The stock market has experienced an unabated rally so far this year, fueled by a torrent of monetary and fiscal stimulus and strong corporate earnings. The S&P 500 has climbed 20%, registering seven straight months of gains and more than 50 highs along the way.
Though investors are concerned about the economic impact of the COVID-19 Delta variant, if vaccines remain effective in minimizing severe cases that lead to hospitalizations and deaths, the adverse effects of the current COVID-19 surge are expected to be limited. According to The Conference Board’s Economic Forecast, the economy is expected to witness a steady rebound in the second half of the year on the back of improving consumer spending, a boost in inventories as the holiday period approaches, and continued government support. Furthermore, UBS boosted its year-end S&P 500 forecast to 4650, backed by solid growth activity, solid earnings momentum, and higher fiscal spending.
Given this backdrop, we think it could be wise to bet on high-beta stocks because they tend to perform better than the benchmark indexes in a bull market. As such, quality high-beta stocks Moderna Inc. (MRNA), Microchip Technology Incorporated (MCHP), Sasol Limited (SSL), and OneWater Marine Inc. (ONEW) could be ideal bets to cash in on the bullish market trend.
Moderna Inc. (MRNA)
Biotechnology company MRNA develops messenger RNA-based medicines and vaccines to treat infectious diseases, immuno-oncology, rare diseases, cardiovascular diseases, and auto-immune diseases. The Cambridge, Mass.-based company is known primarily for its COVID-19 vaccine sold under the brand name Spikevax.
This month, MRNA announced that it had begun seeking approval from the U.S. Food and Drug Administration (FDA) for a booster dose of the Moderna COVID-19 vaccine (mRNA-1273) at the 50g dosage level. The company plans to submit data to the European Medicines Agency (EMA) and other regulatory agencies worldwide in the coming days.
MRNA’s revenue increased significantly year-over-year to $4.35 billion in the second quarter, ended June 30, 2021. Its operating income came in at $3.06 billion, versus a 122 million operating loss in the prior-year quarter. The company reported $2.78 billion in net income compared to a $117 million net loss in the second quarter of 2020. Its EPS amounted to $6.46, compared to a $0.31 loss per share during the same period last year.
A $29.69 consensus EPS estimate for the current year represents a 1,614.8% improvement year-over-year. The $20.28 billion consensus revenue estimate for the current year represents a 2424.6% increase from the same period last year. Over the past year, the stock has gained 678.3% in price. Also, it has gained 304.8% year-to-date. In addition, the stock has a 1.48 beta.
MRNA's POWR Ratings reflect this promising outlook. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
MRNA is also rated a B grade for Growth, Quality, and Value. Additionally, within the Biotech industry, it is ranked #34 of 508 stocks.
To see additional POWR Ratings for Stability, Momentum, and Sentiment for MRNA, click here.
Click here to checkout our Healthcare Sector Report for 2021
Microchip Technology Incorporated (MCHP)
MCHP develops, manufactures, and distributes semiconductor devices for various embedded control applications across America, Europe, and Asia. The Chandler, Ariz., company provides general-purpose 8-bit, 16-bit, and 32-bit microcontrollers; 32-bit embedded microprocessor markets; and specialized microcontrollers for automotive, industrial, computing, communications, lighting, power supplies, motor control, and wireless connectivity applications.
This month, MCHP launched the industry's most compact, 1.6T, low-power PHY (physical layer) solution, the PM6200 META-DX2L, which reduces power per port by 35% compared to its 56G PAM4 predecessor, META-DX1. In addition, META-DX2L enables routers, switches, and line cards to double their bandwidth by transitioning to 112G PAM4 interface rates.
During the second quarter, ended June 30, 2021, MCHP’s net sales increased 19.8% year-over-year to $1.56 billion. The company’s operating income grew 68.9% year-over-year to $368.8 million over this period. Its net income increased 104.5% year-over-year to $252.8 million, while its EPS grew 85.4% from the prior-year quarter to $0.89.
