Sticky inflation might trigger more rate hikes this year, which could keep the stock market under pressure. Hence, investors could consider buying fundamentally strong stocks Stellantis (STLA), Honda Motor (HMC), MasterCraft Boat (MCFT), and Genie Energy (GNE) given the uncertainties. These stocks are rated A (Strong Buy) in our proprietary ratings system. Read more.
The benchmark S&P 500 index is up 6% year-to-date, and the tech-heavy Nasdaq Composite has jumped 13% over the same period. While the stock market seems to be improving this year, the Fed is expected to keep interest rates high, which might continue to pressure market sentiment.
The U.S. inflation rate rose 6.4% on an annualized basis in January 2023. Despite the moderating price pressures, inflation remains far above the Fed's 2% target. The CPI increased by 0.5% in January, much higher than the prior month's increase of 0.1%.
Moreover, Regional Fed presidents Loretta Mester and James Bullard said more interest rate hikes might be needed to tame still-hot inflation. Their comments also raised concerns about a potential increase of 50 basis points in the Fed funds rate at the central bank's upcoming policy meeting.
The Fed could end up crushing the economy as it struggles to rein in soaring prices. Hence, investors could consider buying fundamentally strong stocks Stellantis N.V. (STLA), Honda Motor Co., Ltd. (HMC), MasterCraft Boat Holdings, Inc. (MCFT), and Genie Energy Ltd. (GNE) to navigate such uncertainties.
Our proprietary POWR Ratings system currently has an A rating (Strong Buy) for these stocks. Also, they pay stable dividends.
Stellantis N.V. (STLA)
Headquartered in Hoofddorp, Netherlands, STLA designs, engineers, manufactures, distributes, and sells vehicles, components, and production systems. The company's brand portfolio includes Abarth, Alfa Romeo, Chrysler, Dodge, Fiat, Fiat Professional, Jeep, Lancia, Ram, Peugeot, Citroen, DS Automobiles, Opel and Vauxhall, and Maserati.
On February 15, STLA announced that it is growing its software development and engineering network to eight hubs by establishing a new operation in Poland, partnering with GlobalLogic Inc., a supplier of digital engineering services, to recruit talent and establish the Poland software hub quickly.
The companies' new partnership phase enables STLA to maximize its ability to evolve and deliver customizable open automotive platforms.
STLA's four-year average dividend yield is 10.66%, and its annual dividend of $1.12 translates to a 6.49% yield on the prevailing price. The company's dividend has grown at a 17.3% CAGR over the past three years.
During the half-year that ended June 30, 2022, STLA's net revenues increased 21.2% year-over-year to €88 billion ($93.81 billion). Its operating income rose 40.5% from the prior-year period to €10.32 billion ($11 billion). Net profit and EPS came in at €7.96 billion ($8.49 billion) and €2.47, up 17.2% and 17.1% year-over-year, respectively.
Analysts expect STLA's revenue to increase 9.1% year-over-year to $187.54 billion for the fiscal year 2022. Its EPS is expected to be $5.52 in the same year.
The stock has gained 14.7% over the past six months to close the last trading session at $16.66.
STLA's POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It also has an A grade for Value and a B for Stability and Sentiment. It is ranked #9 out of 61 stocks in the Auto & Vehicle Manufacturers industry.
Click here to see the additional ratings of STLA for Growth, Momentum, and Quality.
Honda Motor Co., Ltd. (HMC)
Headquartered in Tokyo, Japan, HMC develops, manufactures, and distributes motorcycles, automobiles, power products, and other products in Japan, North America, Europe, Asia, and internationally. It operates through four segments: Motorcycle Business; Automobile Business; Financial Services Business; and Life Creation and Other Businesses.
On January 13, HMC and LG Energy Solution announced the formal establishment of a joint venture to produce lithium-ion batteries for electric vehicles produced by HMC.
The joint venture will begin construction of a new battery plant early this year with the goal of completion by the end of 2024 and starting mass production of advanced lithium-ion battery cells by the end of 2025. The plant aims to have an annual production capacity of approximately 40GWh.
While HMC has a four-year average dividend yield of 3.99%, it pays $1.42 per share dividend annually, which translates to a 5.57% yield on the current price level. Its dividend payments have grown at a CAGR of 6.7% over the past three years.
