3 Stocks That Won't Go Out Of Style

The global economic recovery may be in potential jeopardy with China caught in an unenviable dilemma between strong politics and good economics with respect to covid lockdowns.

In the world’s second-largest economy and a nation not used to dealing with widespread dissent, economic hardship may seamlessly turn into political instability, thereby risking yet another disruption in the global supply chain. Markets have also reflected the nervousness with a decline in stock futures and Brent crude at the lowest level since January.

Amid such uncertainty, consumption-driven businesses that enjoy inelastic demand and resilient margins for the essential products and services they offer can act as ideal ballast for the choppy waters we can’t find a way out of.

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Hence, it could be wise to add Johnson & Johnson (JNJ), PepsiCo, Inc. (PEP), and Archer-Daniels-Midland Company (ADM) as some technical indicators point to sustained upsides with adequate downside protection.

Johnson & Johnson (JNJ)

JNJ is a worldwide researcher, developer, manufacturer, and seller of various healthcare products. The company operates through three segments: Consumer Health; Pharmaceuticals; and MedTech.

Over the last three years, JNJ’s revenues have grown at a 5.5% CAGR, while its EBITDA has grown at 4.6%. During the same period, the company’s net income has grown at 10.6% CAGR.

JNJ’s sales increased 1.9% year-over-year to $23.79 billion in the fiscal 2022 third quarter ended October 2, 2022. The company’s gross profit stood at $15.98 billion during the same period.

Analysts expect JNJ’s revenue for the fiscal year 2022 to increase by 1.4% year-over-year to $95.04 billion. The company’s EPS for the current year is expected to increase 2.5% year-over-year to $10.04. Moreover, JNJ has topped the consensus EPS estimates in each of the trailing four quarters. Continue reading "3 Stocks That Won't Go Out Of Style"

Two Value Stocks To Buy On Dips

It’s been a volatile year for the major market averages, and the Nasdaq Composite (COMPQ) remains down 28% for the year and on track for its worst annual decline since 2008.

The difference this time is that it’s coming off a multi-year win streak and a more than decade-long bull market, making the current sell-off look more similar to 2000 than the 2008/2009 lows.

That said, for investors willing to look outside of the traditional FAANG names that have massively outperformed for years, there are always opportunities to hunt down alpha. This update will look at two general market names trading at deep discounts to fair value.

Builders FirstSource (BLDR)

Builders FirstSource (BLDR) is the largest supplier of structural building products, value-added components, and services to the professional market for the single-family and multi-family construction/repair/remodeling market in the United States.

The company has ~560 distribution/manufacturing locations across 42 states and boasts a market cap of $9.7BB.

Unfortunately, though, with the housing market teetering on a recession with new and existing home sales down sharply, investors have become worried about buildings products name, and Builders FirstSource hasn’t been immune from this anxiety despite continuing to put up phenomenal results.

In fact, the company just recently reported revenue of $5.8BB (+ 5% year-over-year) and adjusted annual EPS of $5.20, a 53% increase from the year-ago period.

Notably, these results were lapping already difficult comparisons from the year-ago period, with Q3 2021 annual EPS up 308% in the year-ago period. The strong growth in earnings was driven by ~20% growth in its higher-margin value-added products combined with aggressive share repurchases, repurchasing $2.0BB in shares to date (~30% of common shares).

Normally, I would be skeptical of a company growing annual EPS through share buybacks and buying back shares to this degree, given that many companies have a bad habit of buying back shares to prop up earnings vs. doing it opportunistically.

However, Builders FirstSource’s core business is strong with growth in its key segments (core organic sales in Value-Added Products up 20%, Repair, Remodel & Other up over 30%), and the stock is significantly undervalued. Continue reading "Two Value Stocks To Buy On Dips"

3 Stocks To Watch This Holiday Season

With the moderation of inflation in October and indications of the Fed following suit with a slower interest rate hike next month, the festive season promises to be merrier than expected for consumers and businesses alike.

Retail and consumer businesses whose demand and margins are resilient enough to make them relatively immune to macroeconomic headwinds stand to gain from the increased consumer spending during the holiday season.