The company’s EPS is expected to grow 28.8% year-over-year to $8.49 in its fiscal year 2021. Analysts expect MCHP’s revenue to increase 21.4% year-over-year to $6.6 billion in the current year. The stock has surged 50% in price over the past year and 117% so far this year. MCHP has a 1.67 beta.
MCHP’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. MCHP also has a B grade for Momentum and Growth. The stock is ranked #41 of 99 stocks in the A-rated Semiconductor & Wireless Chip industry.
Beyond the POWR Ratings grades we have just highlighted, one can see the MCHP ratings for Value, Stability, Sentiment, and Quality.
Click here to checkout our Semiconductor Industry Report for 2021
Sasol Limited (SSL)
SSL operates as an integrated chemical and energy company in South Africa. Mining; Exploration and Production International; Energy; Base Chemicals; and Performance Chemicals are the company’s operational segments. In addition, it markets organic and inorganic commodity and specialty chemicals, including organics, inorganics, wax, phenolic, carbon, ammonia, and specialty gases; and offers engineering and project services.
This month, SSL and the Central Energy Fund signed a memorandum of understanding (MOU) to collaborate on expediting the development of gas solutions in South Africa. The deal brings together two of South Africa's top gas industry pioneers that have extensive expertise working across the gas value chain, from exploration to downstream operations.
For its fiscal year ended June 30, 2021, SSL’s cash generated from operating activities increased 6% year-over-year to R451 billion ($31.60 million). The company’s adjusted EBITDA grew 38.44% year-over-year to R48.42 billion ($3.39 billion) over this period.
A $1.9 billion consensus revenue estimate for the current year represents a 13% increase from the same period last year. SEIC’s EPS is expected to increase 24.3% year-over-year to $3.73 in its fiscal 2021. Also, the stock has advanced 80.5% in price over the past year and 68% over the past nine months. The stock has a 2.81 beta.
SSL's POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. SSL has also been rated B for Quality and Sentiment. Within the A-rated Foreign oil & Gas industry, it is ranked #24 of 49 stocks.
Click here to see additional POWR Ratings for Growth, Value, Momentum, and Stability for SSL.
OneWater Marine Inc. (ONEW)
ONEW in Buford, Ga., is one of the country's largest and fastest-growing premium recreational boat retailers. It operates 70 stores in 11 states, eight of which are among the top twenty marine retail consumers. The company provides various products and services, and has diverse income sources, including the sale of new and used boats, parts and accessories, finance and insurance products, maintenance and repair services, and ancillary services, such as boat storage.
This month, ONEW acquired PartsVu, an online marketplace for OEM marine parts, electronics, and accessories. Through this acquisition, the company intends to expand its position in the marine parts and accessories market while reducing its vulnerability to the cyclicality of boat sales.
Last month, ONEW acquired Stone Harbor Marina. According to ONEW, Stone Harbor should extend the company's footprint in the Northeastern United States and expand its new and used boat sales, storage, service and repair, and finance and insurance products.
ONEW’s gross profit increased 34.1% year-over-year to $126.95 million in its third fiscal quarter, ended June 30, 2021. Its operating income grew 28.1% from its year-ago value to $64.94 million. The company's net income surged 140.2% year-over-year to $34.50 million, while its EPS increased 28.8% from the prior-year quarter to $3.04.
Analysts expect ONEW's revenue to increase 22.5% year-over-year to $1.25 billion in its fiscal year 2021. In addition, the company's EPS is expected to grow 144% in the current year. Over the past year, the stock has gained 36.5% in price and 27.2% year-to-date. ONEW has a 1.67 beta .
It is no surprise that ONEW has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has a B grade for Value, Sentiment, and Quality. In the A-rated Athletics & Recreation industry, it is ranked #6 of 35 stocks.
In addition to the POWR Ratings grades we have just highlighted, one can see the ONEW ratings for Growth, Stability, and Sentiment here.
MRNA shares were trading at $446.84 per share on Thursday morning, up $23.94 (+5.66%). Year-to-date, MRNA has gained 327.72%, versus a 21.78% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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