The sellers continue to come out of the woodwork, with a generally weak environment hitting a big air pocket to end last week, decisively dragging all indexes and the vast majority of individual stocks lower—we’re even seeing the selling spread to the commodity arena, with even the impenetrable defensive areas taking hits. At this point, the major indexes are retesting their January-March lows, and we’re still seeing positive divergences under the surface, but as we’ve been saying for most of the past few months, you have to see it to believe it—right now, there’s no question the trends are pointed down, so we advise staying mostly on the sideline. Our Market Monitor is now at a level 4.
This week’s list is a potpourri of names that are holding well, including some that have lifted thanks to huge earnings beats. Our Top Pick is one of those and, if all goes well, could be part of a new group move.
Market Overview
Tide Continues to Go Out
The sellers continue to come out of the woodwork, with a generally weak environment hitting a big air pocket to end last week, decisively dragging all indexes and the vast majority of individual stocks lower—we’re even seeing the selling spread to the commodity arena, with even the impenetrable defensive areas taking hits. At this point, the major indexes are retesting their January-March lows, and we’re still seeing positive divergences under the surface and horrible sentiment among investors; thus, we wouldn’t be shocked if the market did at least stage a near-term bounce. But as we’ve been saying for most of the past few months, you have to see it to believe it—right now, there’s no question the trends are pointed down, with even the safe havens getting hit of late, so we advise staying mostly on the sideline and, if you buy, keeping it small and entering near key support. Our Market Monitor is at a level 4 now, and we’ll see how things progress from here.
This week’s list is a potpourri of names that are holding well, including some that have lifted thanks to huge earnings beats. Our Top Pick is United Airlines (UAL), which looks part of a potential group move as travel trends are super bullish.
| Stock Name | Price | Buy Range | Loss Limit |
| Cal-Maine Foods (CALM) | 54 | 53-55 | 47.5-48.5 |
| Comstock Resources (CRK) | 17 | 15.5-16.5 | 13-13.5 |
| Corteva (CTVA) | 57 | 55.5-57.5 | 50-51 |
| Coterra Energy (CTRA) | 29 | 27-28.5 | 23.5-24.5 |
| Lantheus (LNTH) | 59 | 54.5-56.5 | 47.5-48.5 |
| Lululemon (LULU) | 368 | 355-365 | 325-330 |
| Mosaic (MOS) | 64 | 62-65 | 54-56 |
| Royal Gold (RGLD) | 135 | 137-139 | 125-127 |
| United Airlines (UAL) ★ TOP PICK ★ | 51 | 49.5-51.5 | 44.5-45.5 |
| Westrock (WRK) | 50 | 48-49.5 | 44-45 |
Stock Picks & Previously Recommended Stocks
Stock 1
Cal-Maine Foods (CALM)
| Price | Buy Range | Loss Limit |
| 54 | 53-55 | 47.5-48.5 |
Why the Strength
The rapid spread of avian influenza throughout the U.S. has decimated poultry flocks, with prices for shell eggs up 130% since the first commercial case of bird flu was discovered in February. Cal-Maine is the largest fresh egg distributor and producer in the U.S., with a sales focus in the mid-Atlantic, midwestern and southern regions, and it’s the obvious beneficiary of that move. Higher net average selling prices and volumes for shell eggs and improving demand helped push Cal-Maine’s financial results significantly higher in fiscal Q3. Revenue of $477 million rose 33% from a year ago and beat estimates by 2%, while per-share earnings of 81 cents missed by 2 cents but nearly tripled from a year ago. Specialty egg sales (a key part of the company’s growth strategy) increased 26% and made up 39% of total shell egg revenue in the latest quarter. Management indicated that customer preference for specialty eggs continues to expand, with consumers willing to pay premium prices for these products, including cage-free eggs (Cal-Maine has spent $625 million to expand its capacity of these since 2018). This is significant since several huge commercial egg buyers have pledged to buy only cage-free eggs in the future, including Walmart and other major retail food outlets. Most recently, Cal-Maine announced that it plans to spend $82 million in expanding its cage-free layer hen facilities in Utah and Kentucky, and the news prompted several Wall Street firms to upgrade the company (a reason for the strength). Analysts, meanwhile, see sales growth in the upper 40-ish percent range in the next two quarters, with earnings soaring both this year and next, and seeing how things have gone in the past (Cal-Maine usually has a good couple of years when there’s a disruption in the industry), even that will likely prove conservative.
