Three Stocks to Watch for the Week of May 3rd, 2021

Since the coronavirus bear market, stocks rebounded powerfully. The strong action reflects rising confidence that the economy will eventually recover from the coronavirus.

With the market back in an uptrend, it is now a good time for investors to consider putting their money to work.  Our team has some recommendations for potential candidates to watch this week. 

Old Republic International Corp. (ORI) is a holding company engaged in insurance underwriting and related services.  Through subsidiaries, the company markets, underwrites, and provides risk management services for general, title, and other insurance coverages.   On April 22, 2021, Old Republic published financial results for its Q1 2021, reporting that net income excluding investment gains increased by 46.5% year-over-year (YOY) to $206.3 million.  This growth was driven primarily by the company’s General Insurance and Title Insurance businesses.

The also stock has an impressive record of positive earnings surprises, as it hasn’t missed an earnings consensus estimate in any of the last four quarters.  Most recently, Old Republic reported EPS of $0.69 versus consensus estimate of $0.45.

For the current fiscal year, Old Republic is expected to post earnings of $2.05 per share on $7.1 billion in revenues.  This represents a -8.48% change in EPS on a -0.31% change in revenues.  For the next fiscal year, the company is expected to earn $2.15 per share on $6.96 billion in revenues.  This represents a year-over-year change of 14.63% and -1.93%, respectively.

ORI saw its share price increase 56% in the last year, slightly above the market return of around 52% (not including dividends). 

The stock currently trades at just 4.4 times earnings and sports a 3.57% dividend yield.  

TripAdvisor, Inc. (TRIP) is a Needham-based online travel company.  The firm runs a website and mobile application that provide hotel reservations, as well as bookings for travel and restaurants.  TripAdvisor is famous for user-generated content that compares the travel experiences of different hotels, shopping centers, and eateries.  The firm has a market cap of more than $6.7 billion and posted an annual revenue of $604 million in December 2020, down from more than $1.5 billion the year before, as the pandemic hit the travel industry.

However, with the economy reopening, TripAdvisor is poised for a strong comeback. 

According to Insider Monkey, the number of hedge funds holding TRIP jumped by the end of the fourth quarter 2020, when 41 hedge funds held stakes worth $1 billion, up from 29 in the previous quarter worth $716 million.  

On March 2, investment advisory Citi upgraded TripAdvisor stock to Buy from Neutral and assigned it a price target of $62 based on a new subscription product the company was offering.  Citi said the service could attract 10 million subscriptions and create $1 billion in revenue for the travel firm.

Of 21 analysts offering recommendations for TRIP stock, 6 rate the stock a Buy, 11 call it a Hold, and 4 say Sell.  

Micron Technology (MU) is an Idaho-based company that produces memory and data storage products for electronic devices.  It offers a wide array of products for use in computers, smartphones and other devices, including random access memory and flash drives. 

The company is most famous for making solid state drives (SSDs) that are used in computers for data storage.  The Micro SSDs are the cheapest large capacity models in the world.  The company achieves this by using a new especially designed chip in these drives.  Micron stock has been soaring as demand for all kinds of machines rises globally.

Micron Technology has a market cap of more than $106 billion and posted more than $21 billion in revenue in September 2020.  With US President Biden pushing a plan for massive government spending to boost local manufacturing, Micron Technology is one of the firms that could gain from this new attention on American brands. 

The company also leads the market in DRAM Flash, a memory system used to run operating systems in cars, computers, and smartphones otherwise dependent on cloud-storage.  DRAM represented more than 70% of FQ2 sales for the firm.

The pros also see MU as a Buy currently.  Of 31 analysts offering recommendations for the stock, 26 rate it Buy and 5 call it a Hold.  There are no Sell ratings for the stock.  

Bonsai Partners chimes in with a Buy rating.  The firm highlighted a few stocks in their Q4 2020 investor letter and Micron is one of them.  Here is what Bonsai Partners said:

“Micron is a manufacturer of memory semiconductor chips. Micron’s stock appreciated 60.1% during the quarter.

Micron’s shares significantly appreciated this quarter for a couple of reasons.  First, and most importantly, the DRAM market appears to have begun its cyclical rebound.  As a result, we will likely see higher pricing and profitability through at least the calendar year 2021, hopefully meaningfully longer.”

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