In the final leg of 2020, does the market have what it takes to reach a record high? If you ask J.P. Morgan, the answer is yes.
According to strategist Dubravko Lakos-Bujas, the S&P 500’s earnings are bouncing back more quickly than expected thanks to the Federal Reserve’s accommodative monetary policy, global reopenings and long-term tech plays. He argues this earnings trend could power the index’s rally to a record 3,600, reflecting a 6% gain from current levels.
Tech is the key here. Although the space has had a rough going recently, the strategist sees the latest pullback as “healthy," noting that tech names are still relatively insulated from COVID’s economic impact. Tech profits could also potentially help offset earnings weakness in the broader market.
“As for COVID-19 sensitive companies, Q2 likely marked the bottom with earnings to see a sustained recovery as the economy rebounds, and consumer and corporate behavior gradually normalize,” Lakos-Bujas commented. What’s more, the firm expects improving demand and falling interest costs to drive a rebound in S&P 500 companies’ margins, with a full recovery potentially coming by the second half of 2021.
Bearing this in mind, we wanted to take a closer look at three stocks that have earned J.P. Morgan’s stamp of approval. Accompanying a bullish rating, the firm’s analysts believe each could climb at least 60% higher in the year ahead. Running the tickers through TipRanks’ database, we got all the details and learned what makes them such compelling plays.
PDC Energy (PDCE)
First up we have PDC Energy, which is the second largest oil and gas producer in the DJ Basin and has significant scale (182,000 net acres). Based on its standing in the space, J.P. Morgan is pounding the table on this name.
Firm analyst Arun Jayaram sees the company as one of the “positioned operators among the small to mid-cap E&Ps given that it pairs a strong free cash flow profile and relatively clean balance sheet with a cheap multiple.” Out of all the names in the firm’s E&P coverage universe, PDCE trades at the lowest 2021 EBITDA multiple and has the highest free cash flow yield.
Additionally, even though Colorado politics presents challenges given that it’s a purple state, or a swing state, the analyst believes these headwinds can be overcome.
“In our view, the stock appears to be discounting a significant haircut to its undrilled inventory from regulatory headwinds in Colorado consistent with the implementation of ‘hard’ 2,000 ft. setback rules. While we don’t expect potentially restrictive political measures in Colorado to go away, we see the current ~2.6x discount as too punitive, with just a half turn re-rate providing ~40% upside to shares,” Jayaram commented.
The analyst argues that the stock presents investors with a “rare opportunity” to snap up a name at a discount to PDP value. Shares are currently changing hands for only 73% of Jayaram’s PDP estimates, based on recent strip pricing.
“We view this as a compelling risk-reward given the growing likelihood the State could enforce ‘soft’ 2,000 ft. setbacks that would still provide PDCE with the ability to tap the lion’s share of its undrilled DJ Basin inventory, albeit with additional administrative hurdles in the permit process that could modestly raise the cost of doing business,” the analyst stated.
It should be noted that PDCE has approximately 400 DUCs or permitted wells in the DJ Basin, which could serve to buffer the operational risk for several years and provide leeway for the company to successfully navigate the changes to the permitting process, in Jayaram’s opinion.
With the “significant dislocation from the value of the underlying asset base,” Jayaram gives PDCE a place on J.P. Morgan's U.S. Equity Analyst Focus List as a value pick.
It should come as no surprise, then, that Jayaram sides with the bulls. To this end, he puts an Overweight rating and $23 price target on the stock. Investors could be pocketing a gain of 93%, should this target be met in the twelve months ahead. (To watch Jayaram’s track record, click here)
Are other analysts in agreement? They are. Only Buy ratings, 11, in fact, have been issued in the last three months. Therefore, the verdict is unanimous: PDCE is a Strong Buy. Given the $21.50 average price target, shares could jump 80% in the next year. (See PDCE stock analysis on TipRanks)
Moving on to another player in the energy game, GeoPark is a leading independent oil and gas company with oil and gas assets in Chile, Colombia, Brazil, Peru and Argentina. With a solid asset base in Colombia, which accounts for 81% of its production, J.P. Morgan sees big things in store for this oil play.
