What are you thankful for this holiday weekend? Taking a look at the broader picture of the US economy, there’s a lot that’s going right. The jobs situation is improving, wages are up, and consumers are flush with cash. While inflation is high, and remains a problem, we do have the ingredients for a good year ahead.
The stock markets have done their part, too. We should all be grateful for the S&P 500’s record highs and a 25% gain this year.
So let’s show our appreciation – for strong investment returns. Wall Street’s analysts have been busy finding the stocks that will make you thankful you got into the market, and we’ve used the TipRanks data to get a closer look at three of them. Each has a Strong Buy rating from the analyst community, and stands to notch more gains on top of its already impressive growth.
Calumet Specialty Products (CLMT)
We’ll start in the industrial sector, where Calumet is a producer of specialty products. The company’s product list includes aliphatic solvents, naphthenic oils, and paraffin waxes. The company has been in business for over a century, and has 10 production facilities putting out more than 3,400 unique end products. Calumet boasts over 2,700 business customers in 90 countries around the world.
This month, Calumet has itself had enough to be thankful for, in the form of some good news for the company. Just last week, the company announced several new strategic partnerships that will enhance its renewable diesel fuel business. These included the investment, as convertible debt, of $300 million by Oaktree into Calumet’s subsidiary, Montana Renewables (MRL), and the carve out of MRL as wholly-owned pure-play subsidiary in the renewable fuel market.
Earlier this month, on the 5th, Calumet released its 3Q21 earnings. The top line revenue, of $874.9 million, was the highest in two years, and up 54% year-over-year. EPS did even better. Earnings had been negative for the past seven quarters, but has turned positive and came in at 64 cents profit per share. Impressively, Calumet’s stock is up 380% this year.
Analyst Roger Read, covering the stock for Wells Fargo, sees the moves on the renewable diesel front as key factors for Calumet going forward. He believes the spin-off of MRL will give the company greater agility in the field, while the investment from Oaktree brings needed capital.
“The cash infusion from an outside investor helps validate the Renewable Diesel conversion project while maintaining the majority of the project's value for CLMT. Longer term, we see CLMT's willingness to separate renewable diesel from the rest of CLMT as supportive of our SOTP valuation approach and positive outlook,” Read noted.
To this end, Read rates CLMT an Overweight (i.e. Buy) and his $27 price target implies ~80% upside for the year ahead. (To watch Read’s track record, click here)
"A proactive management team remains focused on establishing the Renewable Diesel ops… Some supply-chain issues remain but CLMT seems to have made it through the worst of the pandemic with margins intact and/ or expanding,” the analyst summed up.
The Wells Fargo view is hardly the only positive take on Calumet. The stock has 5 recent analyst reviews on record, and they include 4 Buys against just 1 Hold, for a Strong Buy consensus rating. The shares are selling for $15.02 and the $22 average price target indicates room for ~46% growth ahead. (See CLMT stock analysis on TipRanks)
Devon Energy (DVN)
For the second stock on our list, we’ll shift over to the oil and gas industry. Devon Energy is involved in hydrocarbon exploration and extraction, and from its Oklahoma City headquarters the company controls acreage in come of the country’s best hydrocarbon-bearing formations. These include the Delaware and Eagle Ford in Texas and the Williston in North Dakota. Devon is a major player in the energy industry, with a $30 billion market cap and annual revenues that exceeded $2.55 billion, even accounting for the pandemic slowdown in Q2.
Devon’s strong position in the energy industry is clear to see from its financial results this year. In Q1 alone, the company brought in $2.52 billion, nearly matching its 2020 top line total. In Q3, revenues were up 21% sequentially and 230% year-over-year to reach $3.8 billion. Earnings have also been rising, and the Q3 EPS of $1.08 per share was up from a 4-cent loss in the year ago quarter.
