Weekly Performance Review March 22nd – 26th, 2021

Stocks largely ran in place last week, with the major indexes closing mixed for the week, as investors seemed to continue weighing optimism about reopening against inflation and interest rate concerns.  Small-cap stocks lagged for the second consecutive week, signaling a potential pause or reversal in their recent market leadership.  Similarly, communication services stocks fared worst within the S&P 500 Index, dragged down by sharp declines in shares of several traditional media companies following a stretch of strong performance.  The closure of the Suez Canal because of a disabled cargo ship raised worries about already stressed global supply lines but boosted oil prices and energy stocks.  Consumer staples, utilities, materials, and real estate shares were also strong.

A slightly wider aperture reveals that equities are up 6% so far this year, while the one-year figure is still the show-stopper, with the S&P 500 gaining more than 75% since its March 23, 2020 low.

The economic rebound remains on track, forming a sturdy foundation – After a year in which gains in the stock market ran well ahead of the gains in the economy.  The path ahead for the stock market may be a bit windier – Faster economic growth and increasing corporate profits will likely help justify recent strong stock-market gains and elevated valuations.  At the same time, the path ahead could produce more moderate gains than we’ve experienced lately, and with more volatility along the way.

Fortunately, the WSWD research team has their finger on the pulse of the market and is here to provide the community with timely trading and investing ideas.  

Continue reading to find out which of our recent trades are still in the buy zone.  

03-22-2021_X up 1.88%

In the current split market rally, investors should be cautious about adding new stocks, especially techs, to their portfolios.  Instead consider commodities-based stocks which are gaining momentum, thanks to an economic recovery that’s pushing up demand and prices.  

U.S. Steel stock climbed from a low of around 5 in March 2020 to a high of 24.71 in January. Analysts at Investor Business are calling a cup and handle here “Shares are closing in on a buy point of 24.81 from a cup base, though they fell 7.3% to 22.41 last week.   On a weekly chart, X stock now has a cup-with-handle buy point with a 24.56 buy point. The daily chart is on track to have a proper handle with that 24.56 buy point after close Monday.”

The stock also carries a Zacks #2 raing of Buy.  The 9 analysts offering 12-month price forecasts for U.S. Steel Corp. have a median price target of $23.89.

03-23-2021_IZEA down 9.6%

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 $4.05.

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

03-24-2021_JPM up 3.39%

JPMorgan Chase (JPM) is the biggest U.S. bank by market value.  Markets see it as a window into U.S. consumer spending and corporate sentiment. 

The bank’s fourth-quarter earnings beat expectations, and it also plans to buy back $30 billion in shares this year, after the Federal Reserve found it and other banks were solid enough to withstand a severe recession.

Analysts expect JPMorgan earnings to grow 20% this year.  The current consensus among 27 analysts offering recommendations for JPM stock, 18 rate the stocks a Buy, 6 rate the stock a Hold and 3 rate the stock a Sell.

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03-25-2021_ESI up 1.36%

Element Solutions Inc. (ESI) produces and sells specialty chemical products in the United States, China, and internationally. 

 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 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 yesterday’s close the stock was $18.59 per share.

03-26-2021_PEJ down 3.35%

Recently, President Biden said that there will be enough vaccines available for all US adults by the end of May, two months earlier than previously expected which means the light at the end of the tunnel is finally in sight. Some Americans are even making vacation and travel plans for the summer as recent data suggests.  Exchange-traded funds with exposure to travel, entertainment, and other industries are likely to benefit from the end of COVID-19.  One of the top performers this year is The Invesco Dynamic Leisure & Entertainment ETF (PEJ).

PEJ tries to pick winning stocks rather than deliver a market-cap-weighted basket that reflects the industry. Its stock selection process is a bit opaque beyond the broad descriptions of its screens: fundamental, timeliness, valuation and risk. PEJ holds about 30 stocks, many more than the 10 or so in our narrow benchmark. Some might see value in this diversification, which mitigates single-stock risk, while others might see a lack of focus. Either way, many of these ‘extra’ stocks are restaurant chains, which our benchmark excludes from the leisure & entertainment industry. By firm size, the fund tilts significantly away from large-caps. The resulting portfolio has lagged our benchmark over the past 12 months. PEJ isn’t cheap to hold but can be fairly traded with care.