Tag: stock analysis

2 Retail Names With Higher Prices Ahead

Posted on by Taylor Dart

We’ve seen a better start to the year for the major market averages, with the S&P 500 (SPY) up over 3% year-to-date and the Nasdaq Composite enjoying an even more impressive 4.5% return.

While some of these gains could be whittled away if we see a disappointing CPI report with higher-than-expected inflation, this is certainly a welcome departure from last year’s mess, with both indexes down over 20% for the first time since 2008.

Unfortunately, not all stocks have participated, and one sector that continues to remain in the doghouse from a sentiment standpoint is the Retail Sector.

Within the sector, the restaurant group has outperformed on hopes of peak inflation and improving demand (lower gas prices), but other retail brands like Chico’s FAS (CHS), with the stock being one of the worst performers year-to-date.

While this is partially attributed to the company’s softer holiday sales numbers, the sell-off is starting to look overdone, and a lot looks priced in here, with the stock trading at a mid-single-digit PE ratio.

Meanwhile, within the restaurant space, Wingstop (WING) may be an outperformer but it is positioned to continue its outperformance with aggressive unit growth and deflation in its core commodity (bone-in chicken wings).

This allowed it to price less aggressively than peers and capture market share despite a challenging backdrop where traffic growth has been elusive, especially while gas prices are hovering above $4.00/gallon.

Let’s take a closer look at both names below:

Wingstop (WING)

Wingstop (WING) began as a small buffalo-style chicken wing restaurant in Texas and has since grown to 1,800+ restaurants, with more than 95% of its system being franchised.

Since going public, the company has outperformed nearly all other restaurant stocks with a 640% return in just seven years. Continue reading "2 Retail Names With Higher Prices Ahead" →

Good Defense in a Bear Market

Posted on by The MarketClub Team

The S&P 500 slumped 19% in 2022, registering its biggest decline since 2008. Besides geopolitical turbulence and supply-chain disruptions, the market pullbacks were mostly driven by fears of a looming economic slowdown as an undesirable side-effect of the Federal Reserve’s fight against high inflation with aggressive interest rate hikes.

Since there is still a long way to go before inflation can be reined in to around the desired 2% mark, the central bank, by its own admission, is far from done with interest rate hikes. Hence, the market, subdued by the ever-increasing risk of a recession, is unlikely to stabilize anytime soon.

In fact, bearish sentiments have become so pervasive that the strengthening dollar has also been unable to offset the increasing luster of precious metals, such as gold. Such commodities are gaining popularity among market players as ballast during panic-driven market sell-offs and a time-tested hedge against a potential economic downturn.

Which factor will influence gold prices in 2023 the most?

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The VanEck Vectors Gold Miners ETF (GDX) is expected to offer downside protection. The fund is managed by Van Eck Associates Corporation. It offers exposure to some of the largest gold mining companies in the world.

Since gold mining stocks strongly correlate with prevailing gold prices, the ETF provides indirect exposure to gold prices.

Here are the factors that could influence GDX’s performance in the near term: Continue reading "Good Defense in a Bear Market" →

1 Energy Stock to Fuel Your Portfolio This Winter

Posted on by The MarketClub Team

Amid macroeconomic and geopolitical headwinds, energy stocks have fared better than the broader market this year.

The war between Ukraine and Russia had led to a significant rise in prices of crude oil and natural gas as the world feared a shortage of these essential commodities with widespread sanctions on Russia, a major oil and gas producer. This led to investors’ focus shifting to energy stocks.

Oil and gas major TotalEnergies SE (TTE) has gained 29.8% in price year-to-date and 27% over the past year to close the last trading session at $63.13. Courbevoie, a France-based company, announced a solid third-quarter performance.

The company’s iGRP segment reported a record adjusted net operating income of $3.60 billion in the quarter, rising $1.10 billion sequentially, and cash flow of $2.70 billion, driven by increase in average LNG selling price.

TTE’s CEO Patrick Pouyanné said, “In a context marked by an average Brent price of $100/b and an increase in gas prices exacerbated by Russia’s military aggression in Ukraine, TotalEnergies leveraged its integrated model, particularly LNG, to generate results in line with previous quarters.”

