Fundamentally strong stocks, SCOR SE (SCRYY), Thermon Group Holdings, Inc. (THR), and The L.S. Starrett Company (SCX), which are being propelled by strong investor sentiment, have been rated “Strong Buy” in our POWR Ratings system as they have the potential to deliver market-beating returns in a subdued macroeconomic environment.
Today’s investors have been greeted with the welcome news that the consumer price index rose 0.1% for March against a Dow Jones estimate of 0.2% and 5% from a year ago vs. the estimate of 5.1%. Excluding food and energy, core CPI increased by 0.4% and 5.6% annually.
While the Federal Reserve’s campaign against stubborn inflation through aggressive interest-rate hikes seems to be having its desired effect, much of this deceleration has been caused by a decline of 3.5% in energy costs and an unchanged food index.
However, in an increasingly fragmented world that’s witnessing redrawing of the energy map and shifting geopolitical allegiances, the tables might turn on a dime. Earlier this month, Saudi Arabia-led OPEC+ announced a cut of more than a million barrels of output a day, in addition to a reduction of 2 million barrels a day agreed upon in October 2022.
This has taken about 3% of the world’s petroleum production taken off the market in seven months and has led to a sudden surge in the price of crude oil in the market, which has been delicately balanced between demand and supply, which might, in turn, derail the disinflationary process and complicate problems for a Central Bank working hard to reinforce a stumbling banking system.
IMF’s latest forecasts for the U.S. and global economy don’t seem encouraging either. The organization has predicted that tighter lending in the aftermath of the banking turmoil could shape shave 0.44 percentage points off U.S. GDP in 2023.
Total economic output is expected to increase by 2.8% this year, down from 3.4% last year, with nations worldwide still reeling from the pandemic and the war in Ukraine. Furthermore, tensions between the U.S. and China could cost the world 2% of its economic output.
With this context, let’s take a closer look at the featured stocks, which have weathered the recent turbulence impressively and look well-positioned to keep shining in an otherwise bleak macroeconomic background.
SCOR SE (SCRYY)
SCRYY is a life and non-life reinsurance provider based in Paris, France. The company operates through two segments: SCOR Global P&C (Non-Life) and SCOR Global Life (Life), and three divisions: SCOR Global P&C; SCOR Global Life; and SCOR Global Investments.
On December 19, 2022, SCRYY announced the fourth renewal of its contingent capital facility for three years, with an aim to protect the group’s share capital and solvency. This facility, introduced in January 2011, would provide the group with additional capital of up to EUR 300 million coverage in case of extreme events (natural catastrophes or life events impacting mortality) or a significant fall in the share price.
During the fourth quarter of the fiscal year 2022, SCRYY’s gross written premiums increased by 7.7% year-over-year to €4.91 billion ($5.35 billion). During the same period, the group’s net income increased by 76.6% year-over-year to €208 million ($226.75 million), while its annualized ROC improved by 9.2 percentage points to come in at 16.8%.
SCRYY has proposed a dividend of €1.40 per share for the fiscal year 2022. If approved during the 2023 Annual General Meeting, to be held on May 25, 2023, the dividend is set to be paid on June 1 to shareholders of record as of May 30.
SCRYY’s revenue for the fiscal year 2023 is expected to increase 0.92% year-over-year to $21.11 billion. The company’s top line is expected to keep growing over the next two fiscal years to come in at $22.16 billion for the fiscal year 2025.
The stock has gained 12% over the past month and 76% over the past six months to close the last trading session at $2.42, above its 50-day and 200-day moving averages of $2.37 and $2.00, respectively.
SCRYY has an overall rating of A, which equates to a Strong Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
SCRYY also has an A grade for Growth and B for Sentiment, Momentum, Stability, and Value.
Unsurprisingly, SCRYY tops the list of 26 stocks in the Insurance - Life industry. Click here for all ratings of SCRYY.
Thermon Group Holdings, Inc. (THR)
THR provides engineered industrial process heating solutions for process industries. The company operates through four geographic segments: United States and Latin America (US-LAM); Canada; Europe, Middle East, and Africa (EMEA); and Asia-Pacific (APAC).
For the third quarter of the fiscal year 2023 that ended December 31, 2022, THR’s sales increased by 21.4% year-over-year to $122.1 million, while its adjusted EBITDA increased by 44.5% year-over-year to $29.75 million. As a result, the company’s adjusted net income increased by 41.8% and 40.5% year-over-year to $17.5 million and $0.52 per share.
THR’s total assets stood at $650.10 billion as of December 31, 2022, compared to $636.67 billion as of March 31, 2022.
THR’s revenue and EPS for the fiscal year that ended March 31, 2023, are expected to increase 21.5% and 88.6% year-over-year to $432.29 million and $1.57, respectively. Revenue and EPS are expected to increase by a further 6.1% and 8.3% during the next fiscal to come in at $458.80 million and $1.70 per share.
Moreover, THR has an impressive earnings surprise history of surpassing consensus EPS estimates in each of the trailing four quarters. The stock has gained 49.7% over the past six months to close the last trading session at $23.25, above its 200-day moving average of $19.74.
THR has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. It also has an A grade for Sentiment and B for Momentum, Growth, and Quality.
THR is ranked #8 of 79 stocks in the A-rated Industrial - Machinery category. Additional ratings for THR’s Value and Stability can be found here.
The L.S. Starrett Company (SCX)
SCX is involved in manufacturing measuring and cutting tools for industrial, professional, and consumer markets. The company distributes its products through multiple channels across the world.
Although the company’s international operations faced significant hurdles, its North American businesses have benefited from continued high demand for precision granite products and stable demand for the Company’s portfolio of precision measuring tools and saw blades sold through industrial distribution.
As a result, for the second quarter of the fiscal year 2023 that ended December 2022, SCX’s net sales increased by 8.9% year-over-year to $66.78 million. During the same period, the company’s gross margin increased by 13.9% year-over-year to $21.58 billion, while its operating income grew by 41.9% year-over-year to $5.96 million.
Consequently, SCX’s net income for the quarter increased by 23.9% and 23.5% year-over-year to $3.13 million, or $0.42 per share.
SCX’s stock has gained 18.5% over the past six months and 52.7% over the past year to close the last trading session at $10.75, above its 50-day and 200-day moving averages of $10.50 and $8.57, respectively.
SCX has an overall rating of A, which translates to a Strong Buy in our POWR Ratings system. It also has an A grade for Value and B for Sentiment, Momentum, and Growth.
SCX is ranked #3 of 89 stocks in the Industrial - Equipment category.
Click here for additional POWR Ratings for the Stability and Quality of SCX.
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SCRYY shares were trading at $2.50 per share on Wednesday afternoon, up $0.08 (+3.31%). Year-to-date, SCRYY has gained 9.41%, versus a 7.11% rise in the benchmark S&P 500 index during the same period.
About the Author: Santanu Roy
Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities.
Great Investor Sentiment, Strong Momentum and an "A" POWR Rating: 3 Stocks That Have It All StockNews.com