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Hence, it would be opportune to add Walmart Inc. (WMT), Flowers Foods, Inc. (FLO), and The Simply Good Foods Company (SMPL) as some technical indicators point to sustained upsides that could leave you thankful this season.

Walmart Inc. (WMT)

The retail giant WMT offers opportunities to shop an assortment of merchandise and services at everyday low prices (EDLP) in retail stores and through e-commerce platforms.

The company operates through three segments: Walmart U.S.; Walmart International; and Sam’s Club. Over the last three years, WMT’s revenues have grown at a 4.8% CAGR.

For the third quarter of the fiscal year 2023 ended October 31, 2022, WMT’s total revenues increased 8.7% year-over-year to $152.81 billion, with strength in Walmart U.S., Sam’s Club U.S., Flipkart, and Walmex.

During the same period, the company’s adjusted operating income increased 4.6% year-over-year to $6.06 billion, while its adjusted EPS increased 3.4% year-over-year to $1.50.

WMT’s revenue and EPS for the fiscal year ending January 2024 are expected to increase 2.9% and 8.7% year-over-year to $619.49 billion and $6.60, respectively. The company has an impressive earnings surprise history as it surpassed the consensus EPS estimates in three of the trailing four quarters. Continue reading "3 Stocks To Watch This Holiday Season"

Under $10 Health Food Company With Solid Financials

The latest data shows signs of inflation cooling down. The food index increased 0.6% sequentially in October after a 0.8% increase in September. The food-at-home index rose 0.4% in October, registering the smallest monthly increase since December 2021.

US Food Inflation

Source: Trading Economics

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Over the recent past, packaged foods have grown in significance due to their easy-to-handle characteristics and hygienic properties. The global packaged food market is expected to reach $4.11 trillion by 2028, growing at a 4.5% CAGR. The market is also concurrently witnessing increased consumption of dairy products.

Packaged food company Lifeway Foods, Inc. (LWAY) produces and markets probiotic-based products internationally. Its primary product is drinkable kefir, a cultured dairy product. The company sells its products under the Lifeway and Fresh Made brand names and private labels.

The stock has gained 34.9% over the past year and 54.6% year-to-date to close its last trading session at $7.11. It is up 29.5% over the past month. Continue reading "Under $10 Health Food Company With Solid Financials"

1 Strong Trending Financial Stock And 1 To Avoid

With a slower increase in supplier and consumer prices signaling an easing of inflationary pressures, hopes of less aggressive interest rate hikes by the Federal Reserve are also rising.

While a broad economic recovery bodes well for the financial services sector, given rising borrowing costs and credit risks, traders should be judicious in picking stocks from this space.

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Given its strong price trends, it could be wise to buy NerdWallet, Inc. (NRDS) to capitalize on the industry tailwinds. On the other hand, Ally Financial Inc. (ALLY) might be best avoided now, given its downtrend.

NerdWallet, Inc. (NRDS)

NRDS operates as a personal finance company. Through its platform, it delivers a range of financial products, including credit cards, mortgages, insurance, SMB products, personal loans, banking, investing, and student loans, to empower consumers and small and medium-sized businesses (SMBs) to make informed financial decisions at the right time.

For the fiscal 2022 third quarter, which ended September 30, 2022, NRDS’s revenue increased 45% year-over-year to $142.6 million, driven primarily by success across credit cards, banking, personal loans, and SMB verticals. During the same period, the company’s net income came in at $0.7 million or $0.01 per share, compared to a net loss of $7.8 million or $0.16 per share in the previous-year quarter.

Analysts expect NRDS to report revenue of $139.59 million for the fourth quarter of the current fiscal, ending December 2022, registering a 40.3% year-over-year increase. During the same period, the company’s EPS is expected to come in at $0.08, compared to a loss of $0.13 per share in the year-ago period.

Owing to its strong performance and solid growth prospects, NRDS is currently commanding a premium valuation compared to its peers. In terms of forward P/E, NRDS is currently trading at 67.53x compared to the industry average of 10.39x. Also, its forward EV/EBITDA multiple of 15.43 compares to the industry average of 12.28. Continue reading "1 Strong Trending Financial Stock And 1 To Avoid"