TTE announced that it had obtained a 9.375% participating interest in the 16 million ton per annum (Mtpa) North Field South (NFS) LNG project in Qatar to fuel its growth further.

After combining its participating interest in North Field East (NFE) with NFS, TTE will add LNG production of 3.5 Mtpa to its worldwide LNG portfolio by 2028, which is in line with its goal to increase natural gas in its sales mix to 50% by 2030.

During the previous quarter, the company also announced that production had started at the Ikike field in Nigeria. The project is expected to deliver peak production of 50,000 barrels of oil equivalent per day by the end of this year.

TTE also launched the Begonia project in Angola and the Fenix project in Argentina, which is expected to produce 10 million cubic meters per day of natural gas after the expected operations in early 2025.

Moreover, the company’s partner Eni announced in August that it had made a significant gas discovery in the Cronos-1 well in Cyprus, with initial estimates indicating 2.5 TCF of gas. Continue reading "1 Energy Stock to Fuel Your Portfolio This Winter" →

3 Homebuilder Stocks to Buy When Inflation Eases

Posted on by The MarketClub Team

According to Bankrate’s national survey of large lenders, the average rate on 30-year mortgages is 6.59%, up 12 basis points compared to this time last week.

Mortgage Interest Rates

Source: Bankrate National Survey

As the cumulative effects of a protracted campaign of interest rate hikes by the Fed are yet to be felt, economic growth, or lack thereof, is expected to replace inflation as the topmost concern.

Amid such a downturn, softening demand from home buyers could end up exerting downward pressure on mortgage rates, thereby restoring equilibrium.

According to Nadia Evangelou, senior economist & director of forecasting at the National Association of Realtors, “If inflation continues to decelerate over the next several months, mortgage rates will likely stabilize below 7%.”

Is the Fed’s target of a 2% inflation rate realistic in the current economic scenario?

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In addition to high margin backlogs to help weather a potential slowdown, moderation of inflation, and consequently mortgage rates, would bode well for home-building stocks D.R. Horton, Inc. (DHI), Toll Brothers, Inc. (TOL), and KB Home (KBH) as some technical indicators point to sustained upsides with adequate downside protection. Continue reading "3 Homebuilder Stocks to Buy When Inflation Eases" →

MCD vs QSR: Which Is Healthier For Your Portfolio?

Posted on by Taylor Dart

While the S&P-500 (SPY) and Nasdaq Composite (COMP) are on track for a significant losses this year, the Restaurant Sector has put together a solid performance, on track for just a 9% loss or an 1100 basis point outperformance vs. SPY.

This is despite starting off the year with a much worse performance, with the index briefly down 25% as of May, despite it trailing the S&P-500 and Nasdaq at the time.

The strong recovery in the sector can be attributed to the fact that inflation looks to have peaked, which is a huge benefit to restaurant margins.

Plus, valuations were already at their most attractive levels since March 2020 as of early 2022, with the index starting its bear market six months before the S&P 500 in July 2021.

Finally, while not all restaurant names are considered defensive, quite a few are lower-beta, pay attractive yields, and some benefit from a recessionary environment as they become trade-down beneficiaries.

In this update, we’ll look at two of the largest names in the sector and which looks like the better buy after this violent market-wide correction.

McDonald’s (MCD) and Burger King (QSR) have gone head to head for years from a competition standpoint regarding burger wars.

While McDonald’s has more than twice the number of restaurants globally and started out a decade earlier with Burger King being the copycat, there’s no clear consensus on the better restaurant operator among the two.

From strictly a same-store sales or wallet share standpoint in the United States, McDonald’s has been the undisputed leader, and Burger King has lagged over the past couple of years.

However, with similar prices, similar menus, and Burger King’s appearing to have more iconic fries while McDonald’s wins on burgers, it’s difficult to crown a leader.

That said, there are significant differences when it comes to investing in the brands, especially given that Burger King is just one piece of Restaurant Brands International’s portfolio, which also consists of Popeyes’s Louisiana Chicken, Tim Hortons, and the newly added Firehouse Subs.

In this article, we won’t try to answer the near-impossible question of which is the better burger chain, but we’ll highlight which stock looks healthier for one’s portfolio. Continue reading "MCD vs QSR: Which Is Healthier For Your Portfolio?" →