The U.S. economy performed well and grew faster than expected during the second quarter of 2024, positioned it to regain speed. Increased government spending, solid gains in consumer spending, and rising investments contributed to its growth.
Given this backdrop, it could be wise to invest in fundamentally strong high-beta stocks Devon Energy Corporation (DVN), Marathon Oil Corporation (MRO), and Tenet Healthcare Corporation (THC) for aggressive investors.
The U.S. economy poised a rapid growth level with its real gross domestic product increasing at an annual rate of 2.8% in the second quarter of 2024, compared to the real GDP growth of 1.4% during the first quarter. The improvement during the second quarter largely reflected rise in consumer spending, inventory investment, and business investment.
In the second quarter, increase in consumer spending was observed in both, services and goods. The price index for gross domestic purchases surged 2.3%, from a 3.1% increase in the previous quarter. Also, the personal consumption expenditures price index increased 2.6%, compared to the 3.4% in the first quarter.
Amid these economic tailwinds, growth investors and investors with high-risk tolerance may be interested in betting on high-beta stocks which have great potential to generate high returns but also comes with downside risks when markets fall. High-beta stocks tend to perform better than the benchmark indexes in a bull market, marking them a suitable choice for aggressive investors seeking higher returns.
Given these factors, let’s delve deeper into the fundamentals of top high-beta stocks: DVN, MRO, and THC.
Devon Energy Corporation (DVN)
DVN is an independent energy company which engages in the exploration, development, and production of oil, natural gas, and natural gas liquids.
On July 8, DVN entered into a definitive purchase agreement to acquire the Williston Basin business of Grayson Mill Energy in a transaction valued at $5 billion, which consists of $3.25 billion of cash and $1.75 billion of stock to the sellers. The strategic acquisition bodes well with DVN’s operations and enables it to efficiently expand oil production and operating scale.
DVN’s total revenues increased 13.4% year-over-year to $3.92 billion for the second quarter that ended June 30, 2024. Its earnings before income taxes grew 15.9% from the year-ago value to $1.04 billion. The company’s net earnings came in at $855 million, and $1.34 per share, indicating growth of 22.5% and 25.2% from the prior year’s quarter, respectively.
In addition, the company’s cash, cash equivalents and restricted cash were $1.17 billion as of June 30, 2024, versus $875 million as of December 31, 2023.
Street expects DVN’s revenue and EPS for the fourth quarter (ending December 2024) to increase 5.3% and 4.3% year-over-year to $4.37 billion and $1.47, respectively. Furthermore, the company surpassed the consensus EPS estimates in each of the trailing four quarters.
Shares of DVN have surged marginally over the past six months to close the last trading session at $43.67.
DVN’s robust growth prospects are reflected in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has a B grade for Value and Quality. Within the Energy – Oil & Gas industry, DVN is ranked #16 out of 78 stocks.
Click here to access additional ratings of DVN for Stability, Sentiment, Growth and Momentum.
Marathon Oil Corporation (MRO)
MRO is an independent exploration and production company which engages in international exploration, production, and marketing of crude oil and condensate, natural gas liquids, and natural gas. It also produces and markets products manufactured from natural gas like liquefied natural gas and methanol.
On July 31, MRO’s Board of Directors declared a dividend of $0.11 per share on the company’s common stock. The dividend is payable on September 10, 2024, to stockholders of record on August 21, 2024.
MRO pays an annual dividend of $0.44, which translates to a yield of 1.59% at the current share price. Its four-year average dividend yield is 1.28%. Moreover, the company’s dividend payouts have increased at a CAGR of 43.1% over the past three years.
On May 29, MRO and ConocoPhillips (COP) entered a definitive agreement under which ConocoPhillips will acquire MRO in an all-stock transaction with an enterprise value of $22.5 billion, including $5.4 billion of net debt. The acquisition is expected to offer a unique combination of added scale, resilience and long-term durability to MRO.
For the second quarter that ended June 30, 2024, MRO’s total revenues and other income increased 12.8% year-over-year to $1.71 billion. Its income from operations grew 15.2% from the year-ago value to $523 million. The company’s adjusted net income came in at $357 million and $0.63 per share, up 21% and 31.2% from the prior year’s quarter, respectively.
Furthermore, the company’s adjusted free cash flow was $364 million for the period.
Analysts expect MRO’s revenue and EPS for the third quarter (ending September 2024) to increase 0.8% and 0.3% year-over-year to $1.83 billion and $0.77, respectively. Moreover, the company has topped the consensus EPS estimates in three of the four trailing quarters.
MRO’s shares have gained 15.4% over the past six months and 6% over the past year to close the last trading session at $27.67.
MRO’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has a B grade for Quality. Within the Energy – Oil & Gas industry, MRO is ranked #21 among 81 stocks.
In addition to the POWR Ratings we’ve stated above, we also have MRO ratings for Momentum, Growth, Stability, Sentiment, and Value. Get all MRO ratings here.
Tenet Healthcare Corporation (THC)
THC operates as a diversified healthcare services company. The company operates through two segments: Hospital Operations and Services; and Ambulatory Care. Its general hospitals offer acute care services, operating and recovery rooms, radiology and respiratory therapy services, clinical laboratories, and pharmacies.
On August 5, THC entered into a definitive agreement with Orlando Health for the sale of its 70% majority ownership interest in Brookwood Baptist Health in Birmingham for nearly $910 million in cash.
The transaction included five hospitals – Brookwood Baptist Medical Center, Princeton Baptist Medical Center, Walker Baptist Medical Center, Shelby Baptist Medical Center, Citizens Baptist Medical Center.
THC’s net operating revenues for the second quarter that ended June 30, 2024, increased marginally from the prior year’s quarter to $5.10 billion. The company’s net income available to Tenet common shareholders came in at $259 million and $2.64 per share, up 110.6% and 129.6% from the prior year’s quarter, respectively.
Furthermore, the company’s adjusted EBITDA increased 12.1% year-over-year to $945 million.
Analysts expect THC’s EPS for the fiscal year (ending December 2024) to increase 53.5% year-over-year to $10.71 and its revenue is estimated to increase 1.5% year-over-year to $20.85 billion for the same year. Moreover, the company surpassed the consensus EPS and revenue estimates in each of the trailing four quarters.
THC’s stock has soared 73.7% over the past six months and 120.8% over the past year to close the last trading session at $160.50.
THC’s POWR Ratings reflect its robust outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
THC has a B grade for Growth, Value, and Sentiment. It is ranked #2 among the 10 stocks in the A-rated Medical - Hospitals industry.
Click here to access additional THC ratings for Quality, Stability, and Momentum.
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DVN shares were trading at $44.72 per share on Friday afternoon, up $1.05 (+2.40%). Year-to-date, DVN has gained 0.41%, versus a 18.81% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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