For Immediate Release
Chicago, IL – May 11, 2023 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Forestar Group Inc. FOR, Green Brick Partners, Inc. GRBK, M.D.C. Holdings, Inc. MDC, Meritage Homes Corp. MTH and J Sainsbury plc JSAIY.
Here are highlights from Wednesday’s Analyst Blog:
5 Mid-Cap Stocks on a Roll
The debt ceiling chatter and concerns about new inflation data appear to be making investors restless. But the debt ceiling saga is not new. We have something like this almost every year – in fact, this year it may be losing front lines to inflation and the Fed.
Inflation is what we have been talking about for the last many quarters. The only thing that's finally changed is the likelihood of the Fed freezing rates at these levels. Although some over optimistic analysts think that there could be a rate cut a few months down the line, Fedspeak doesn't support this theory as of now. That means we're basically down to staring at the inflation data in the hope that it continues its downward trajectory, so the Fed doesn't change its mind. And there are a number of reasons why it might.
Supply chain bottlenecks have eased in most segments. This was one of the biggest factors pushing up inflation in the months after the pandemic.
The second biggest reason for inflation was the amount of money that the Fed pushed into the economy during the pandemic. The effects of policy tightening and the markets slumping in 2022 have had a sobering effect on most people.
So the post-pandemic euphoria and the splurging that went with it are no more. People are more likely to watch what they spend now because there's a chance that we may enter a recession soon. If prices increase on any item and it isn't anything essential, chances are they'll wait for them to hit reality again. Except for leisure and travel. That's a story covered in 2 Stocks Set to Sail Through Any Recession.
The third big factor was oil prices, made worse by the Russia-Ukraine war. But Biden's decision to release strategic reserves and increase production, while the world moves on a faster track to green sourcing may be having the desired effect. Production cut threats or no, oil prices don't look so bad any more.
With the three biggies out of the way, there are a couple of offsetting factors we should keep in mind as well. The first, already touched upon above, is leisure spending, particularly on travel, which may keep services on the inflation path. The second is housing, where supply continues to lag demand, despite a lot of inventory addition over the past year.
None of these factors change overnight. But any kind of news flow around them tends to have an effect on the market, creating volatility that we should make the most of. Following is a list of mid-cap stocks, with neither the high risk characteristic of small caps or slow growth typical of large caps:
Forestar Group Inc.
Arlington, TX-based Forestar Group, a subsidiary of D.R. Horton, operates as a residential lot development company in the U.S. It acquires land and develops infrastructure for single-family residential communities. Its single-family finished residential lots are then sold to local, regional and national homebuilders.
Zacks #1 (Strong Buy) ranked Forestar is up 28.8% year to date. But its 2023 and 2024 estimate revisions are even more impressive. In the last 30 days, the 2023 estimate has increased 72 cents (45.9%) while the 2024 estimate increased 97 cents (66.0%). The reasonable valuation (8.4X P/E) indicates room for further upside.
Green Brick Partners, Inc.
Plano, TX-based Green Brick is a homebuilding and land development company in the U.S. It has homebuilding and land development operations in the central and southeastern U.S. A. Its activities include land acquisition and development, entitlements, design, construction, title and mortgage services, marketing and sale of townhomes, patio homes, single family homes, and luxury homes in residential neighborhoods, and master planned communities. It owns or controls home sites in Dallas-Forth Worth, Austin, Atlanta metropolitan areas, and the Treasure Coast, Florida.
#1 ranked Green Brick is reasonably valued at 9.9X P/E despite a 114.4% increase since the beginning of this year. The price appreciation is supported by some robust numbers: the 2023 estimate is up $1.88 (47.1%) and 2024 estimate up $2.12 (53.1%) in the last seven days.
M.D.C. Holdings, Inc.
Denver, CO-based M.D.C. offers homebuilding and related financial services in the U.S. Homebuilding operations include both land acquisition and development and home construction, targeted at single-family detached homes for first-time or first-time move-up homebuyers. Financial services include mortgage loan origination and insurance coverage primarily to support its homebuilding business It operates in Colorado, Florida, Maryland, Nevada, Pennsylvania and Virginia.
Zacks #1 ranked M.D.C. is up 30% since the beginning of the year. But at 13.2X P/E, there appears to be more room to run. Particularly because its 2023 and 2024 estimates have jumped a respective 69 cents (27.2%) and 91 cents (30.4%) in the last seven days.
Meritage Homes Corp.
Like MDC, Scottsdale, AZ-based Meritage Homes offers both homebuilding and related financial services. And like MDC, it acquires and develops land, and constructs both attached and detached homes for first-time and first move-up buyers. It operates in Texas, Arizona, California, Colorado, Florida, North Carolina, South Carolina, Georgia and Tennessee. Financial services offered include title and escrow, mortgage, title insurance and closing/settlement services to its homebuyers.
Zacks #1 ranked Meritage is reasonably valued at 8.0X P/E, although its shares have soared 37.2% year to date. The $2.46 (18.9%) 30-day increase in the 2023 estimate and $2.14 (15.1%) increase in the 2024 estimate make it worth catching the momentum in this stock.
J Sainsbury plc
London, UK-based J Sainsbury plc retails food, general merchandise and clothing through the convenience store and supermarket formats in the UK and Ireland. It also offers financial services, such as credit cards, scorecards and personal loans; and home, car, pet, travel and life insurance products.
The #1 ranked stock has had a great run this year, appreciating 38.5%. Its valuation of 15.3X P/E indicates that it is trading close to its high point over the past year. For the year ending March 2024, the estimate increased 6 cents (5.9%) in the last seven days while for the following year, it increased 9 cents (9.2%).
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