Technical Analysis
CALM peaked around 43 last March and then drifted lower for several months before bottoming at 35 in August. It took about five more months of tightening around that level, however, before the stock embarked on a new uptrend. Take-off occurred shortly after New Year’s, with shares galloping to higher peaks each month since then. The pullback since then has been very well contained even by the 25-day line; we’re OK with a nibble here and a stop in the upper 40s.
| Market Cap | $2.80B | EPS $ Annual (May) | |
| Forward P/E | 32 | FY 2020 | 0.33 |
| Current P/E | 152 | FY 2021 | 0.04 |
| Annual Revenue | $1.53B | FY 2022e | 1.79 |
| Profit Margin | 8.3% | FY 2023e | 2.79 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) |
| Latest qtr | 478 | 33% | 0.81 | 189% |
| One qtr ago | 390 | 13% | 0.02 | -92% |
| Two qtrs ago | 316 | 8% | -0.37 | N/A |
| Three qtrs ago | 350 | -23% | -0.09 | N/A |
Stock 2
Comstock Resources (CRK)
| Price | Buy Range | Loss Limit |
| 17 | 15.5-16.5 | 13-13.5 |
Why the Strength
Comstock Resources isn’t a well known name, which makes sense given its size (less than $4 billion market cap) and the fact that it operates in a less popular basin (372,000 acres in the Haynesville and Bossier shales, found in parts of Louisiana and east Texas). But it might be the most direct, highest-levered play to the bull market in natural gas; indeed, nearly 100% of production is gas, the firm believes it has 25 years of drilling inventory and it claims to have the lowest cost operations among its peers (just 67 cents of direct costs per unit of gas produced!) Throw in the fact that Comstock has higher margins thanks to direct gas marketing deals (two thirds of output is sold into the Gulf Coast, which is higher priced; 14% goes direct to LNG shippers, a figure that’s bound to rise) and cash flow is going bananas, with Q4’s tally coming in at 45 cents per share, and of course that was before the moonshot in natural gas prices so far in 2022. The one thing missing so far is shareholder returns—Comstock’s cash spigot just began to open up, so that money is being used to chop debt (totaled 2.2 times cash flow at year-end, likely to hit 1.5 times or less at the end of 2022; it recently announced the redemption of another chunk of notes that were due in 2025), but like some other energy stocks that have perked up, investors figure it’s just a matter of time until Comstock starts paying dividends and/or buying back tons of stock, especially with current gas prices standing more than 35% higher than they were in Q4. It’s an intriguing small-cap energy story. Q1 results are due May 3.
Technical Analysis
CRK was at a split-adjust 450 back in 2008, so you can tell that it’s been a rough decade-plus for the stock—after crashing into 2016, shares were essentially rangebound in the single digits for a few years. But those doldrums are now over, with a huge rally last fall, and after one more dip to the 40-week line in January and February, a moonshot advance to 18 before getting yanked down by the market. It’s not for the faint of heart, but we’re OK starting a small position here or on dips.
| Market Cap | $3.77B | EPS $ Annual (Dec) | |
| Forward P/E | 6 | FY 2020 | 0.23 |
| Current P/E | 14 | FY 2021 | 1.16 |
| Annual Revenue | $1.85B | FY 2022e | 2.93 |
| Profit Margin | 15.7% | FY 2023e | 3.41 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) |
| Latest qtr | 655 | 139% | 0.37 | 164% |
| One qtr ago | 511 | 187% | 0.34 | N/A |
| Two qtrs ago | 344 | 91% | 0.22 | 999% |
| Three qtrs ago | 341 | 51% | 0.25 | 108% |
Stock 3
Corteva (CTVA)
| Price | Buy Range | Loss Limit |
| 57 | 55.5-57.5 | 50-51 |
Why the Strength
Higher food prices mean farmers will be planting more and spending more on herbicides and insecticides to protect crops. Corteva is one of the largest seed and crop protection businesses in the world, having been spun off from Dow Chemical in 2019. Just over half of sales come from seeds, primarily the major crops of corn, soy, alfalfa, sorghum, sunflower and cotton. Corteva has seven brands that have specific traits that are bred or genetically modified into the seed itself, usually offering resistance to specific pesticides. That dovetails with the other major arm of the business, crop protection, which is primarily pesticides and fungicides. Crop protection demand is expected to rise faster than global plantings this year because of higher fuel prices – GMO seeds allow farmers to spray higher concentrations of pesticides at once, reducing trips through the fields, cutting fuel costs. World crop plantings are expected to rise 6% this year, with Latin America seeing must faster growth – management expects its sales in the region to jump 26% this year. Overall, good demand and higher prices has Corteva projecting sales up nearly 9%, topping $17 billion, with earnings per share around $2.46, up 14%, with earnings likely to accelerate in 2023. The global nature of the business means that foreign exchange can push results a couple of percentage points either way and bad weather in key markets like Brazil and the U.S. Midwest are always risks, but overall the trends look good. Earnings are due May 4.