Writing for the firm, analyst Ricardo Rezende opined: “We recommend GPRK for investors looking for exposure to oil prices... we think the stock reflects long-term oil prices at $50/barrel (bbl), in line with the current the forward curve.”
In addition, the company’s portfolio management approach to its assets (operations must be self-funding and prove their value on a standalone basis) and the fact that it recently grouped its operations into two segments, could “help the company rein in costs – an additional positive, especially in a low oil price environment,” according to Rezende.
That being said, Rezende argues “most of GeoPark’s current – and future – value lies in its Colombian operations.” Llanos-34, its “best asset”, is located in the country. This asset saw an average production of 26kboed in Q2 2020, with it also holding roughly 71% of net proved reserves.
GPRK has made a significant effort to expand its exposure to the areas around Llanos 34, with its holdings in the area now totaling over 1.4 million acres. As part of these efforts, it acquired five exploration blocks in partnership with Hocol (Ecopetrol), agreed with Parex to assume a 50% working interest in the Llanos 94 block and acquired Amerisur, an independent E&P whose most relevant block (CPO-5) is in the vicinity of Llanos 34.
The latter acquisition is the key to the company’s success, in Rezende’s opinion, as it “opened a new exploration region for GeoPark: Putumayo, a region closer to the border with Ecuador.”
Expounding on this, the analyst stated, “Llanos 34 and its vicinities, in our view, are much more important drivers to GeoPark’s investment case than any other blocks the company has a stake in. Also, a successful exploration campaign in areas that GeoPark recently incorporated and the ramp-up on CPO-5 are the other relevant triggers in the area. We see production in Colombia reaching 39.8 kbpd in 2023, compared to 28.5kbpd in 2018.”
All of this prompted Rezende to rate GPRK an Overweight (i.e. Buy) along with a $16 price target. This target conveys his confidence in GPRK’s ability to soar 119% in the next year. (To watch Rezende’s track record, click here)
Looking at the consensus breakdown, 2 Buys and no Holds or Sells have been published in the last three months. Therefore, GPRK gets a Moderate Buy consensus rating. Based on the $13.60 average price target, shares could surge 85% in the next year. (See GeoPark stock analysis on TipRanks)
iTeos Therapeutics (ITOS)
Making our way to the healthcare sector, iTeos Therapeutics is focused on the discovery and development of a new generation of highly differentiated immuno-oncology therapeutics. With its development pipeline boasting significant potential, J.P. Morgan thinks that now is the time to get in on the action.
Its two lead candidates, EOS-850 (an A2AR antagonist) and EOS-448 (an anti-TIGIT antibody), are targeting key mechanisms of cancer immunosuppression, and are in development alone as well as with other therapeutic combinations.
The A2A receptor, a key signaling component within the immunosuppressive ATP-adenosine pathway, has been shown to modulate immune responses in pathological conditions. As for the T-cell immunoreceptors with immunoglobulin (Ig) and ITIM domains (TIGIT) program, it is another receptor that certain cancer types use to sustain tumor growth.
Weighing in for J.P. Morgan, 5-star analyst Anupam Rama wrote: “We acknowledge that development in the adenosine and TIGIT classes are competitive with the likes of multiple large pharma/biotechs and SMID biotechs; that said, we still see iTeos as having multiple value-creating levers with both EOS-850 and EOS-448.”
These include the potential for the molecules to differentiate themselves over time within a particular target class. EOS-850 has demonstrated a differentiated PK/PD profile pre-clinically, with early responses looking encouraging. Based on this solid data, a Phase 1/2 trial was initiated for EOS-850 in patients with advanced solid tumors, both as monotherapy and in combination with standard of care therapies. Dose escalation in the combination arms of the study is expected to begin in Q3 2020, and data from the dose expansion monotherapy cohort is expected in 1H21. Rama sees these readouts as capable of driving major upside.
