The S&P 500 finished Wednesday trading down 1.4%, and the Nasdaq was off by 2.4%. Investors were particularly concerned about Alphabet’s (GOOG) lower-than-expected cloud profits. Its stock fell by nearly 10% on the day.
As a result of Alphabet’s mixed results from its latest quarter, 39 NYSE stocks were hitting five-year lows, compared to just three hitting five-year highs. On the Nasdaq, the ratio of lows to highs was 142 to 3. In other words, there isn’t a lot of good news to report from the day's trading.
However, I did manage to find three stocks with interesting upside moves.
MSA Safety
Pittsburgh-based MSA Safety (MSA) reported Q3 2023 results on Tuesday after the markets closed. The company manufactures safety equipment such as job site helmets, gas and flame detectors, gas masks, and other breathing apparatus.
On the top line, revenues were $447 million, 17% higher than in Q3 2022, while its adjusted operating income of $101 million was 35% higher than a year ago. On a per-share basis, it earned $1.78 on an adjusted basis in the quarter, 32 cents higher than the analyst estimate.
“Growth was broad-based across our key product platforms and regions, a testament to the resiliency of our business, our differentiated safety products and solutions, and strategic exposure to attractive end markets and long-term secular trends,” stated CEO Nish Vartainian.
As a result of the strong results, it now expects sales to increase in the mid-teens in 2023. Investors liked what they read. Its shares gained more than 7% on the day. Thanks to today’s move, MSA shares are up 11.1% in 2023 and 36% over the past year.
If you’re into options, the June 21/2024 $190 put is a possible winner. If you sell the puts, your annualized yield is nearly 29%. Currently, in the money by 16%, you’ve got 240 days to expiration to play this out. Your net price of $159.80 is just 59 cents higher than where it’s currently trading.
Given its third-quarter results, you could buy the shares for $10-$15 less than in the open market.
Shenandoah Telecommunications
Honestly, I was only attracted to Shenandoah Telecommunications (SHEN) because of its name. However, any time a stock moves double digits on a big down day -- up 10.5% -- it pays to take a closer look.
The company, which provides broadband service to customers in the Mid-Atlantic, announced on Tuesday that it was acquiring the parent company of Horizon Telecom for $385 million, consisting of $305 million in cash and $80 million in stock.
Horizon attracted the company because of its 7,200 route-mile fiber network in Ohio. Horizon generates 64% of its revenue from commercial customers. Its history dates back to 1895. Its fiber-to-the-home product is found in 14,000 homes and businesses in its Ross County local market and 18,000 other homes adjacent to its commercial fiber network.
“The acquisition of Horizon is a transformative transaction that we believe will allow us to accelerate our Fiber First strategy by doubling the size of our commercial fiber business and creating a new beachhead for our Glo Fiber business,” stated Shenandoah Telecom CEO Christopher E. French.
“We now expect to pass 150,000 additional homes with fiber in greenfield markets, targeting 600,000 total passings by the end of 2026.”
Usually, you don’t see an acquirer’s stock jump by much when a deal’s announced unless investors see the transaction's benefit. Clearly, they do. Its shares are now up 51% in 2023.
Despite the good day, there wasn’t a whole lot of options action on SHEN stock.
However, if you’re interested, the April 19/2024 $25 call expires in 177 days, just shy of six months, a reasonable time to bet on the company. The ask of $3.70 is about 15% of the strike. The shares have to rise by at least 16% for you to exercise your right to buy shares at $25.
At the very least, you should get some of the $370 back before the call expires next April. Given its momentum, this looks very interesting.
Banco Macro
For my final stock to discuss, we’re headed south to Argentina. Banco Macro (BMA) is one of the top banks in the South American country. Its shares gained nearly 6% on the day with volume of 291,834, about 21% higher than its 30-day average.
I’m not sure why its shares were higher in Wednesday’s trading. However, the ADRs are having a good year, up 20.2% year-to-date. Over the past five years, they’re down 55.3%. Its shares traded on the Buenos Aires Stock Exchange are up nearly 1,000% over the same period.
The bank announced its Q2 2023 results in late August. Its net income was 394% higher than a year earlier, with a 3% deposit increase. Its non-performing loans were a reasonable amount of 1.37% of its loan portfolio. It finished the second quarter with 462 branches serving 4.7 million retail and more than 123,700 commercial customers in Argentina.
The bank’s book value per ADR was $45.31 in Q2 2023, 50% lower than a year ago. Its book value per peso rose 2% year-over-year. Currency fluctuations are part of the bargain if you invest in Latin America.
I’ll look more closely at this bank, given it has a 4.5% dividend yield, considerably higher than some of the more prominent American banks.
This one’s more suited to investors comfortable with above-average volatility. That said, the bank’s shares are good value despite their gains in 2023.
As for the options, the volume’s light with a 30-day volume of just 60.
On the date of publication, Will Ashworth did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