Technical Analysis
CTVA topped in May of last year, declining gradually and building a solid foundation in the mid 40s for a few months. There was a good move in October, but it wasn’t until February that the stock changed character, eventually rallying to 62 before the latest air pocket. The market is a risk, but nibbling on some during this dip near the 50-day line should be a solid risk-reward.
| Market Cap | $41.9B | EPS $ Annual (Dec) | |
| Forward P/E | 23 | FY 2020 | 1.50 |
| Current P/E | 28 | FY 2021 | 2.15 |
| Annual Revenue | $15.7B | FY 2022e | 2.46 |
| Profit Margin | 1.7% | FY 2023e | 2.95 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) |
| Latest qtr | 3.48 | 8% | 0.08 | 100% |
| One qtr ago | 2.37 | 27% | -0.14 | N/A |
| Two qtrs ago | 5.63 | 8% | 1.40 | 11% |
| Three qtrs ago | 4.18 | 6% | 0.79 | 34% |
Stock 4
Coterra Energy (CTRA)
| Price | Buy Range | Loss Limit |
| 29 | 27-28.5 | 23.5-24.5 |
Why the Strength
Coterra Energy was formed last year when Cabot Oil & Gas, a leading natural gas producer in the Marcellus, merged with Cimarex, which had a big position in the more liquid-y Permian and Anadarko basins—the end result being a more well balanced operator that benefits from elevated prices from everything, with a bit more than half of revenue from natural gas, a third from oil and the rest gas liquids. The story here is similar to others, with an investment grade balance sheet, huge cash flows and a plan to return tons of money to shareholders via both dividends and share buybacks, and now that some of the merger and payout uncertainties are in the past, the stock’s action has improved: In late February, the top brass saw $3 billion of free cash flow at then-current strip prices (which, especially for gas, are much higher now), with a promise to pay out at least half (it was 60% in Q4) of that in dividends (including a solid 2% base dividend)—and on top of that is a $1.25 billion share buyback program that will be executed as management sees fit. The real upside, as mentioned above, could come from natural gas prices, which are benefiting not just from the general inflation but on the prospect of much higher demand in Europe over time—prices are up from $4.50 or so in late February to $6.50 today, and we wouldn’t be surprised if Coterra layered on some super-profitable hedges for the quarters ahead as gas prices have soared. Even if prices ease somewhat, there’s no reason the stock can’t yield nearly double digits with plenty of buybacks, too. Earnings are due May 3.
Technical Analysis
CTRA has lagged its peer group in recent months, with shares mostly languishing as the Cabot/Cimarex merger officially went through and investors looked for guidance of the new entity; even into early March, shares really hadn’t made any net progress for months. But we think the stock has changed character since then, with a strong run to new highs before the rug has been pulled out from the energy group over the past few days. If you want in, you could nibble here or just keep it on your watch list.
