uncover winning options trades. Read on for more.
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Benjamin Graham, the Godfather of Value Investing, summed up the notion of technical versus fundamentals with his quote:
“In the short run the market is a voting machine. In the long run it is a weighing machine.”
The multi-year melt up in stocks is starting to soften. Continued out-sized annual returns will be more difficult to come by. This is especially true now that the Fed has begun to withdraw liquidity and raise interest rates.
Staying nimble and picking the right stocks at the right time will carry ever more importance in the coming months. The POWR Ratings will definitely help you pick the right stocks. Technical analysis will help you pick the right time to both enter and exit positions.
A quick walk through of the recent trades in ArcelorMittal (MT) for the POWR Options portfolio will help to show how I use technical analysis to identify price areas to consider putting on and taking off positions.
My approach is just one of many. It is, however, a simple methodology that has stood the test of time. So let’s jump in.
The chart below is a one-year price chart for MT stock. There is horizontal support at the $28 area. I like to term it “eyeball support.” MT has bounced off this level seven times in the past 12 months. Clearly a solid support area:
Once an area of interest is identified, just a little more work needs to be done. My method utilizes only four main components:
9-day RSI (Relative Strength Index)
MACD (Moving Average Convergence Divergence) Histogram
Bollinger Percent B
20-day moving average
RSI indicates when a stock is getting overbought (above 70) or oversold (under 30). MACD compares the 12-day moving average to a longer 26-day moving average to help uncover divergences in momentum.
Bollinger Percent B is a volatility-based indicator that identifies where the closing price of a stock is relative to the upper and lower bands. 100 is the upper band and 0 is the lower band.
The 20-day moving average is widely followed, especially by the algo machines that dominate trading today.
When all four indicators align at the same time, it is usually a reliable indication that things have gotten overdone either to the upside or downside. Time to take a counter-trend position.
Looking at the chart again shows the three times POWR Options took a long position in MT calls based on oversold readings (light green).
9-day RSI was under 30, MACD was deeply in the red, Bollinger Percent B was nearing zero and shares were trading at a big discount to the 20-day moving average.
The chart also shows how POWR Options used the same method to exit those positions based on overbought readings (purple).
The method is simple. Buy when things get oversold and sell when things get overbought. To quote Warren Buffett, “Be Greedy When Others Are Fearful and Be Fearful When Others Are Greedy.”
The results of the three trades are shown below:
Certainly not all results will be this effective. Trading is about probability, not certainty. Using a simple technical methodology along with the POWR ratings can help provide a solid one-two-punch to put the odds in your favor when swing trading options.
What To Do Next?
While the concepts behind options trading are simpler than most people realize, applying those concepts to consistently make winning options trades is no easy task.
The solution is to let me do the hard work for you, by starting a 30 day to my POWR Options newsletter.
I’ve been uncovering the best options trades for over 30 years and with the quantitative muscle of the POWR Ratings as my starting point I’ve achieved an 87% win rate over my last 15 closed trades!
During your trial you’ll get full access to the current portfolio, weekly market commentary and every trade alert by text & email.
I’ll be adding the next 2 exciting options trades (1 call and 1 put) when the market opens this Monday morning, so start your trial today so you don’t miss out.
There’s no obligation beyond the 30 day trial, so there is absolutely no risk in getting started today.
SPY shares rose $0.01 (0.00%) in after-hours trading Friday. Year-to-date, SPY has declined -4.34%, versus a % rise in the benchmark S&P 500 index during the same period.
About the Author: Tim Biggam
Tim spent 13 years as Chief Options Strategist at Man Securities in Chicago, 4 years as Lead Options Strategist at ThinkorSwim and 3 years as a Market Maker for First Options in Chicago. He makes regular appearances on Bloomberg TV and is a weekly contributor to the TD Ameritrade Network “Morning Trade Live”. His overriding passion is to make the complex world of options more understandable and therefore more useful to the everyday trader. Tim is the editor of the POWR Options newsletter. Learn more about Tim’s background, along with links to his most recent articles.