During the fiscal third quarter that ended December 31, 2022, HMC's sales revenue increased 20.3% year-over-year to ¥4.44 trillion ($32.96 billion). The company's profit for the period grew 27.7% year-over-year to ¥265.14 billion ($1.96 billion), while EPS attributable to owners of the parent increased 28.5% year-over-year to ¥144.49.
HMC's revenue is expected to rise 15.9% year-over-year to $33.40 billion in the fiscal first quarter ending June 2023. Additionally, it has topped consensus revenue estimates in three of the trailing four quarters, which is impressive.
Shares of HMC have gained 13.3% year-to-date to close the last trading session at $25.90.
HMC's strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
The stock has an A grade for Value and a B for Quality and Stability. Within the Auto & Vehicle Manufacturers industry, it is ranked #2.
Beyond what is stated above, we've also rated HMC for Growth, Momentum, and Sentiment. Get all HMC ratings here.
MasterCraft Boat Holdings, Inc. (MCFT)
MCFT designs, manufactures, and markets recreational powerboats. The company operates through four segments: MasterCraft; Crest; NauticStar; and Aviara.
On November 2, MCFT announced an expansion of its popular entry-level NXT lineup with the all-new 2023 NXT21 and NXT23. The new models deliver best-in-class wave performance, added storage, spacious hybrid bow design, and standard telematics.
Durable and uncomplicated, the two new entry-level offerings provide the ultimate all-day, on-water experience for boaters at an approachable price point. This should help the company expand its customer base.
MCFT's net sales increased 10.2% year-over-year to $159.19 million in the fiscal 2023 second quarter that ended January 1, 2023. The company's adjusted EBITDA grew 9.8% year-over-year to $29.82 million. Its adjusted net income rose 11% from the prior-year quarter to $21.27 million, while its adjusted EPS rose 18.8% year-over-year to $1.20.
Street expects MCFT's EPS and revenue to amount to $1.04 and $158.14 million in the fiscal third quarter ending March 2023. Moreover, the company has surpassed the consensus EPS and revenue estimates in each of the trailing four quarters.
The stock has gained 47.6% over the past nine months and 18.9% over the past year to close the last trading session at $33.24.
It's no surprise that MCFT has an overall rating of A, equating to a Strong Buy in our POWR Ratings system.
The stock has a B grade for Value, Sentiment, and Quality. MCFT is ranked #2 out of 37 stocks in the Athletics & Recreation industry.
In addition to the POWR Ratings highlighted above, one can access MCFT's grade for Growth, Momentum, and Stability here.
Genie Energy Ltd. (GNE)
GNE and its subsidiaries supply electricity and natural gas internationally to residential and small business customers. It has three operational segments: Genie Retail Energy (GRE); GRE International; and Genie Renewables.
On December 6, 2022, GNE's Genie Solar subsidiary received notice to proceed with constructing its first company-owned community solar generation project. Given the environmental benefit and the economics driving community solar development, GNE looks forward to expanding to additional sites in the coming months.
Its current annual dividend of $0.30 yields 2.38% on prevailing prices. GNE's four-year average dividend yield is 2.93%.
During the fiscal third quarter (ended September 30, 2022), GNE's gross profit increased 24.7% year-over-year to $43.14 million. The company's income from operations rose 34.8% year-over-year to $23.54 million, while its adjusted EBITDA increased 35.4% from the year-ago value to $24.50 million.
Also, its net income attributable to GNE common stockholders came in at $18.31 million compared to a net loss of $2.66 million in the prior-year quarter. In addition, its earnings per share attributable to GNE common shareholders stood at $0.70 compared to a net loss per share of $0.10 in the same quarter the prior year.
The stock has gained 106.1% over the past year to close the last trading session at $12.43. Moreover, it has gained 19.8% over the past month.
GNE's robust prospects are reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
It has an A grade for Value and Momentum and a B for Growth. Within the 64-stock Utilities – Domestic industry, it is ranked #2.
To access GNE's ratings for Stability, Sentiment, and Quality, click here.
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STLA shares were unchanged in premarket trading Wednesday. Year-to-date, STLA has gained 17.32%, versus a 4.36% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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