5 Cheap Strong Buy Stocks with Market-Beating Performance – June 7, 2022

Inflation has been the top story this year, joining the supply chain, chip shortages, energy prices and COVID from last year, and the Ukraine war and related sanctions this year. The tight labor market and overheated housing market have been other issues.

Of course, some of these themes are feeding each other. For instance, energy prices are linked to both shortages and the war. And since they affect all other goods, they are one of the biggest contributors to the high inflation rate.

The solution, according to some, is that we do more at home: go from hyper-global to more-local. This would mean shorter supply chains but I’m not sure it would bring down cost. Companies have already worked out the math and it’s still cheaper to get stuff manufactured overseas. Especially with the stronger dollar. But that means that global inflation remains a local story.

A hawkish Fed is horrible for the markets, though it’s the bitter pill that must be swallowed. Rising interest rates will inevitably bring down consumption appetite (as we are already seeing in the housing market).

The big concern is that consumer spending could fall more than desirable. This is a calculated risk, as is always the case in a rising interest rate environment, not only because things get too expensive, but also because you make more from your savings. And it could trigger a recession. Recent data from the government, however, indicates that we really shouldn’t be fretting about that just yet.    

Particularly because we don’t have an overheated market anymore. In fact, many stocks are undervalued right now. And it does look like the market is already pricing in a lot of uncertainty, including that which pertains to global inflation.

Could there be further downside to the markets? Probably. Almost certainly, in fact. But timing the market to attempt to get in at the bottom doesn’t always play out well — it could be that you waited just a bit too long.

Even if there is more downside ahead, and even if you don’t manage to get into good stocks at their absolute bottom, chances are that you would still stand to gain. All the major indexes are down on the month, which could be a good entry point.

Pangaea Logistics Solutions, Ltd., Berry Corp., Delek US Holdings, Inc., Kronos Worldwide, Inc. and Sanderson Farms, Inc. (highlighted below) have a Zacks #1 Rank (Strong Buy). In addition to being hugely undervalued, they also have other things going for them, such as being inherently low-risk in a down market, or standing to benefit from the current conditions of supply chain disruption or high energy prices, and so forth. Let’s see some details-    

Pangaea Logistics Solutions, Ltd. (PANL Free Report)

Pangea provides seaborne dry bulk logistics and transportation services to industrial customers worldwide. The ongoing supply chain disruption has allowed the company to raise prices and generate strong profitability in the last several months.

These rates are likely to moderate as a result of continued fleet additions and normalization in the supply chain. However, Pangea typically focuses on long-term fixed-rate contracts. If the markets soften and there is reduced demand, its focus on the long term will delay the negative impact on its business.

Pangea belongs to the Transportation – Shipping industry, which is in the top 13% of Zacks-classified industries. Companies that belong to the top 50% of Zacks-classified industries usually better the bottom 50% by a factor of 2 to 1. That is because there are certain positive drivers in these industries, which act in favor of them. When combined with the Zacks #1 rank, the chances of upside are even greater.

Pangea also has Value, Growth and Momentum Scores of A. Its earnings are expected to grow at a double-digit rate in both 2022 and 2023. Estimates for the two years are up a respective 32.5% and 45.2% in the last 30 days.

Berry Corporation (BRY Free Report)

Berry Corp. is an independent upstream energy company engaged in the development and production of conventional oil reserves in western United States. It belongs to the Oil and Gas – Integrated – U.S. industry, which is in the top 12% of Zacks-classified industries.

It has Value, Growth and Momentum Scores of B, B and A, respectively. Both revenue and earnings are expected to grow at an at least double-digit clip this year and the next. The 2022 estimate is up 66.8% and the 2023 estimate is up 93.4% in the last 30 days.

Delek US Holdings, Inc. (DK Free Report)

Delek US Holdings is engaged in integrated downstream energy operations, including refining, logistics and retail in the U.S. The Oil and Gas – Refining and Marketing industry to which it belongs is in the top 2% of Zacks classified industries. It Value, Growth and Momentum Scores are B, C and C, respectively.

Analysts currently expect its revenue and earnings to grow a respective 55.6% and 220.1% this year before declining in the next. But estimates for both years have continued to increase in the last 30 days. For 2022, they are up an average 32.8% and for 2023 they are up 22.3%.

Kronos Worldwide, Inc. (KRO Free Report)

Kronos produces a range of specialty chemicals including titanium dioxide pigments in Europe, North America and the Asia Pacific. It belongs to the Chemical – Diversified industry (top 28% of Zacks-ranked industries). Kronos has scored a B for Value, Growth and Momentum.

Its revenue and earnings are expected to grow 16.1% and 110.2% this year, followed by single-digit growth in the next. In the last 30 days, its 2022 estimate has jumped 60.9% while its 2023 estimate jumped 61.0%. Analysts don’t appear to be concerned about demand slowing down in the near term.

Sanderson Farms, Inc. (SAFM Free Report)

Sanderson Farms, an integrated poultry processing company, produces, processes, markets, and distributes fresh, frozen, and prepared chicken products to retailers, distributors and casual dining operators in the U.S., as well as to frozen chicken resellers in export markets.

It belongs to the Food – Meat Products industry (top 9%). It has scored A for Value, Growth and Momentum. Its revenue and earnings are expected to grow 30.1% and 100.1% in 2022.

While analysts are modeling in a decline for 2023, they continue to raise their estimates for both years. In the last seven days, the 2022 estimate has jumped 27.0% while the 2023 estimate has jumped 22.5%.

One-Month Price Performance

Image Source: Zacks Investment Research

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