Endeavor Group Holdings is My Growth Stock of the Week
Endeavor Group Holdings (EDR) is a global sports and entertainment company. It is comprised of industry leaders, including entertainment agency WME; sports, fashion, events, and media company IMG; and premier mixed martial arts organization UFC. In today’s article, I will discuss why EDR has such a promising growth outlook, the particular upside for its core asset, the UFC, and developments in the broad economy that bode well for EDR.
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Endeavor Group Holdings (EDR) is a global sports and entertainment company. It is comprised of industry leaders, including entertainment agency WME; sports, fashion, events, and media company IMG; and premier mixed martial arts organization UFC. The company specializes in talent representation, sports operations & advisory, event & experiences management, media production & distribution, experiential marketing, and brand licensing.
EDR made its public debut in April of last year and is up about 10% from its opening price. However, the company has been a beneficiary of the recovery in live events as well as growth in its core assets. This is evident in its recent earnings report which showed revenues more than 50% higher compared to the same quarter last year.
In today’s article, I will discuss why EDR has such a promising growth outlook, the particular upside for its core asset, the UFC, and developments in the broad economy that bode well for EDR.
Growth Outlook
EDR has many ingredients of a growth superstar and a long-term outperformer. This includes strong franchises, exposure to powerful, secular trends, and reasonable valuations.
This is quite evident in its recent earnings report which showed that the company generated $5.1 billion in revenue in 2021, and it’s forecasting between $5.2 billion and $5.5 billion in 2022. Next year, the company is forecast to earn $1.51 per share, implying a forward P/E of 19.7 which is in-line with the S&P 500.
This is quite reasonable considering that EDR owns several unique and high-quality assets with obvious synergies and long-term upside that are positively exposed to secular trends in the economy like the rising value of high-quality content, rights to streaming sports, and the pent-up demand for live events.
UFC Ownership
Maybe the most intriguing aspect of EDR is its ownership of the UFC. In 2020, EDR acquired the remaining portion of UFC that it didn’t own for an estimated value of $3.5 billion. Currently, the UFC has an estimated value between $8 and $9 billion as UFC’s streaming rights are coming up in 2023.
Its previous deal was signed with ESPN in 2018 for 5 years and $150 million per year, and it’s quickly become an important part of its ESPN+ package. The value of sports content continues to increase as it’s a subscriber magnet for streamers and for networks, it’s one way to ensure that live viewing doesn’t totally plummet.
Beyond this, it’s also possible to see UFC’s value continuing to grow. Based on trends, demographics, and interests of young people, it’s possible that MLB and the NHL are displaced as the 3rd and 4th most popular sports by MLS and the UFC. It also has a global appeal like the NBA or the Premier League.
Thus, I believe that the value of the UFC will continue to compound at a double-digit rate and continue to grow in popularity faster than other major sports. Individual sports teams are realizing values in the billion-dollar range with the Denver Broncos estimated to sell for around $4 billion later this year. Thus, the UFC’s total value of $8-$9 billion seems reasonable in this context especially when the league has better economics as it takes 80% of revenues vs 50% for owners in sports leagues.
Betting on Content
EDR’s ownership of UFC exposes it to the rising value of sports content. EDR is also exposed to other types of content as it manages some of the highest-profile talent in the sports, media, and entertainment worlds
If we look at the current online streaming landscape, it’s clear that there are too many companies competing for a finite amount of attention. This circumstance is leading to competition and bidding wars for high-profile actors and creators which benefits EDR. This will certainly benefit EDR which is an important intermediary in the supply chain of content creation with its representation of music artists, movie actors and actresses, athletes, and models. Now, the company is branching out into new areas like YouTube creators, esports players, streamers, TikTok influencers, etc.
Economy Reopening
In 2020, EDR’s revenue dropped and net loss widened compared to the previous year. Of course, the pandemic was the major factor.
As the economy reopens and life slowly returns to normal, EDR is likely to benefit from the same pent-up demand that is rippling across the economy. If we look at history, there tends to be a creative boom in the years following a pandemic.