It should also be noted that a new formulation of EOS-850 with improved dissolution properties and good absorption under high pH conditions is expected to be available for a clinical bridging study in Q1 2021, with completion potentially coming in Q2 2021. Assuming a net initial price of $12,000 per cycle of therapy, Rama estimates peak global sales of $2-2.5 billion by 2039.
Additionally, EOS-448 has shown high binding affinity and that it actively engages FcyR, based on preclinical data. A Phase 1/2a study is now underway for EOS-448 in patients with advanced solid tumors, and preliminary results from the escalation phase are slated for release in 1H21, another potential catalyst, according to Rama. For this therapy, Rama believes peak sales could land at $3 billion.
“From current levels, execution on one product across a few indications or a combination of both products in more select go-forward indications has the potential to create meaningful value (via probability of success increase and/or peak revenue increases),” Rama said.
What’s more, both therapies are wholly owned by ITOS, which leaves “the potential for future strategic interest in both assets pending evolution of data,” in Rama’s opinion. On top of this, both assets have shown signals of activity in interesting but less-competitive indications.
Everything that ITOS has going for it convinced Rama to keep an Overweight (i.e. Buy) rating on the stock. Along with the call, he attaches a $40 price target, suggesting 61% upside potential. (To watch Rama’s track record, click here)
Turning now to the rest of the Street, other analysts echo Rama’s sentiment. 4 Buys and no Holds or Sells add up to a Strong Buy consensus rating. At $45, the average price target is more aggressive than Rama’s and implies 81% upside potential. (See ITOS stock analysis on TipRanks)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
The post 3 Stocks on J.P. Morgan’s Radar for Over 60% Upside appeared first on TipRanks Financial Blog.
Bitcoin Back Below $30,000 After A Record 8 Weeks In The Red
Bitcoin decoupled from equity markets to the downside on Monday after ending last week as the eighth consecutive weekly loss.
Bitcoin decoupled from equity markets to the downside on Monday after ending last week as the eighth consecutive weekly loss.
Bitcoin has failed to hold the $30,000 level on Monday after scoring its eighth consecutive week in the red for the first time ever.
During these eight weeks, which began in late March and ended on Sunday, bitcoin has lost over 35% of its U.S. dollar value according to TradingView data. Before the beginning of the losing streak, BTC was trading at around $46,800.
Bitcoin is changing hands slightly below $30,000 at the time of writing. The peer-to-peer currency climbed as high as $30,600 earlier on Monday to trade at around $29,400 as the trading in equity markets nears its end in New York.
While bitcoin turns south, major U.S. stock indices have been in the green. The Nasdaq, which is said to be highly correlated with bitcoin, decoupled from the digital money along with the S&P 500 to denote modest gains near market close on Monday, per TradingView data.
A Tough Year For Bitcoin
Despite making two new all-time highs in 2021, bitcoin already erased nearly all of those gains in 2022.
Bitcoin’s choppy trading year so far can be partly attributed to a broader sentiment of economic uncertainty as the Federal Reserve tightens the U.S. economy, withdrawing liquidity from the market after almost two years of quantitative easing.
The central bank has already raised its basic interest rates two times this year, the last of which was double the magnitude of the previous one and represented the largest hike in two decades: While the Fed increased interest rates by 0.25% in March, it raised them by 0.50% earlier this month.
When the Fed raises or lowers interest rates through its Federal Open Markets Committee (FOMC), what it is actually doing is setting a target range. The graph above depicts the lower and upper bounds of that target range in red and blue, respectively.
While the U.S. central bank system sets the target, it cannot mandate that commercial banks use it — rather, it serves as a recommendation. Therefore, what banks end up using for lending and borrowing excess cash between them overnight is called the effective rate. This is shown by the green line in the graph above.
