After a year most of us want to forget, we are all shaking off our New Year's celebrations and taking in the promise of relief for 2021 – from a perpetually controversial policy, the never-ending corona crisis and market volatility.
The latter may be key, at least for equity investors. We are entering a period of relative calm after a very turbulent year and now is the time to review investment choices and make portfolio decisions for the months and years to come.
The Investing Insights platform has both the information and the tools necessary for this act of financial introspection. By combining the Strong Buy analysts' consensus with the unique Smart Score system's Perfect 10 rating, investors can navigate directly to stocks that make a strong case for bullish moves.
Here are the details of three such stocks, along with supportive comments from the analysts.
Devon Energy ( DVN )
Let's start with Devon Energy (NYSE :), a mid-cap player in the oil regions of Texas. The company owns mineral rights to more than 1.8 million acres in Oklahoma, Texas and New Mexico, with additional production areas in Wyoming. Devon has more than 10,000 production wells in active use and has proven reserves totaling 757 million barrels of oil equivalent, 64% of which are recoverable liquids.
The corona pandemic and chronic low prices in the energy sector hurt Devon in the first half of 20, and by the second quarter revenues had dropped to $ 394 million. That's starting to turn around, and third quarter revenue of $ 1.07 billion lived up to expectations. In Q3, the company reported several strong figures: oil production of 146,000 barrels per day exceeded guidelines by 6,000 barrels; production costs improved 8% yoy; and free cash flow was $ 223 million in the quarter. Devon left Q3 with $ 1.9 billion in unlimited cash available. As a further sign of strength, Devon announced towards the end of the third quarter that it entered into a $ 2.56 billion deal to acquire WPX Energy (NYSE :).
The bottom line about Devon, Piper Sandler analyst Mark Lear writes, “With the recently announced WPX merger, DVN reaffirmed its commitment to improving its balance sheet, increasing shareholder returns through a fixed plus variable dividend model and alluding to further efficiency improvements. to be captured through portfolio optimization, which we expected to be a major added benefit of the deal. "
Lear & # 39; s positive comments come with an Overweight (i.e. buy) rating, and his target price of $ 21 indicates he is confident of a 15% rise over the next 12 months.
In general, the analysts' consensus on DVN is not unanimous, but it is almost unanimous. The Strong Buy consensus rating is backed by 14 Buys against a single Hold. (See DVN Stock Analysis)
Invitation Homes ( INVH )
Next up is Invitation Homes (NYSE :), a major player in rental housing. The corona crisis has dampened much economic activity, including home buying, and an unexpected result was the strength in the single-family rental housing sector. Invitation Homes has a portfolio of high-quality properties in Florida and the Western US, with a total of some 80,000 homes.
Invitation saw $ 459 million in revenue in the third quarter, up 3.6% year-over-year, along with Same Store (ie, rental office location) growth of 4% yoy. The company's third-quarter rental collection rate was 98% of the average historical rate – this was considered a strong result given the ongoing economic and public health crisis. The company also paid out its regular dividend of 15 cents for the third quarter, bringing the return to 2%.
Raymond James analyst Buck Horne sees INVH in a strong position to capitalize on current housing and employment trends.
“[We] continues to see abundant evidence of a secular shift in longer-term demand in favor of SFR housing. Millennial demographics, the flexibility of working from home, de-densification / de-urbanization, and population migration across multiple states are all important catalysts. We believe Invitation's industry-leading scale of improving efficiency and strengthening its balance sheet position makes the company one of the main beneficiaries of these trends, ”said Horne.
Horne & # 39; s comments support his Buy rating, and his $ 36 target price indicates a 24% increase for 2021.
Invitation Homes has a unanimous Strong Buy consensus rating, backed by 7 Buy reviews. (See INVH stock analysis)
Pinduoduo, Inc. ( PDD )
Last but not least is Pinduoduo (NASDAQ :), the second largest online marketplace in China. This company had more than 585 million active buyers in 2019, putting it just behind Alibaba's higher profile.
China's e-commerce ecosystem is growing fast and busier – businesses need to stand out to succeed. Pinduoduo manages this by offering several unique services to its customers, including consumer-to-manufacturer tools that bring end-user preferences to the attention of the service provider; a New Brand Initiative designed to help emerging traders brand their products; and an agricultural initiative connecting small farmers with second-tier city markets. The company has built these initiatives around a logistics and data analysis platform that lets merchants know what their customers want.
The company also works from the buyer's side. Pinduoduo has created a "virtual bazaar" that enables social interaction when purchasing online. The customer can share information about products and prices through social networks, improving both the shopping experience and the value for money – both are important for acquiring and retaining customers.
In the third quarter, PDD reported $ 2.09 billion in total revenues, exceeding estimates by 12% and growing 89% year over year. The total number of active buyers in the quarter grew 36% year-on-year to 731.3 million.
Jailong Shi, five-star analyst at Nomura, writes of PDD: “What impressed us most was marketing spend, which grew 46% year-on-year in the third quarter, increasing the operating margin by 26 pp year-on-year to -2%. Competition in the Chinese e-commerce industry remained fierce in the third quarter … making PDD's results look more striking by comparison. We believe this set of results was solid evidence of PDD's strong execution and the effectiveness of its funding strategy, which appears to have worked well to bolster the loyalty and engagement of its users … "
Shi rates PDD a Buy, and his $ 192 price target implies room for ~ 10% upside potential.
Pinduoduo has 9 recent ratings, splitting 8 to 1 in favor of Buys versus Hold, leading the analysts to rate the consensus of a Strong Buy. (See PDD Stock Analysis)
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