| Market Cap | $23.6B | EPS $ Annual (Dec) | |
| Forward P/E | 7 | FY 2020 | 0.54 |
| Current P/E | 15 | FY 2021 | 2.25 |
| Annual Revenue | $3.45B | FY 2022e | 4.10 |
| Profit Margin | 30.1% | FY 2023e | 3.36 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) |
| Latest qtr | 2225 | 387% | 0.83 | 219% |
| One qtr ago | 440 | 51% | 0.52 | 478% |
| Two qtrs ago | 325 | -2% | 0.26 | 420% |
| Three qtrs ago | 460 | 19% | 0.38 | 171% |
Stock 5
Lantheus (LNTH)
| Price | Buy Range | Loss Limit |
| 59 | 54.5-56.5 | 47.5-48.5 |
Why the Strength
As the world’s elderly population explodes, the need to diagnose and treat end-stage illnesses is rapidly expanding. An essential part of the disease diagnostic process involves imaging agents, which help radiologists and other healthcare professionals visualize the function of a patient’s internal organs. Lantheus specializes in making imaging agents, targeted therapeutics and artificial intelligence-based medical device software that assist physicians in diagnosing and treating cancers and other conditions affecting the heart, brain, lungs and other organs. Lantheus’ worldwide revenue for Q4 and the full year climbed 38% and 25% from a year ago to reach $130 million and $425 million, respectively (the reason for the strength), and per-share earnings of 25 cents beat estimates by 8 cents. The company said the strong financials were largely the result of the successful launch of new product Pylarify, an imaging agent for identifying prostate cancer (and which brought in over $35 million in sales in Q4, the first quarter of its launch). The firm also recently signed an agreement with the medical device company Palette Life Sciences to promote Pylarify—another reason for the strength. Additionally, Lantheus said 2022 is already looking “productive” as the firm just received FDA approval for its on-site manufacturing facility for ultrasound imaging-enhancement product Definity. The company’s product portfolio expansion plans have led management to project Q1 sales of around $165 million (up 77% if realized) and per-share earnings of around 48 cents, while analysts see earnings taking a step-function leap higher this year and advancing steadily from there, especially as demand for these products should be insulated from the world’s current worries. Earnings are due this Thursday, April 29.
Technical Analysis
Beginning last February, LNTH spent 12 months etching out what amounted to a long launching pad, with shares gyrating between 20 and 30 for many months. Then came the blast-off in late February on Q4 results, which saw a massive gap up on more than 10 times average volume (something that usually leads to prolonged gains)—and sure enough, LNTH has pushed nicely higher since then. Further weakness would be tempting.
| Market Cap | $3.97B | EPS $ Annual (Dec) | |
| Forward P/E | 28 | FY 2020 | 0.47 |
| Current P/E | 121 | FY 2021 | 0.49 |
| Annual Revenue | $426M | FY 2022e | 2.05 |
| Profit Margin | 13.3% | FY 2023e | 2.50 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) |
| Latest qtr | 130 | 38% | 0.25 | 257% |
| One qtr ago | 102 | 15% | 0.08 | 100% |
| Two qtrs ago | 101 | 53% | 0.11 | 10% |
| Three qtrs ago | 92.5 | 2% | 0.05 | -86% |
Stock 6
Lululemon (LULU)
| Price | Buy Range | Loss Limit |
| 368 | 355-365 | 325-330 |
Why the Strength
Having accomplished the goals of its prior five-year plan, the athleisure- and athletic-wear maker rolled out a roadmap this month to double sales in the next five years. Lululemon’s biggest opportunity is expanding outside of the U.S. and Canada, which account for 85% of 2021’s $6.26 billion revenue. Management wants to quadruple international business, with China seen as a prime avenue to achieve that growth; the Chinese consumer’s strong digital shopping culture should fit well with Lululemon’s increasing focus on digital, which now originates half of total sales. Another piece of the growth plan is appealing more to men by expanding beyond its workout/yoga apparel offerings into hiking, tennis and golf. In the near-term, the existing Lululemon business continues to show some of the strongest trends in retail, with same-stores sales seen rising double-digits this year, driving both total sales and the bottom line up 20%. Lululemon’s core customer is very brand loyal, which has executives planning a paid membership program later this year, offering clothing discounts and other perks. It’s part of a strategy to grow the company beyond apparel, including putting more resources into Mirror, a large reflective computer screen that offers on-demand workouts with digital feedback. Mirror is only about 2% of sales, but taps into the upscale home workout trend that made Peloton a highflier for a time. Lululemon remains a solid retail growth story.