The Fed previously hiked interest rates consistently from 2016 to 2019, until plunging it near zero in the aftermath of the COVID-19 pandemic outbreak, as noted in the graph.
Bitcoin’s higher sensitivity to liquidity and therefore interest rates can be explained by a greater participation of institutional investors in the market, whose allocations are based on the availability of capital and broader economic conditions, Morgan Stanley reportedly said.
Therefore, while Bitcoin was able to sustain a bull market in the midst of the Fed increasing interest rates in 2017, raising nearly 2,000% from January to December that year, the odds aren’t on the side of the bulls this year.sp 500 nasdaq pandemic covid-19 bitcoin btc
Here’s What Will Be Open And Closed on Memorial Day
Rite Aid, Best Buy and Pizza Hut will be open. Not so much with the Stock Market, though.
Rite Aid, Best Buy and Pizza Hut will be open. Not so much with the Stock Market, though.
Just in case you forgot to remember, Memorial Day will take place on Monday, May 30th.
Memorial Day is one of the most American of all holidays, second only to the Fourth of July.
The holiday was created to honor people who served in the United States military.
The first Memorial Day took place in 1868, though it is a holiday with a surprisingly murky history.
The U.S. Department of Veterans' Affairs says that 25 different cities and towns have claimed to have invented the holiday.
Still, Memorial Day weekend has long served as the unofficial kick off of summer, with friends gather in backyards and public parks to hold BBQs and flout open container laws.
As with many federal holidays, it can be a bit unclear what business and government agencies will be open.
Maybe you’re the type that always needs to buy some last minute potato dip at the grocery store, or if you’d prefer to go to a restaurant rather than deal with all that sunshine.
Either way, we’ve put together a list of what definitely won’t be open on Memorial Day, and what likely will be.
There is also the caveat that some chain restaurants and stores give their franchises the flexibility to set their own hours and days of operation.
What Will Be Open On Memorial Day?
Public Parks And Beaches
It just wouldn’t be Memorial Day without people grilling in the park and on the beach.
While some public parks closed down during the pandemic, that is thankfully behind us.
Some parks might close on the early side, but you should be all set for an afternoon picnic.
Memorial Day is the unofficial start of summer, as well as the unofficial start of summer movie season. If you’re curious about checking out “Top Gun: Maverick,” most theaters will be open.
Subways and Buses
While a lot of government employees get the day off, subway and buses will continue to run, though in reduced capacity in some cities.
Rite Aid, CVS and Walgreens
Chain drug stores seemingly never take the day off, just in case you really need to buy some shampoo from Rite Aid (RAD) - Get Rite Aid Corporation Report, CVS (CVS) - Get CVS Health Corporation Report or Walgreens (WBA) - Get Walgreens Boots Alliance Inc Report
Kohl’s, Lowe’s, Big Lots, Sam’s Club, Walmart, Target and Home Depot
All the major big box stores will be open on Memorial Day, though some locations might close early.
Nearly all shopping malls will be open on Memorial Day, and many of them will be having sales.
Trader Joe’s, Publix, Walmart, Wegmans
Barnes and Noble
Starbucks and Dunkin
The Apple Store
If you want to spend your day off at the Apple Store (APPL) , that is an option available to you, as most locations will be open that day.
Not in the mood to make your own hamburger? More of a taco kind of person?
Take heart: all the major fast food chains, including McDonald’s (MCD) - Get McDonald's Corporation Report, Wendy’s (WEN) - Get Wendy's Company Report, Taco Bell (YUM) - Get Yum! Brands, Inc. Report, Subway, Chipotle (CMG) - Get Chipotle Mexican Grill, Inc. Report and Pizza Hut will all be open.
Are you a fan of air-conditioning and having other people cook for you?