Many summer concerts are already selling out which also bodes well for EDR’s roster of assets which include many that have been negatively affected by the lack of fans.
POWR Ratings
These positives are reflected in EDR’s POWR Ratings which rate the stock a B which equates to a Buy. B-rated stocks have B-rated stocks have posted an average annual performance of 20.1% which compares favorably to the S&P 500’s annual performance of 8.0%.
The POWR Ratings also evaluates stocks by different components to give additional insight on each stock. EDR has an A for Growth due to the positive trends detailed above and a B for Sentiment as 6 out of 9 analysts covering the stock have a Buy rating. Click here to see more of EDR’s POWR Ratings.
EDR shares were trading at $30.24 per share on Tuesday morning, up $0.75 (+2.54%). Year-to-date, EDR has declined -13.33%, versus a -3.07% rise in the benchmark S&P 500 index during the same period.
About the Author: Jaimini Desai
Jaimini Desai has been a financial writer and reporter for nearly a decade. His goal is to help readers identify risks and opportunities in the markets. He is the Chief Growth Strategist for StockNews.com and the editor of the POWR Growth and POWR Stocks Under $10 newsletters. Learn more about Jaimini’s background, along with links to his most recent articles.
3 Energy Stocks That Doubled in the Past Year and Have More Room to Run
Although oil prices declined on Monday due to concerns over new COVID-19- related lockdowns in China, the prices could remain elevated because disruptions to Russian oil exports could create a global oil supply crisis. Energy stocks Marathon Oil (MRO), EnLink (ENLC), and Whiting Petroleum (WLL) have doubled in price over the past year and could soar higher in the near term, driven by the industry tailwinds. Let’s discuss.
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Oil prices declined more than 8% on Monday on concerns over new COVID-19 lockdowns in China and the possibility of another round of peace talks between Ukraine and Russia this week. However, despite the slide, oil held above $100 per barrel. West Texas Intermediate crude futures, the U.S. oil benchmark, slipped 8.3% to trade at $104.50 per barrel, while the international benchmark Brent crude traded 7.4% lower at $111.61 per barrel.
On the other hand, the International Energy Agency has warned that three million barrels per day of Russian oil output could be at risk beginning in April. This threatens to create a global oil supply shock, and prices could remain elevated. “We still expect that Brent crude will continue to rally as the market continues to price in a rise in energy supply risk amid immense supply disruptions,” TD Securities said.
Given this backdrop, we think energy stocks Marathon Oil Corporation (MRO), EnLink Midstream, LLC (ENLC), Whiting Petroleum Corporation (WLL), which have each doubled in price in the past year, could soar higher in the near term.
MRO explores for and produces oil and condensate, natural gas liquids, natural gas, and their byproducts. The Houston, Tex., company operates through two segments: the United States and International.
In January, the company announced a dividend of 7 cents per share, which was payable on March 10, 2022. It marked MRO’s fourth consecutive increase in its quarterly base dividend. Furthermore, the company has increased its base dividend by more than 130% over the last year.
MRO’s total revenues and other income increased 116.9% year-over-year to $1.80 billion in its fiscal fourth quarter, ended Dec. 31, 2021. Its income from operations improved 395.6% year-over-year to $739 million. The company’s non-GAAP net income increased 704.1% from its year-ago value to $592 million, while its non-GAAP net income per share stood at $0.77, up 741.7% year-over-year in the same period.
The $0.87 consensus EPS estimate for the fiscal first quarter, ending March 31, 2022, represents a 313.7% improvement year-over-year. The $1.65 billion consensus revenue estimate for the same quarter represents a 54.3% increase from the same period last year. It has an impressive earnings surprise history; it topped the Street’s EPS estimates in each of the trailing four quarters.
The stock has gained 128% in price over the past year and 54% year-to-date to close yesterday’s trading session at $25.29.
MRO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which translates to Buy in our POWR ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
MRO has an A grade in Momentum and a B in Growth, Sentiment, and Quality. It is ranked #26 of 89 stocks in the B-rated Energy – Oil & Gas industry.