Technical Analysis
LULU peaked in November with most growth stocks, diving 38% into January and living below its 40-week line for many weeks in a row. But that was effectively the low, and after retesting that area a few times, the stock popped on earnings in late March. Since then, LULU has been up and now back down, but it’s held almost all of that earnings move. It’s not a classic setup, but a nibble here with a stop under 330 seems like a decent risk-reward.
| Market Cap | $44.6B | EPS $ Annual (Jan) | |
| Forward P/E | 39 | FY 2021 | 4.70 |
| Current P/E | 48 | FY 2022 | 7.79 |
| Annual Revenue | $6.26B | FY 2023e | 9.33 |
| Profit Margin | 20.5% | FY 2024e | 11.02 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) |
| Latest qtr | 2.13 | 23% | 3.37 | 31% |
| One qtr ago | 1.45 | 30% | 1.62 | 40% |
| Two qtrs ago | 1.45 | 61% | 1.65 | 123% |
| Three qtrs ago | 1.23 | 88% | 1.16 | 404% |
Stock 7
Mosaic (MOS)
| Price | Buy Range | Loss Limit |
| 64 | 62-65 | 54-56 |
Why the Strength
Sanctions against top potash producers Russia and Belarus, coupled with fertilizer traders avoiding Russian supply, have created major worries for farmers worldwide. As a result of tightened inventories, the prices of several widely used fertilizers (including potash) have more than doubled from a year ago, fueling expectations of massive earnings for companies like Mosaic. But the nation’s largest phosphate and potash fertilizer producer’s recent strength is more than just supply-based; it’s also about higher demand from domestic growers now that crop prices are soaring. What’s more, lots of crops—and inputs—will be needed to address food shortages beginning to appear around the globe (including places like Sri Lanka and Peru). The intensifying demand for fertilizer was reflected in Mosaic’s Q4 report; while revenue missed estimates, it still rose an eye-opening 56% from a year ago and was up 12% from the prior quarter. Per-share earnings of $1.95 missed by 3 cents but more than tripled from a year ago and up 44% sequentially. The company expects rising fertilizer prices to remain elevated guided for Q1 phosphate sales prices to be more than $60 a ton above prices realized in Q4, while potash prices are forecast to increase $125 per ton. Mosaic plans to return up to 75% of its free cash flow to shareholders in 2022 in the form of dividends and buybacks and recently announced a new $1 billion repurchase authorization. Wall Street sees earnings mushrooming to $12 per share this year, and even after a retrenchment, remaining near $9 in 2023.
Technical Analysis
MOS broke out of a cup-shaped pattern last September on above-average volume, but quickly hit a wall in October. The subsequent decline was halted at the 40-week line in December, then came the big breakout in January when shares made it above the October peak at 42. From there the stock went on to nearly double after the Russian invasion before finally seeing some air come out of the balloon last week. Yes, the dip could continue, but if you want in, starting small on this sharp correction makes sense.
| Market Cap | $24.6B | EPS $ Annual (Dec) | |
| Forward P/E | 6 | FY 2020 | 0.85 |
| Current P/E | 14 | FY 2021 | 5.04 |
| Annual Revenue | $12.4B | FY 2022e | 12.11 |
| Profit Margin | 19.2% | FY 2023e | 9.02 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) |
| Latest qtr | 3.84 | 56% | 1.95 | 242% |
| One qtr ago | 3.42 | 44% | 1.35 | 487% |
| Two qtrs ago | 2.8 | 37% | 1.17 | 964% |
| Three qtrs ago | 2.3 | 28% | 0.57 | N/A |
Stock 8
Royal Gold (RGLD)
| Price | Buy Range | Loss Limit |
| 135 | 137-139 | 125-127 |
Why the Strength
In times of geopolitical upheaval, gold and silver are typically viewed by investors as ideal hedges, while copper is a key metal widely used in the red-hot renewable energy sector. As it turns out, all three metals are in high demand, which is why Royal Gold (covered in the March 7 report) looks good. Unlike traditional mining companies, Royal isn’t involved in the actual mining process; it’s a streamer, which involves providing up-front payments to miners in exchange for the right to buy gold, silver, copper and other resources at a set price, or else receive a percentage of the output. In total, the company has streaming or royalty deals with 35 producing properties, as well as over 100 exploration properties and around 20 development projects. Royal recently provided guidance for its upcoming Q1 report, raising investors’ expectations. For Q1, the company sold 56,500 gold equivalent ounces (GEOs) of gold, silver and copper related to its streams, which was 8% above prior guidance. The company’s average realized price for gold was $1,863 per ounce in Q1, up 4% sequentially, while copper was up 4% and silver was flat. For full-year 2022, Royal expects total sales volume of around 330,000 GEOs at the midpoint which, if realized, would be roughly equivalent to last year’s volume. That said, the trend of Royal’s output has risen in recent years, due largely to the firm’s 100% stream on the Khoemacau Copper Mine in South Africa (which the company believes could deliver up to $40 billion in annual revenue related to silver). Analysts, meanwhile, see earnings rising in the low double digits this year and next, but there’s upside should precious metal prices rally. The Q1 report is due May 4.