Well as an American, you are entitled to go eat at Ruth’s Chris Steakhouse, The Cheesecake Factory (CAKE) - Get Cheesecake Factory Incorporated Report, Bonefish Grill, Applebee's, Chili's or Olive Garden (DRI) - Get Darden Restaurants, Inc. Report on Memorial Day.
Most chain restaurants will be open for takeout, delivery and dining in. Many will offer discounts to service members and veterans.
If it’s your job to bring a six-pack to the BBQ, Total Wine will be open on Memorial Day, as will the majority of locally-owned liquor stores.
What Will Be Closed On Memorial Day?
The Federal Government
Memorial Day is a federal holiday, so federal courts and government offices will be closed.
The State Government
Most non-essential state government offices will be closed, including the Post Office and most courthouses.
Some local banks may choose to remain open for part of the day. But generally, national banks such as Bank of America (BAC) - Get Bank of America Corp Report, Capital One (COF) - Get Capital One Financial Corporation Report, Chase (CCF) - Get Chase Corporation Report and PNC (PNC) - Get PNC Financial Services Group, Inc. Report will be closed.
The Stock Market
The New York Stock Exchange, Dow Jones, NASDAQ will all be closed on Memorial Day. Go eat some hotdogs, day traders.
(Alice Cooper Voice) School’s is out for the summer!
Though in some cities, schools may be open until June, especially if it is trying to make up for time lost because of covid-19.
But even then, students will have Memorial Day off.
The Department of Motor Vehicles
The DMV is a state agency, and not a federal one. They are generally closed on Memorial Day in most cities.dow jones nasdaq pandemic covid-19
Top Gas ETFs to Buy in 2022 with Soaring Gas Prices
To grab your piece of the rising energy costs, below are the top gas ETFs to buy in 2022. Let’s get started.
The post Top Gas ETFs to Buy in 2022 with…
All anyone wants to talk about anymore is the soaring price of gasoline. After all, the cost to fill your tank has never been higher. With industry profits piling up, get your share with the best gas ETFs to buy before the second half (2H) of 2022.
First, the pandemic severely strained the industry as demand fell off from global lockdowns. As a result, over 100 oil and gas companies went out of business.
Then, as the economy reopened and demand started catching up, Russia’s invasion of Ukraine stoked a fire under an already strained market. So, demand is outpacing supply as nations look elsewhere to fill the supply gap left by Russia’s massive presence in the commodity market.
Nonetheless, gasoline is essential to keep the economy running smoothly. You need gas for fuel to get to work and back. Not to mention, businesses rely on gas for transporting goods, which influences prices. To grab your piece of the rising energy costs, below are the top gas ETFs to buy in 2H of 2022.
What Are the Best Gas ETFs to Buy Right Now?
The top gas ETFs to buy are outperforming the market right now as soaring energy costs boost profits. For example, Natural Gas Futures (NG1) are up over 120% YTD and almost 200% over the past year.
Meanwhile, all major indexes are down significantly this year, with the Nasdaq 100 Index (NDX) slipping almost 30% YTD. On top of this, researchers at J.P. Morgan predict gas prices could remain elevated “even as far back as 2024” as supply disruptions will be hard to overcome.
No. 3 Barclays iPath Series B Bloomberg Natural Gas Subindex (NYSE: GAZ)
- YTD Return: 124%
- Expense Ratio: 0.45%
Although the Natural Gas Subindex is set up as an Exchange Traded Note (ETN), it can help you gain exposure to the surging gas market. An ETN differs from an ETF in that the fund consists of unsecured debt notes rather than holding a group of stocks.
The GAZ ETN seeks to replicate the returns of the Bloomberg Natural Gas Subindex by investing in futures contracts. That said, the ETN does not pay a dividend. Therefore, GAZ is best as a short-term tool.
Since the ETN is not tied to any companies, only futures, it can carry additional risks. For example, investors are left with little or nothing if the issuer defaults. In comparison, ETFs hold several companies, helping to diversify and spread risk.
