Stock Hotlist for the Week of March 22nd, 2021

Markets have been volatile lately, and that’s not necessarily a bad thing, but not every name is rising.  With fresh stimulus money just dispersed, many retail investors are looking for the best stocks to buy now. 

While there are obvious choices, sometimes the lesser-known stocks could have the most potential. Right now, investors are showing a focus on tech and other small-cap niches. Our research team has three hot recommendations for next week, and they’re all currently trading for under $20 a share.  

Momo Ads Inc. (MOMO), the Chinese company behind its namesake social-search platform and its Tinder-like Tantan dating app has fallen on hard times lately, but on Thursday, Momo gets a chance to woo back investors with its fourth-quarter results after the market close and strong financials could be the next catalyst to breathe life back into the stock.

Momo‘s revenue went from nearly quadrupling in 2016 to more than doubling in 2017, and the deceleration has degenerated to the point where revenue declined 9% through the first nine months of last year. 

You can’t just write this off as pandemic weakness.  Online dating and social discovery continue to be a growth story outside of Momo.  Tinder parent Match Group (MTCH) and recent IPO Bumble (BMBL) grew their top lines by 17% and 19%, respectively, in 2020. But you have to like Momo as a value stock with growth turnaround potential.

Match Group and Bumble trade at an enterprise value that is 14 to 18 times trailing revenue.  Momo, with its cash-rich balance sheet, is fetching less than its trailing revenue.  It’s also very profitable right now with an earnings multiple in the single digits.

MOMO also sports a nearly 5% yield.  The company has declared an annual dividend with its fourth-quarter financials in back-to-back years.  As rough as 2020 may have been, the company is still profitable and still has ample cash to announce another beefy payout on Thursday.  

As of Friday’s close, MOMO stock was $16.31 per share.  Momo is currently so out of favor that even a whiff of a turnaround can send the shares rallying on Friday.

Element Solutions Inc. (ESI) produces and sells specialty chemical products in the United States, China, and internationally.  The company’s Industrial & Specialty segment provides industrial solutions, which include chemical systems, consumable chemicals and energy solutions and serves the aerospace, automotive, construction, consumer electronics, consumer packaged goods, and oil and gas production end markets.  The specialty chemicals maker with some tech exposure fell nearly 5% last week to 19.75, just holding above a 19.50 buy point from a breakout earlier this month.

The global specialty chemicals industry took a hit last year as the COVID-19 pandemic brought economic activities to a halt around the world, and ESI was no exception.  Nonetheless, the situation seems to be improving as economies are gradually reopening.  According to a report by Mordor Intelligence, the specialty chemicals market was valued at $900 billion in 2020 and it is expected to see a CAGR of more than 4% during 2021 to 2026.  The report stated that factors like robust growth in construction activities as well as agrochemicals, which is driven by growth in demand for food around the world as population increases, are expected to drive the specialty chemicals market.

Moreover, the global automotive sector is poised to make a comeback this year, which bodes well for the specialty chemicals industry since automotive is a major consumer.  Notably, per a report by the IHS Markit, global light vehicle production is expected to increase 14% in 2021 to reach 84.3 million units.  The report stated that recovery in demand as well as restoration of manufacturing operations in most regions are expected to drive this uptick.

The consensus estimate for ESI’s current-year earnings has climbed 6.2% over the past 60 days.  The company’s expected earnings growth rate for the current year is nearly 24%.  As of Friday’s close the stock was $19.75 per share.

One of the lesser known tech names that has done very well in 2021 is Izea Worldwide Inc. (IZEA)IZEA is a marketing technology company providing software and professional services that enable brands to collaborate and transact with the full spectrum of today’s top social influencers and content creators.  The company serves as a champion for the growing Creator Economy, enabling individuals to monetize their content, creativity, and influence.  IZEA launched the industry’s first-ever influencer marketing platform in 2006 and has since facilitated nearly 4 million transactions between online buyers and sellers. Leading brands and agencies partner with IZEA to increase digital engagement, diversify brand voice, scale content production, and drive measurable return on investment.

Shares of the tech stock have climbed from around $2 in January to as high as $7.45.  The initial run started after Izea inked a 7 figure deal with a “Fortune 100” retailer.  The company also won numerous repeat orders as well as expanding on other contracts like the one it had with the US military.

This week the company reported on its Q1 progress.  To date, the company’s Managed Services bookings for Q1 2021 to date are now 75% greater than Managed Services bookings for all of Q1 2020.   Furthermore, the company’s software as a service customer base grew to new record levels in March.  The company attributed this growth to its self-service influencer discovery tool, IZEAx Discovery.  With a continuous focus on digital media marketing and the growth of apps like TikTok and Instagram, IZEA is in a hot niche right now.  Shares currently trade for $4.52.

The company’s Q4 and 2020 full year earnings call is scheduled for Tues., March 30th after the closing bell.   

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