Technical Analysis
After a grueling 14-month slide following its August 2020 peak, RGLD finally hit rock bottom at 92 last October. A 16-week period of tightening then ensued before the stock finally broke free in February and rallied persistently to 147 in April, right around the previous record high. The pullback after touching this level has been sharp, but like many commodity names, this decline has come right down toward the 50-day line. We’ll set our buy range up a bit, trying to catch a rebound if it comes.
| Market Cap | $9.01B | EPS $ Annual (Dec) | |
| Forward P/E | 34 | FY 2020 | 2.42 |
| Current P/E | 35 | FY 2021 | 3.60 |
| Annual Revenue | $654M | FY 2022e | 4.01 |
| Profit Margin | 41.1% | FY 2023e | 4.41 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) |
| Latest qtr | 169 | 6% | 1.05 | 14% |
| One qtr ago | 174 | 19% | 1.07 | 34% |
| Two qtrs ago | 168 | 40% | 1.04 | 96% |
| Three qtrs ago | 143 | 5% | 0.84 | 24% |
Stock 9
United Airlines (UAL) ★ Top Pick
| Price | Buy Range | Loss Limit |
| 51 | 49.5-51.5 | 44.5-45.5 |
Why the Strength
You can say what you want about inverted yield curves, Fed rate hikes and all the other worrisome economic signs, but none of that is being seen in travel, where business trends are booming at a much faster-than-anticipated rate; that’s the reason why United Airlines (and some major travel firms) have shown relative strength of late. United’s Q1 report was OK, with revenue still down 21% from the same quarter of 2019 (pre-pandemic), partly due to a 19% capacity drop, which contributed to another huge loss. But the reason for the strength was due to what management said about Q2 and beyond, with the CEO stating “the demand environment is the strongest it’s been in my 30 years in the industry; we’re now seeing clear evidence that the second quarter will be a historic inflection for our business.” Indeed, United believes it will now be profitable in Q2 and the bottom line will grow from there; analysts saw a Q2 loss north of $3 per share, but now see a profit of 22 cents per share despite the headwinds of rising fuel prices, and the 2023 estimate is up above $7 per share and likely to rise from there. And what’s more encouraging is this being an industry trend, with Delta, Alaska and American all saying that March results (tail end of Q1) were strong and Q2 should be great, with the big picture looking like most airlines will finally get back to pre-pandemic operating levels during the next year or two. The fact that masks are now optional on flights does’t hurt the demand picture, either. It’s a solid turnaround story.
Technical Analysis
UAL’s post-crash rally stalled out just above 60 back in March of last year, with new variants of the virus and higher fuel costs causing headwinds; shares didn’t bottom until a year later as the Russian invasion caused prices to spike and the industry was riddled with cancellations. But that was the bottom, and after a snapback, UAL actually touched five-month highs last week despite the market’s implosion. We do think the stock has a chance of counter-trending to the market, so you can start here or (preferably) on dips.
