Times are uncertain and investors are jittery. Several unusual events are cropping up in various sectors, which are making it difficult for anyone to predict the immediate future of the economy. Everything seems to be going up, except assets. Home prices are shooting up, while the strong demand for first homes appears to keep digesting the high flying market, contradicting basic economic theory. Utilities stocks are climbing even as bond yields rise, which has never happened before. Not to mention the surging inflation, higher interest rates, and growing chances of a recession weighing on investors.
On the other hand, the Russia-Ukraine war has propelled oil and energy prices to staggering highs, which has played a major part in fanning the already growing inflation.
Amid this tumult, investors are facing another situation. They have nowhere to go with their money. The traditional safe alternative instruments like real estate and gold are less attractive now due to the former’s high prices and the latter’s falling value. Hence, many investors are staying put in equity, or even increasing their positions in hopes of greater rewards when the economy stabilizes and the stock market grows.
It is crucial for self-driven retail investors to buy into the right stock at the right time. However, in a chaotic situation like this, choosing equity investments with the best prospects and lowest risks can get overwhelming. For this reason, it is important to pay heed to what market experts are doing.
Bearing this in mind, we are regularly curating pieces highlighting the expertise and recommendations of the world’s top experts, as we believe that this will be immensely helpful for investors at this point.
Among market experts, Wall Street analysts are professionals who track the financials, fundamentals, and prospects of companies and industries in their coverage; participate in corporate events like investor day conferences and earnings calls; and interview top executives. All this, in order to reach deeper into the developments of the companies and gain better insights into their prospects.
In today’s Expert Spotlight piece, we will talk about one of the top minds of Wall Street whose history with accurate stock recommendations has helped investors make correct decisions.
Our expert of the day, Dan Payne, is the managing director of the National Bank of Canada, where he has worked for almost 12 years after obtaining a Charter in Financial Analysis in 2008. Payne largely covers energy stocks listed on the stock exchanges in U.S. and Canada.
This five-star rated analyst is ranked #1 among all 7,881 analysts covered on TipRanks, and #2 among 18,697 overall experts in the TipRanks universe.
The complex Star ranking system of TipRanks includes an expert’s success rate, the average returns generated, and statistical significance which increases with each transaction or recommendation made by the expert. In this regard, Dan Payne’s profile is very impressive.
The analyst has a success rate of a whopping 84%, with an average return of 90.1% over the past year. Furthermore, his recommendations generated an alpha of 78% over the S&P 500 index, and 81.5% over the energy sector's performance, in the past year.
Payne’s most accurate stock recommendation has been Birchcliff Energy Ltd. (BIREF) in the year between October 06, 2020, and October 06, 2021, during which, the stock gained 363.6%.
In light of the current rally in the utilities sector, Payne made three stock recommendations last week, two of which were Buys. Let's take a look at the bullish calls he's been exploring.
Headwater Exploration (CDDRF)
Headwater Exploration, formerly Corridor Resources, produces natural gas for the Canadian and U.S. markets. The stock has returned 35.88% year-to-date.
The company’s strong fundamentals are making it attractive to investors seeking to gain exposure to energy stocks. Notably, the company’s return on equity (ROE) in the past twelve months is 12%, which indicates that the company has made C$0.12 in profit for every C$1 of shareholder capital, a reasonably good number.
Moreover, for the past five years, Headwater has managed to increase its net income by 33%, as compared with the industry’s net income growth of 10% during the same period.
Also, Wall Street analysts recently displayed more bullishness about the company than usual. Analysts are looking at a 147% annual revenue growth rate by the end of 2022, driven by optimism regarding Headwater’s sales pipeline.
Moreover, in the March quarter, the company reported working capital of $77.1 million with no outstanding debt. This highlights the financial strength of the company.
Among the bullish analysts was our analyst, Dan Payne, who reiterated a Buy rating on the stock with a price target of C$10.50 ($8.20, considering $1=C$1.28).
Wall Street is bullish on CDDRF with a Strong Buy consensus rating based on five unanimous Buys. The Headwater price projection points at a price target of $7.85, which indicates a 40.91% upside from pre-Tuesday price levels.
Crescent Point Energy (NYSE: CPG)
Headquartered in Calgary, Canada, Crescent Point Energy is involved in the exploration, development, and production of oil and gas. The stock has returned 33.1% so far this year.
The company’s focused approach to improving its balance sheet is noteworthy. It is taking advantage of the current oil prices to improve its debt profile and overall financial position.
In its recently reported quarterly earnings, Crescent Point reported a profit compared to a loss in the same quarter a year ago, fueled by higher gas and oil prices.
Moreover, after a lull in 2020, Crescent Point increased its dividend by 50% in September last year, post which, the dividend has increased with each quarter.
Last week, Dan Payne reiterated a Buy rating on the stock with a price target of C$20.
Wall Street is optimistic on the stock, with a Strong Buy based on seven Buys and one Hold. The average CPG price target is $10.83, a 44.98% upside from pre-Tuesday price levels.
The continuing war between Russia and Ukraine is expected to continue disrupting the supply of oil and other commodities in the U.S., keeping their prices high. Moreover, even when the war ends with whatever result, the sanctions against Russia are expected to continue to keep oil prices under pressure. In such an environment, investors can make the most of this situation by investing in the right oil and energy stocks.
Our expert analyst Dan Payne’s Buy ratings on CDDRF and CPG are based on strong expertise and solid analysis, which can have a strong hand in making an informed decision.
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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.