As inflation remains at discomforting levels, the swings in the stock market are expected to amplify further as we enter the second half of the year. Therefore, investors could consider adding some exposure to stocks such as Biogen Inc. (BIIB), Celestica Inc. (CLS), and Biglari Holdings Inc. (BH), which have gained significant momentum lately.
Although the Federal Reserve signaled a potential end to its hiking cycle, the stronger-than-expected economic data in recent weeks have induced a fresh bout of volatility in the markets. Investors now await another quarter-percentage-point interest rate hike at the June meeting, bringing the federal funds rate to 5.25% - 5.5%.
Moreover, the minutes from the last meeting showed some members indicated that sticky core inflation would likely keep monetary policy tighter for longer and that more hikes could be coming down the pike later in the year.
With inflation still reigning well above the Fed’s target at 5% and the Fed not cutting rates anytime soon, credit conditions will continue to tighten. This, in turn, comes out as a warning that a recession is lurking just over the horizon. As a result, market experts are once again ringing the alarm bells over an imminent downturn in the second half of 2023.
Thus, for those looking to hedge against market uncertainty this year, the below-mentioned stocks possess robust fundamental strength, favorable outlook, and strong momentum. So, it could be wise to invest in them now.
Biogen Inc. (BIIB)
BIIB discovers, develops, manufactures, and delivers therapies for treating neurological and neurodegenerative diseases. It offers TECFIDERA, AVONEX, PLEGRIDY, FAMPYRA, etc., for treating MS; SPINRAZA for SMA treatment; ADUHELM for treating Alzheimer’s; and FUMADERM for the treatment of severe plaque psoriasis.
On April 25, QALSODY™ (tofersen) 100 mg/15mL injection was granted accelerated approval for the treatment of Amyotrophic Lateral Sclerosis (ALS) in adults who have a mutation in the superoxide dismutase 1 (SOD1) gene by the U.S. Food and Drug Administration (FDA). This approval was based on a reduction of neurofilament, a marker of neurodegeneration.
In the same month, BIIB exercised the option with Denali Therapeutics Inc. (DNLI) to develop and commercialize DNLI’s antibody transport vehicle program targeting Amyloid Beta to advance the next generation of Aβ immunotherapies for the treatment of Alzheimer’s disease. Such developments could benefit the company.
In the first quarter that ended March 31, 2023, BIIB’s income before income tax expense and equity in loss of investee, net of tax, increased 26.2% year-over-year to $438.30 million. The total cost and expenses declined 7.3% year-over-year to $2.02 billion.
Net income attributable to BIIB improved 27.7% from the year-ago value to $387.90 million, while its EPS came in at $2.67, representing a 29.6% year-over-year increase.
In terms of trailing-12-month GAAP P/E, BIIB is trading at 13.87x, 47.3% lower than the industry average of 26.30x. Its trailing-12-month EV/EBITDA multiple of 12.97 is 9.3% lower than the industry average of 14.30x. In addition, BIIB’s trailing-12-month EV/EBIT ratio of 15.16 is 26.6% lower than the industry average of 20.64.
Analysts expect BIIB’s EPS to increase 5.8% year-over-year to $16.34 in the fiscal year 2024 (ending on December 31), while its revenue is expected to be $9.38 billion in the same period. Its EPS is expected to increase by 2.5% per annum over the next five years. BIIB surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive.
Shares of BIIB have gained 50.4% over the past nine months to close the last trading session at $298.69. It is trading higher than its 50-day and 200-day moving averages of $292.21 and $270.96, respectively, indicating an uptrend.
BIIB’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Value and a B for Growth, Momentum, and Quality. It is ranked #2 out of 378 stocks in the Biotech industry. Click here to see the other ratings of BIIB (Stability and Sentiment).
Celestica Inc. (CLS)
CLS provides a hardware platform and supply chain solutions in North America, Europe, and Asia. The company’s operating segments are Advanced Technology Solutions; and Connectivity & Cloud Solutions. It serves aerospace and defense, health tech, industrial, original equipment manufacturers (OEMs), communications, and enterprise markets.
On March 14, CLS announced that Onex had disclosed its intentions to exchange all of its Multiple Voting Shares (MVS) in CLS for Subordinate Voting Shares (SVS) over the course of almost six months.
Rob Mionis, CLS’ President and CEO, said, “In 2022, Celestica posted its highest annual non-IFRS operating margin and highest non-IFRS adjusted EPS in the company’s history. Celestica is a much different company than it was just five years ago and we view this as the next logical phase in the company’s transformation.”
In terms of forward non-GAAP P/E, CLS is trading at 6.32x, 70.5% lower than the industry average of 21.43x. Its forward EV/Sales multiple of 0.27 is 90.4% lower than the industry average of 2.78x. In addition, the stock’s forward Price/Sales and Price/Cash Flows ratios of 0.21 and 3.99 compare with industry averages of 2.69 and 19.71, respectively.
For the first quarter that ended on March 31, 2023, CLS’ revenue rose 17.3% from the year-ago value to $1.84 billion. Its gross profit grew 23.8% from the year-ago value to $164 million. The company’s adjusted net earnings increased 18.7% year-over-year to $57.20 million. Its adjusted earnings per share stood at $0.47, up 20.5% year-over-year.
The consensus revenue estimate of $1.81 billion for the second quarter (ending June 30, 2023) represents a 5.6% increase year-over-year. The consensus EPS estimate of $0.47 for the current quarter indicates a 7.9% year-over-year growth. The company surpassed the consensus EPS and revenue estimates in each of the trailing four quarters, which is promising.
The stock has gained 21.8% over the past year to close the last trading session at $12.91, higher than its 50-day and 200-day moving averages of $11.79 and $11.35, respectively.
CLS’ solid prospects are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. It also has an A grade for Value and Momentum and B for Growth and Sentiment. Within the Technology - Services industry, it is ranked #4 of 82 stocks.
To see the other ratings of CLS for Stability and Quality, click here.
Biglari Holdings Inc. (BH)
BH owns, operates, and franchises restaurants under the Steak n Shake and Western Sizzlin names in the United States. It also engages in businesses such as property and casualty insurance, media and licensing, and oil and gas.
In terms of trailing-12-month EV/EBITDA, BH is trading at 7.25x, 27.9% lower than the industry average of 10.06x. Its trailing-12-month Price/Book multiple of 1.02 is 50.6% lower than the industry average of 2.07x. In addition, the stock’s trailing-12-month Price/Cash Flows ratio of 4.93 compares with the industry average of 10.11.
BH’s revenue increased 5.6% year-over-year to $90.18 million in the first quarter that ended March 31, 2023. Its attributable net earnings and total comprehensive income amounted to $64.89 million and $65.22 million, compared to a net loss and comprehensive loss of $298 thousand and $529 thousand, respectively.
The company’s net earnings per average equivalent Class A share stood at $222.28 versus a net loss per share of $0.98 in the prior-year quarter.
Moreover, the stock has gained 59.4% over the past year to close the last trading session at $206.69, higher than its 50-day and 200-day moving averages of $176.82 and $152.40, respectively.
It is no surprise that BH has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. It has a B grade for Growth, Value, Momentum, Stability, Sentiment, and Quality. Among the 45 stocks in the A-rated Restaurants industry, it is ranked first.
In addition to the POWR Ratings I’ve just highlighted, you can see all the BH ratings here.
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BIIB shares were trading at $296.69 per share on Wednesday afternoon, down $2.00 (-0.67%). Year-to-date, BIIB has gained 7.14%, versus a 9.84% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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