| Market Cap | $16.7B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2020 | -27.57 |
| Current P/E | N/A | FY 2021 | -13.94 |
| Annual Revenue | $29.0B | FY 2022e | -0.04 |
| Profit Margin | N/A | FY 2023e | 7.01 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) |
| Latest qtr | 7.57 | 135% | -4.24 | N/A |
| One qtr ago | 8.19 | 140% | -1.60 | N/A |
| Two qtrs ago | 7.75 | 211% | -1.02 | N/A |
| Three qtrs ago | 5.47 | 271% | -3.91 | N/A |
Stock 10
Westrock (WRK)
| Price | Buy Range | Loss Limit |
| 50 | 48-49.5 | 44-45 |
Why the Strength
Ongoing supply-chain disruptions, extended backlogs and inflation-related issues are pushing containerboard prices higher (up 30% since 2020) and lifting the profit outlook for corrugated packaging maker WestRock. The company is one of the world’s largest paper and packaging companies, supplying cartons, containers, cardboard displays and kraft paper to thousands of businesses across 12 major markets. What’s more, as economies around the world come out of their Covid funks, demand for WestRock’s sustainable fiber-based packaging is increasing, and the company boasted some records in the latest quarter, including solid margin performance in the face of continued supply bottlenecks, higher inflation and increased absenteeism associated with Covid. WestRock saw record revenue of nearly $5 billion in fiscal Q1, a 13% increase from a year ago, as well as 7% earnings per share growth of 65 cents (a 1-cent beat). The company also reorganized its reportable business segments (from two to four) during the quarter, and management believes it will benefit from the vertical integration with its mills. By segment, revenue from paper (27% of sales) soared 24%, while revenue from corrugated packaging (44% of sales) increased 10% and revenue for both consumer packaging (23% of sales) and distribution (6% of sales) rose 7% in Q1. But the stock is turning higher because of what’s to come: WestRock said it plans to continue paying down debt while maintaining a commitment to shareholder returns, including “aggressive” share repurchases (up to $500 million in the coming months) and dividends (a 2.0% yield). After a nice turnaround last year, analysts see earnings soaring 40% this year to a new all-time high and lifting at double-digits rates in 2023. A reasonable valuation (11 times this year’s estimates) adds to the attraction in this uncertain environment. Earnings are due May 5.
Technical Analysis
Following the Covid crash low of 2020, WRK nearly tripled and hit a multi-year peak last May at 62. The stock then entered a downward spiral for the next 10 months that finally reached a nadir at 41 in March. But now it looks like shares have changed character, with the WRK moving north of all its moving averages before a low-volume pothole with the market. It’s not a classic setup, but there should be support in this area, so we’re OK taking swing at it around here.
| Market Cap | $13.3B | EPS $ Annual (Sep) | |
| Forward P/E | 11 | FY 2020 | 2.75 |
| Current P/E | 15 | FY 2021 | 3.39 |
| Annual Revenue | $19.3B | FY 2022e | 4.76 |
| Profit Margin | 3.5% | FY 2023e | 5.42 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) |
| Latest qtr | 4.95 | 13% | 0.65 | 7% |
| One qtr ago | 5.09 | 14% | 1.23 | 68% |
| Two qtrs ago | 4.82 | 14% | 1.00 | 32% |
| Three qtrs ago | 4.44 | 0% | 0.50 | -19% |
Previously Recommended Stocks
Below you’ll find Cabot Top Ten Trader recommended stocks. Those rated HOLD are stocks that traded within our suggested buy range within two weeks of appearing in the Top Ten and still look good; hold if you own them. Stocks rated WAIT have yet to dip into our suggested buy range … but can be bought if they do so within the next week.
Those stocks rated SELL should be sold if you own them; they will no longer be listed here. Finally, Stocks in the DROPPED category are those that failed to trade within our buy range within two weeks of our recommendation; that’s not a bad thing, we just never got the price we wanted. Please use this list to keep up with our latest thinking, and don’t hesitate to call or email us with any questions you may have. New recommendations each week are in bold.