Even better, for investors, Devon generated $1.1 billion in free cash flow during Q3. This was a record for the company, the highest FCF in its 50-year history, and up 8x from the FCF at the end of 2020. The solid fiscal performance, and especially the high free cash flow, led Devon to declare an impressive 71% increase in the regular dividend payout, bumping it up to 84 cents per common share. At $3.36 per share, the dividend now yields over 7%.
The company has built these strong results on continued performance from its Delaware Basin holdings. The Delaware is a rich oil bearing formation straddling the Texas-New Mexico state line, and in recent months it has provided up to 80% of Devon’s drilling and production activity. With the company’s output averaging 608,000 barrels of oil-equivalent per day during Q3, the scale of the Delaware operations becomes apparent. Devon holds rights to 400,000 acres in this formation, and production beat guidance by 5% as of September 30.
Raymond James’s 5-star analyst John Freeman gives some additional detail on Devon’s Delaware boom: “The Delaware is the engine that drives DVN forward, and it continues to provide impressive results. Most recently the Boundary Raider project, where in 2019 Bone Springs wells broke basin IP records, delivered again in the Wolfcamp with IP30’s of 7,300 Boe/d at 60% oil. DVN also successfully completed the Thistle Cobra project, proving up 3-mile laterals in Lea County.”
In light of this performance, DVN shares have gained a robust 197% this year. Yet, Freeman believes the stock has more room to grow. The analyst rates DVN a Strong Buy, and sets a $65 price target suggesting room for 44% upside in the next 12 months. (To watch Freeman’s track record, click here)
Overall, Devon’s impressive results have brought quite a lot of attention from Wall Street, with the analysts publishing 19 reviews that break down 16 to 3 in favor of Buy over Hold. The average price target of $50.95 implies a one-year upside potential of 13% from the current trading price of $45.09. (See DVN stock analysis on TipRanks)
We’ll wrap up with Enovix, a company involved in the development and production of power storage batteries. While that may sound mundane, Enovix is anything but. The company’s products are based on an advanced silicon-anode lithium-ion technology capable of providing a smaller, lighter, more energy-dense battery that existing commercialized lines. Enovix’s product prototypes include a model small and light enough to function in ‘smart’ headsets and eyewear, and another designed for wearable computing devices. The company is also developing a battery line to work with electric automobiles.
This stock is new to the public markets; its shares started trading this past July after completion of a SPAC transaction with Rodgers Silicon Valley Acquisition Corporation. Enovix saw gross cash proceeds of $405 million from the business merger, and the stock has appreciated by a robust 100% since it entered the NASDAQ index.
While Enovix has not begun commercial production of its products, and so does not show a revenue stream yet, it has met several important milestones in recent months. Back in August, the company announced a Purchasing Agreement and a Cooperation Agreement with a wearable device maker in California. Enovix will receive a reservation fee for manufacturing capacity, along with $3.5 million in pre-payments. The agreement stipulates commercial production in 2025 and a total value of $20 million.
Following up, in September Enovix announced it had released pre-production quantities of its AR glasses battery, the small battery designed for smart headsets. The pre-production was conducted in conjunction with an AR electronics company, and demonstrated smooth operation of the automated assembly line at Enovix’s Fremont, California manufacturing facility.
In coverage for investment firm Colliers, analyst Derek Soderberg takes a bullish stance based on the expansion potential of the advanced battery market.
“We believe Enovix offers a much greater opportunity in the advanced battery and EV market. Enovix pioneered advanced battery technology and has a multi-year head start vs. competitors — and is primed to disrupt a massive $60B market. That market could more than double by 2030. And based off the total market valuation of battery incumbents (~$500B), we believe Enovix is undervalued,” Soderberg opined.
To this end, Soderberg puts a Buy rating on Enovix stock, and his $65 price target indicates his confidence in 83% over the coming year. (To watch Soderberg’s track record, click here)
All in all, Enovix has a unanimous Strong Buy consensus rating, based on 3 positive analyst reviews. The shares are trading for $35.52 and their average target of $46 implies a one-year upside of 29.5%. (See ENVX stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.