Today’s episode of Full Court Finance at Zacks explores the end of the first quarter rally and where the stock market stands in April and the beginning of the second quarter.
The S&P 500 and Nasdaq soared through late March as Wall Street turned bullish on tech stocks. The wave of buying and the impressive quarter have heated up certain segments of the market, especially given the economic unknowns ahead. Therefore, we’re looking at two highly ranked Zacks stocks—Humana (HUM) and OI Glass, Inc. (OIs)—which provide great value to investors along with their ability to grow in all types of economic conditions.
The Nasdaq is up about 16% YTD, with the benchmark up about 6%. Both are once again trading above their 50-day and 200-day moving averages and sit at other technical levels that make it more difficult to be a bear.
Wall Street appears to think the issues relating to the Silicon Valley bank have been contained and view the increased financial tightness that would come with it as a net positive. Despite some legitimate controversy over what the Fed will do next, most are convinced that Jay Powell will be much less hawkish for the rest of the year.
Wall Street also liked what it saw from PCE and consumer spending data on Friday morning.
Jax Investment Research
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All that said, the market could face near-term selling pressure with some tech stocks trading at rather overheated levels. There are also several other potential headwinds ahead, including how first quarter 2023 earnings results and guidance come out.
With that in mind, investors probably want to stay exposed to a broadly upbeat market while not chasing a few overbought names in the short term.
Humana Inc. ,Gunjan, is a health insurance company that offers a variety of plans for Medicare, Medicaid and beyond. In short, the need for health care will not stop even if the economy slows down. Plus, America is only going to spend more on health care for an aging population, which fits directly into Humana’s core business.
Humana averaged 12% revenue growth over the past five years, including a 12% expansion in 2022. Zacks estimates that HUM’s sales will help its adjusted earnings grow 11% and 13%, respectively, to climb 12% in 2023 and 9% in 2024. respectively. HUM’s positive earnings revisions have helped propel it to Zacks Rank #2 (Buy) and it continues to grow its dividend while maintaining a very stable payout ratio.
Humana has crushed the market over the past decade and is currently down 13% from its November peaks. Even better, HUM trades at 16.8 times forward 12-month earnings, marking 30% value versus its own 10-year high and 10% versus its median.
OI Glass, Inc. ,OI, One of the top producers of glass bottles and jars on the planet, working with some of the leading food and beverage brands. Glass containers aren’t going anywhere, and OI Glass is in the midst of a revamp to “unlock” more shareholder value.
OI’s revenue climbed 8% last year and raised its earnings guidance to help it now rank #1 (Strong Buy) on the Zacks. Zacks estimates that OI Glass needs to post 5.5% more revenue in 2023 and 12% stronger adjusted earnings.
Shares of OI Glass are up 35% YTD and 70% over the last year, which is part of a 250% run during the last 36 months. At approximately $22.50 per share, OI sits 15% below its average Zacks price target. OI also trades at a nearly 50% discount to the Zacks Industrial Products sector and is down 20% from its five-year high at 8.9X forward earnings.
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