Beyond what is stated above, we have also rated MRO for Value and Stability. Get all the MRO ratings here.
ENLC in Dallas, Tex., provides midstream energy services in the United States. It operates through Permian; Louisiana; Oklahoma; North Texas; and Corporate segments.
On Feb. 16, 2022, ENLC announced that it had executed a memorandum of understanding with Talos Energy Inc. (TALO) to jointly develop a complete carbon capture, transportation, and sequestration (CCS) solution for industrial-scale emitters in Louisiana. Thus, advancing its sustainability initiatives.
ENLC’s total revenues increased 110.8% from the prior-year quarter to $2.24 billion in its fiscal fourth quarter, ended Dec. 31, 2021. Its operating income for the quarter came in at $161.90 million, reflecting an increase of 75.4% year-over-year, while the net income attributable to ENLC stood at $54.80 million, up 136.2% year-over-year. Also, net income attributable to ENLC per unit increased 135.5% year-over-year to $0.11 in the same period.
The Street expects ENLC’s EPS for the fiscal year ending Dec. 31, 2022, to improve 333% year-over-year to $0.22. The $6.78 billion consensus revenue estimate for the same period represents a 1.4% increase year-over-year.
Over the past year, the stock has gained 113.4% in price to close yesterday’s trading session at $9.58. It has gained 39% year-to-date.
It is no surprise that ENLC has an overall rating of B, which equates to Buy in our POWR Ratings system.
ENLC has an A grade in Momentum and a B in Growth. Among the 35 stocks in MLPs – Oil & Gas industry, ENLC is ranked #17.
In addition to the POWR Rating grades I have just highlighted, one can see ENLC’s ratings for Value, Sentiment, Stability, and Quality here.
WLL is an independent oil and gas company based in Denver, Colo., that engages in the acquisition, development, and production of crude oil, natural gas, and natural gas liquids, primarily in the Rocky Mountains region of the United States.
On March 7, 2022, WLL and Oasis Petroleum Inc. (OAS) announced their agreement to combine in a merger of equals transaction. This combined company will have a premier Williston Basin position with top-tier assets and combined production of 167.80 thousand boepd. The company expects this combination to generate strong free cash flow while executing a focused strategy and enhancing capital return.
In February, the company announced that it had entered two separate agreements to acquire non-operated oil and gas assets in the Williston Basin of North Dakota. “By increasing our working interest, we are immediately recognizing substantial cash flow that is accretive for shareholders. We know and understand the Sanish field extremely well and are very comfortable with the rate of return we are achieving,” Lynn A. Peterson, President, and CEO of Whiting, commented.
WLL’s total operating revenue for its fiscal fourth quarter, ended Dec. 31, 2021, increased 18% quarter-over-quarter to $473.41 million. Its adjusted net income came in at $168.49 million, reflecting an increase of 19% quarter-over-quarter, while the adjusted EBITDAX was $226.36 million, up 12.6% compared to the prior quarter’s value. Its adjusted net income per share stood at $4.23, reflecting an increase of 18.5% quarter-over-quarter.
Analysts expect WLL’s revenue for its fiscal quarter ending March 31, 2022, to be $374.47 million, indicating a 21.8% increase year-over-year. The company’s EPS is expected to grow 61.1% year-over-year to $4.50. WLL also beat the consensus EPS estimates in each of the trailing four quarters.
WLL shares have gained 135.9% in price over the past year and 25.9% year-to-date to close yesterday’s trading session at $81.45.
WLL’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system.
WLL is rated A in Momentum and B in Growth and Quality. It is ranked #2 of 14 stocks in the Energy – Drilling industry.
To see additional POWR Ratings for Value, Stability, and Sentiment for WLL, click here.
MRO shares were trading at $24.82 per share on Tuesday morning, down $0.47 (-1.86%). Year-to-date, MRO has gained 51.66%, versus a -3.21% rise in the benchmark S&P 500 index during the same period.
About the Author: Komal Bhattar
Komal’s passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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