Three Stocks to Watch for the Week of October 31st

Stocks surged into the close on Friday on the heels of positive consumer spending figures and mixed corporate earnings results. Personal spending increased 0.6%, exceeding Wall Street’s expectations for a 0.4% rise. The major indices finished the week with solid gains. The Dow stacked on nearly 6% for its fourth consecutive positive week, while the S&P 500 and the Nasdaq rose for the second week in a row with 4% and 2% gains, respectively.  

This week will be eventful on the earnings front, with reports expected from several prominent companies, including Pfizer, Moderna, Toyota, Qualcomm, PayPal, Starbucks, and Kellogg’s, among others. Investors will remain focused on economic growth with Fed policymakers set to gather for the two-day November Federal Open Market Committee (FOMC) meeting, which begins on Tuesday, and a critical interest rate decision expected on Wednesday.  

The Federal Reserve is expected to lift its benchmark interest rate by seventy-five basis points, marking the fourth time in a row it’s approved such a steep increase. The Fed’s latest such hike in September pushed the rate to a range of 3.00% to 3.25%—a level last seen in 2008. The labor market will also be in the spotlight, as several key reports will be released, including the Bureau of Labor Statistics October nonfarm payrolls report.  

Amid unrelenting inflation and a strong potential for a recession, volatility is widely expected to continue as we head into the new year, making the job of selecting stocks difficult. A logical move in times like these is dividend stocks, which pay you just to hold them. Dividend-paying companies regularly reward investors directly with a portion of the cash flow. The most desirable dividend stocks have a history of raising their payouts over time as the company’s profits grow. Our first recommendation for the week is a high-yielding stocks that seem ripe for the picking as we head into the new year.  

Anyone who has kept tabs on the global supply chain and shipping saga that’s been unfolding since the outbreak of covid is probably familiar with Genco Shipping (GNK). The company owns a fleet of 44 ships it leases for dry bulk transportation of goods like grain, coal, and iron ore. The going rate to rent one of Genco’s ships is no less than $27,000 per day, which provides some solid cash flow that the company uses to reward its shareholders.  

Dry bulk shipping rates, along with GNK’s share price, have fallen in recent months. Still, as China recovers from recent lockdowns and seasonal demand is expected to be strong, it’s hard to see the pullback in share price as anything less than an opportunistic bargain.  

GNK pays a handsome 14.8% dividend yield. The company will be looking to display strength ahead of its November 2nd earnings release. The company is expected to report EPS of $0.88, down 38.89% from the prior-year quarter. Meanwhile, the latest Zacks consensus estimate is calling for revenue of $91.06 million, down 22.47% from the prior-year quarter.

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One area of the market that can perform well regardless of what’s happening elsewhere in markets is biotech. Biogen (BII) is a biopharmaceutical company focused on neurological and neurodegenerative disease therapies. The company is on the leading edge of creating drugs and therapeutics for some of the more perplexing chronic diseases like Alzheimer’s. Biogen has been working on drugs that can reduce the buildup of amyloid plaques which could be critical to stemming the advancement of the disease.  

The neurological solutions pioneer has partnered with Eisai, a Japanese pharmaceutical company, to develop Lecanemab, one of its potential amyloid plaque-destroying drug candidates. The two companies will split the drug’s profits 50/50. Recent data from lecanemab has proven “robust” as the drug saw a 27% reduction in patients’ clinical decline on cognitive and functional metrics, causing the entire industry to rethink the historically elusive answer to Alzheimer’s.  

Following the “better than expected” Phase 3 data for lecanemab, JPMorgan analyst Chris Schott raised the firm’s price target on Biogen to $275 from $221. The analyst foresees full FDA approval for lecanemab and believes there is a high probability that the Centers for Medicare and Medicaid Services will cover the drug. Schott would not be surprised to see further upside for the shares into year-end as he expects lecanemab to dominate the competition.

While lecanemab takes center stage, Biogen has a pipeline that features several drugs in various clinical stages. The company’s Spinraza for treating spinal muscular atrophy has been a blockbuster drug. Multiple sclerosis drugs Avonex and Plegridy generate nearly $2 billion in annual sales.  

BIIB shares spiked on the positive lecanemab results and have dwindled since. A better entry opportunity may come, but for long-term-minded investors focusing on growth, Biogen is an intriguing candidate even at its current level.

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Given the unprecedented situation with major world powers Russia and China,  Washington is taking steps to strengthen the technical capabilities of its military and its allies while also seeking to protect the U.S. from cyber threats.

Booz Allen Hamilton (BAH) is one of the world’s largest cybersecurity solutions providers. Specializing in marketing cybersecurity products that other companies produce, nearly every U.S. federal, intelligence and defense agency uses its services. In other words, Booz Allen is poised to scoop up a significant portion of the whopping 15.6 billion that the U.S. is expected to spend on cybersecurity in 2023.

For its fiscal 2023 first quarter, which ended June 30, revenue surged 13% year over year to $2.25 billion, while its net income jumped an impressive 50% to $138.1 million. Wall Street expects $4.88 EPS for the entire year, indicating a reasonable forward P/E of 19.4 times.  

Stifel analyst Bert Subin recently raised the firm’s price target on BAH to $105 from $102 after hosting the company at the firm’s London Industrials & Renewables Summit and coming away with a favorable outlook, driven by continued demand tailwinds and an easing labor market. The current consensus recommendation is to Buy Booz Allen. A median price target of $105 represents an increase of 10% from the current price.