After a month of solid gains in which the , the , and the all reached new record highs, the markets have fallen slightly. This short series of losses fits the general pattern of trading over the past six months: strong gains, a brief pullback that didn't completely wipe them out, followed by another round of gains. Rinse and repeat.
It is a market environment made for long-term investors. Short turn-downs are nothing to fear, but they do come with additional risks to day trading. But today's long-term trends seem to be working for investors willing to "buy and forget." The juxtaposition of periodic losses on an uptrend makes finding the 'perfect' share more important than ever.
That makes the Investing Insights a perfect tool. The Smart Score evaluates a series of factors for each stock—eight factors in all—then distill them into a single-digit rating on a scale of 1 to 10. It lets investors see at a glance where a stock is likely to rise, before getting into the details. to dive.
With this in mind, we used the InvestingInsights to identify three stocks with a 'Perfect 10' from the Smart Score. Unsurprisingly, these are also Strong Buys with significant upside potential for the coming year. Let's take a closer look.
Eastman Chemical (EMN)
Eastman Chemical (NYSE:) of Tennessee began in 1920 and was once a subsidiary of Kodak. Today, the company focuses on the manufacturing of materials, employs more than 14,000 people worldwide, conducts business in 100 countries and achieved sales of $8.5 billion last year. Eastman has an extensive product list, including solvents, resins, acids, glycols and polymers and many others.
Eastman's products are essential in most of their customer sectors – a fact that helped the company weather the coronavirus crisis. After a one-mile drop in sales in the second quarter of last year, the company's sales have posted three quarters in a row of consecutive gains. Fourth quarter revenue was $2.4 billion, about 3% above consensus and up 7.5% year over year. Earnings per share, at $1.99, were up more than 5% yoy. Shares in Eastman are up 42% in the past 12 months, ahead of the 31% gain on the S&P in the same period.
While maintaining its commitment to shareholders, Eastman announced a 69 cents ordinary stock dividend in May. The payment is the third at this level; the company has a recent history of increasing payment between Q3 and Q4 – and has a longer history, going back 12 years, of keeping the dividend reliable. The annualized rate of $2.76 per common share gives a return of 2.5%, slightly higher than the average found among the publicly traded companies of the S&P 500.
Eastman is a healthy company, with a diverse product line and strong market share and brand name; This led Wolfe Research analyst Josh Silverstein to rate the stock as Outperform (i.e. buy), with a price target of $154, implying a ~42% increase over the next 12 months.
Supporting his position, Silverstein writes: "[We] believe the outlook for EMN emerging from the downturn remains positive… Our view is broad market exposure with more room for recovery with less cyclicality than peers and opportunities for sustained price increases that could drive sequential EBITDA growth to beat previous peak levels."
It is clear from the consensus assessment, a strong buy based on 10 buys and 3 positions, that Wall Street generally agrees with the optimistic views on this. The stock is priced at $108.19 and their average price target of $138.31 suggests a 28% gain. (See EMN stock analysis)
Kinross Gold Corporation (KGC)
The correct stock could be a figurative gold mine, but if that stock is in a mining company, it could also just be a literal gold mine! Kinross Gold (NYSE:) is a $7.7 billion gold mining company based in Toronto, Canada and operating in the US, Russia, West Africa and Brazil. The company has approximately 30 million ounces of proven and likely gold reserves, and this year's first quarter gold production saw 558,777 ounces.
Kinross shows a clear pattern in its quarterly results, with the lowest sales in the first quarter and rising revenues in the fourth quarter. The most recent report, for 1Q21, fits this pattern perfectly. The reported $989 million was lower than the $1.23 billion in the fourth quarter, but it was a noticeable increase of 5.5% year-over-year. The gains are due in part to a rise in realized gold prices, which rose 13% yoy to $1,787 an ounce.
In the first quarter, Kinross dodged two bullets that could have seriously hampered operations. First, the Round Mountain opencast mine in Nevada showed instability of the north wall. It was a dangerous situation that delayed some planned mining activities, but has been resolved. And second, a fire in June halted production at the Tasiast mine and plant in Mauritania. The company has been working with local officials to get the situation under control and set a timetable for re-production.
Sometimes Wall Street analysts take a striking action on a stock – and that is the case here. Credit Suisse analyst Fahad Tariq deemed it appropriate to upgrade KGC stock from Neutral to Outperform (i.e. a Buy), writing about the stock: brand – we think the impact is mainly limited to 2021, with 2022/23 still there look like strong production years. There could also be an advantage of a possible earlier restart of the Tasiast factory over the current (somewhat conservative) year-end timeline. In 2022, we expect the company to offset the lost Phase W ounces from Round Mountain with other ore sources, and expect the higher quality ounces to be pulled forward at Tasiast…. We also see the stock supported by buybacks , which can be accelerated in the short term.”
Tariq gives Kinross stock a price target of $8, implying a ~31% gain this year.
With 10 recent ratings on file, including 8 to buy and just 2 to hold, Kinross gets a Strong Buy consensus rating from Wall Street analysts. The average price target of $9.50 suggests a 55% gain for the stock, slightly more bullish than Tariq's above. The current trading price here is $6.09. (See KGC stock analysis)
Synchrony Financial (SYF)
We end up in the financial sector, where Synchrony Financial (NYSE:), the parent company of Synchrony Bank, provides credit, savings and other consumer banking services. The company is headquartered in Stamford, Connecticut, is FDIC insured and fully managed online. Like many online companies, which are able to provide customer service despite the COVID lockdowns, Synchrony saw strong equity gains over the past year, with share price rising 103% in the past 12 months.
Earlier this month, Synchrony announced that it had revamped the consumer finance program it operates in partnership with TJX Companies (NYSE:) the parent company of department stores TJ Maxx. The renewal makes Synchrony the exclusive provider of TJX's rewards programs. In a related – but potentially much larger step – Synchrony is also partnering with Amazon (NASDAQ:) on the Amazon.com Store Card and Prime Store Cards.
Also this month, Synchrony released its financials for the second quarter of 21, with a net profit of $1.2 billion. This works out to $2.12 per share, up 22% from the previous quarter — and light-years higher than the 6 cent EPS reported in the same quarter last year. In a key statistic, the company reported a 58% yoy gain in new accounts, to 6.3 million.
Evercore ISI analyst John Pancari initiates coverage of Synchrony by noting the companies' strong ties to Amazon, writing: "We recognize that despite the size of the company, the financial contribution of the Amazon deal is likely to are constrained by particularly flimsy pricing – evident in JP Morgan's apparent willingness to break up and taking into account Amazon's pricing power Accordingly, we believe the underlying profitability of Amazon's relationship with Synchrony will depend heavily on the transaction volume and of other potential product links…"
However, Pancari is bullish, but rates SYF as Outperform (i.e. Buy) and sets a price target of $56, indicating confidence in an increase of about 22% over one year.
This financial services company has received no fewer than 16 ratings from the Wall Street analyst corps, including 13 for Buy and 3 for Hold. This gives the stock a strong buy consensus picture, while the average price target of $55.80 suggests a 24% increase from the trading price of $44.80. (See SYF stock analysis)
For more stock trading ideas at attractive valuations, visit Investing Insights.
