The Dow, the S&P 500, and the Nasdaq all tumbled between 2% and 2.6% during regular trading hours Wednesday, amid one of the busiest stretches of corporate earnings. The pullback comes as investors take profits from a market that hit record highs earlier in the week, and Wall Street tries to assess how much longer GameStop and other stocks can soar amid epic and very public short squeezes.
The market has gone on an impressive run since the November election and investors are still betting that there will be more coronavirus stimulus under the Biden administration. More tangibly, the early earnings results have come in stronger than expected and the outlook for Q4 and 2021 have continued to improve. So far, the big banks as well as tech giants such as Microsoft MSFT, Apple AAPL, and others have posted blowout quarterly results (also read: A Positive and Reassuring Earnings Picture).
Wall Street is also betting that the vaccine rollout will return the economy to something closer to normal by the summer. And the Fed recently announced that that it will keep its interest rates near zero. All of these factors add up to a bullish case for 2021 and the recent fall is likely just a healthy pullback.
With this in mind, investors might want to add to their portfolios. Today, we dive into three stocks that might be worth buying from within a niche, but attractive part of the market for many: cheap stocks trading for under $20 a share…
Himax Technologies, Inc. HIMX
Prior Close: $9.90 USD
Himax is a fabless semiconductor firm focused on display imaging processing technologies. The company’s solutions are used in everything from TVs, laptops, and smartphones to navigation systems, virtual reality devices, and more. HIMX is coming off three-straight quarters of strong revenue growth, including a 46% climb in Q3.
The company then released stronger-than-projected “preliminary” Q4 results on January 7. “Both revenues and gross margin reached new highs in the quarter, thanks to strong momentum across all major business segments,” CEO Jordan Wu said in prepared remarks.
With this in mind, Zacks estimates call for Himax’s adjusted Q4 earnings to soar from $0.01 all the way to $0.20 per share on the back of 58% stronger revenue that would see it reach $276 million. HIMX is projected to post similar top and bottom-line growth in the first quarter of fiscal 2021. Meanwhile, its full-year fiscal 2020 sales are expected to climb 31%, with FY21 expected to pop 21% higher to hit $1.1 billion.
Both of these revenue estimates represent what would be HIMX’s strongest revenue growth since going public. Himax is also expected to skyrocket from an adjusted loss of -$0.07 to +$0.30 a share in 2020. And the momentum is projected to continue, with FY21 expected to surge 50% higher to +$0.45 a share.
Investors have cheered the company’s 2020 growth and its strong early results. HIMX stock has soared 180% in the past three months and 30% since its January announcement. The stock also jumped to new 52-week highs on Wednesday even as the broader market tumbled. Despite its run, Himax rests 30% below the roughly $14 a share it touched in 2017.
Alongside its cheap price tag, HIMX trades at a big discount to its industry at 1.5X forward 12-month sales vs. 5.1X. Himax’s positive earnings revision help it grab a Zacks Rank #2 (Buy) at the moment.
HIMX also rocks an “A” grade for Growth in our Style Scores system, and two out of the three brokerage recommendations that Zacks has for Himax come in at a “Strong Buy.” Interested investors should note that HIMX, which provides exposure to the broader display space that plays an integral role in our device-heavy world, is set to report its full Q4 results on February 4.
TRI Pointe Homes TPH
Prior Close: $20.71USD
TRI Pointe Homes is one of the largest public homebuilders in the U.S. The firm designs, constructs, and sells single-family homes and condos. TPH operates in key hubs within California, Texas, Colorado, Arizona, Virginia, and many other locations. And TRI Pointe’s revenue climbed by over 16% in both FY17 and FY18, before it slipped by 5% last year. But things changed in 2020.
The coronavirus helped drive U.S. home sales to their highest level in 14 years, as people searched for more space and capitalized on ultra-low interest rates. The tight market has also spurred new home construction. In fact, housing starts jumped nearly 6% in December from November, which represented the highest seasonally adjusted annual rate since 2006. And this strength has shown up in TRI Pointe’s results.
TRI Pointe’s net new home orders jumped 50% last quarter, with its backlog dollar value up 39%. Zacks estimates call for the company’s fiscal 2020 revenue to climb 1.5% to $3.1 billion. The company’s sales are then projected to surge over 16% higher in 2021 to $3.6 billion.
TRI Pointe’s adjusted earnings are projected to jump by 29% and 31%, respectively over this stretch. And it has crushed our earnings estimates by an average of 52% over the trailing four periods.
TRI Pointe’s bottom-line estimates have improved in the last seven days alone as we get closer to its fourth quarter FY20 earnings release on Feb. 18. The firm’s positive EPS revisions help it grab a Zacks Rank #2 (Buy) right now and its Building Products-Home Builders space rests in the top 13% of our over 250 Zacks industries. Plus, it announced in November a new stock repurchase program of up to $250 million, and it holds an “A” grade for Value.
TPH stock has outpaced its highly ranked industry over the last 12 months, up 28%. This run includes an 18% jump in the past month (to put it slightly above $20). Even if things return closer to normal as the vaccine rolls out, millennials continue to reach their prime homebuying years, and a shortage of homes could help TRI Pointe and other homebuilders going forward.
Amcor plc AMCR
Prior Close: $11.06 USD
Amcor is a global packaging powerhouse that services a variety of industries, from food and beverage to pharmaceuticals and personal care. The company expanded its reach and portfolio when it purchased Bemis in June 2019. AMCR’s offerings include flexible and rigid packaging, specialty cartons, and more.
The firm has started to prepare for a greener future by focusing on making what it calls “increasingly light-weighted, recyclable and reusable” products that are made “using a rising amount of recycled content.”
Amcor’s sustainability efforts will likely prove vital amid growing backlash to plastic and waste. That said, plastic and paper packaging of all types remain vital around the globe and likely will for years to come, especially when we consider the e-commerce expansion that Amazon AMZN, FedEx FDX, and others are benefitting from.
Amcor stock is far from glamorous, having climbed around 25% in the last five years. But this is good enough to outpace its industry. Furthermore, its 4.2% dividend yield easily tops its industry’s 2.3% average and more than doubles the 30-year U.S. Treasury.
Zacks estimates call for its sales to climb 1.3% both this year and next to reach $12.8 billion. Meanwhile, its adjusted EPS figures are projected to jump 11% this year and another 5% next year. Amcor’s earnings revisions have climbed to help it grab a Zacks Rank #2 (Buy) heading into the release of its “Half Year 2021 Results” on Feb. 2.
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Microsoft Corporation (MSFT): Free Stock Analysis Report
Amazon.com, Inc. (AMZN): Free Stock Analysis Report
Apple Inc. (AAPL): Free Stock Analysis Report
FedEx Corporation (FDX): Free Stock Analysis Report
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Himax Technologies, Inc. (HIMX): Free Stock Analysis Report
Amcor PLC (AMCR): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.