| Date | Stock | Symbol | Top Pick | Original Buy Range | Price as of 4/25/2022 |
| HOLD |
| 2/28/22 | Allegheny Tech | ATI | | 23.5-25 | 28 |
| 3/14/22 | Antero Resources | AR | | 23-24.5 | 32 |
| 11/8/21 | Arista Networks | ANET | ★ | 129-134 | 119 |
| 4/18/22 | Box Inc | BOX | | 30-31 | 32 |
| 3/14/22 | Cameco | CCJ | | 24.5-26 | 27 |
| 4/4/22 | Cleveland-Cliffs | CLF | | 30.5-32 | 28 |
| 4/11/22 | CNX Resources | CNX | | 20-21 | 21 |
| 3/14/22 | CrowdStrike | CRWD | | 176-184 | 215 |
| 5/10/21 | Devon Energy | DVN | ★ | 25-26.5 | 56 |
| 4/18/22 | Dexcom | DXCM | | 470-485 | 443 |
| 3/14/22 | Fluor | FLR | | 27-28.5 | 26 |
| 4/18/22 | Golar LNG | GLNG | | 23-24 | 22 |
| 1/18/22 | Halliburton | HAL | | 27-28 | 35 |
| 4/18/22 | Halozyme | HALO | | 40.5-42 | 45 |
| 3/21/22 | Hilton | HLT | | 147-151 | 156 |
| 4/11/22 | Horizon Therapeutics | HZNP | ★ | 108-111 | 107 |
| 3/21/22 | Lantheus | LNTH | | 52-54 | 59 |
| 3/28/22 | LPL Financial | LPLA | | 181-186 | 197 |
| 1/10/22 | Marathon Oil | MRO | | 17.0-17.8 | 24 |
| 4/18/22 | Marriott | MAR | | 177-182 | 182 |
| 3/21/22 | Nutrien | NTR | | 97-101 | 100 |
| 2/14/22 | Occidental Petroleum | OXY | | 38-40 | 55 |
| 4/11/22 | Pacira Pharm | PCRX | | 76-77 | 76 |
| 3/7/22 | Palo Alto Networks | PANW | ★ | 525-540 | 600 |
| 3/7/22 | Patterson-UTI | PTEN | | 14-15 | 16 |
| 4/11/22 | Paychex | PAYX | | 133-136 | 132 |
| 3/28/2022 | PDC Energy | PDCE | ★ | 70-73 | 71 |
| 1/10/2022 | Pioneer Natural Res. | PXD | | 194-198 | 231 |
| 3/21/2022 | Pure Storage | PSTG | ★ | 33-35 | 31 |
| 4/18/2022 | Range Resources | RRC | | 31-32 | 30 |
| 3/7/2022 | Royal Gold | RGLD | | 123-127 | 135 |
| 4/18/2022 | Royalty Pharma | RPRX | ★ | 43-44.5 | 42 |
| 4/11/2022 | Shockwave Medical | SWAV | | 202-208 | 186 |
| 4/18/2022 | SSR Mining | SSRM | | 23.5-24.5 | 22 |
| 4/4/2022 | Tesla | TSLA | | 1050-1100 | 998 |
| 4/11/2022 | U.S. Steel | X | | 34.5-36.5 | 33 |
| 4/11/2022 | Wheaton Prec Metals | WPM | | 47.5-49.5 | 47 |
| 4/4/2022 | Wolfspeed | WOLF | | 111-115 | 105 |
| WAIT |
| None this week | | | | | |
| SELL RECOMMENDATIONS |
| 3/21/22 | Alpha Metallurgical | AMR | | 116-124 | 126 |
| 4/4/22 | Baker Hughes | BKR | | 34.5-36.5 | 31 |
| 2/28/22 | CarGurus | CARG | | 44.5-47 | 37 |
| 1/3/22 | CF Industries | CF | | 67-69 | 94 |
| 3/7/22 | Civitas | CIVI | | 53-56 | 60 |
| 3/28/22 | FMC Corp | FMC | | 128-132 | 132 |
| 4/4/22 | Gold Fields | GFI | | 14-15 | 13 |
| 3/28/22 | Helmrich & Payne | HP | | 39.5-41.5 | 44 |
| 4/4/22 | Inspire Medical | INSP | | 252-260 | 229 |
| 1/31/22 | Intra-Cellular Tech | ITCI | | 45-48 | 53 |
| 1/24/22 | Newmont Mining | NEM | | 61.5-63 | 73 |
| 3/21/22 | Oasis Petroleum | OAS | | 147-152 | 136 |
| 4/11/22 | Quanta Services | PWR | | 129.5-133.5 | 121 |
| 3/28/22 | SolarEdge | SEDG | | 310-323 | 253 |
| 3/7/22 | Steel Dynamics | STLD | | 70-73 | 89 |
| 3/14/22 | Westlake | WLK | ★ | 117-121 | 128 |
| DROPPED |
| None this week | | | | | |
The next Cabot Top Ten Trader issue will be published on May 2, 2022.