At the same time, the ETN moves alongside the price of natural gas contacts. So, if you are looking for direct exposure to gas prices, the GAZ ETN may be for you.
Keep reading for more on gas ETFs to buy.
No. 2 United States Natural Gas Fund (NYSE: UNG)
- YTD Return: 128%
- Expense Ratio: 1.11%
The United States Natural Gas Fund is another way investors can invest in natural gas prices without physically trading futures. For one thing, UNG is a commodity pool. Or in other words, it pools investor money to invest in futures, swaps and forward contracts.
The fund aims to give investors access to daily changes in natural gas deliveries at the Henry Hub, a distribution center. As a result, the daily changes resemble changes in natural gas prices.
However, since management is consistently active, it will cost more to invest. Though the higher expense is not slowing UNGs momentum, up close to 130% YTD. Likewise, UNG is more geared for short-term trading as it holds near-month contracts.
No. 1 United States 12 Month Natural Gas Fund (NYSE: UNL)
- YTD Return: 113%
- Expense Ratio: 0.90%
Similarly, the United States 12 Month Natural Gas Fund is a commodity pool targeting the price of natural gas. But, UNL differs in that it holds futures contracts for the nearest 12 months.
In other words, UNL buffers itself from short-term movements. As a result, investors can gain exposure to changes in natural gas prices with less risk than short-term contracts.
If you wish to capture your piece of the soaring energy prices but want less risk of contango (higher spot price), UNL may be a better choice.
Best Leveraged Gas ETFs to Buy
To maximize your returns, you can opt for a leveraged ETF to multiply the changes in an underlying index. For example, the ProShares Ultra Bloomberg Natural Gas ETF (NYSE: BOIL) targets to return 2X the daily performance of a natural gas index.
As a result, investors can earn double the daily returns of natural gas changes. With this in mind, the BOIL ETF is up 322% in 2022 alone.
However, there is a significant risk of investing in leveraged ETFs. Though you can earn double the returns, you can also double your losses. Investing in these funds is only recommended if you are comfortable with the significant fluctuations.
Best Inverse (Short) Gas ETFs to Buy
For those that think gas prices will ease soon, finding an inverse gas ETF to buy in 2022 may be for you. Or, if you have earned a pretty penny on gas and oil stocks already, you may want to protect your downside.
Nevertheless, the ProShares Ultrashort Bloomberg Natural Gas ETF (NYSE: KOLD) is a way to earn (-2X) the daily performance of a natural gas index.
In comparison, the KOLD ETF is down 90% YTD while natural gas prices soar. So, it gives you an idea of how quickly earnings can dry up in these types of investments.
What Gas ETFs to Buy for Passive Investors
The funds listed above are the best gas ETFs to buy for capturing the explosive rise in gas prices. But, for passive investors, these may not be the best option. For one thing, the gas and oil market can change rapidly.
During the pandemic, oil prices plunged below $0 for the first time. Then, two years later, we are looking at record high prices of over $130. As a result, oil and gas ETFs are having wild swings.
Nonetheless, research from J.P. Morgan shows the cost burden of higher gas prices is around $7 billion per month. As a result, consumers have less to spend in other areas of the economy. We already see the evidence with companies like Walmart (NYSE: WMT) and Target (NYSE: TGT) missing earnings estimates while blaming transportation costs.
In short, profits are being pulled from other parts of the economy to compensate for the lack of supply and rising demand. With this in mind, the energy sector looks ready to continue its run.
The Energy Select Sector SPDR Fund (NYSE: XLE) is an excellent option for passive investors looking to gain exposure with less risk. The XLE ETF is up 48% YTD while investing in top gas and oil companies like Exxon Mobile (NYSE: XOM). No matter your investing style, with the price at the pump holding steady, these are the top gas ETFs to buy this year to get your share.
The post Top Gas ETFs to Buy in 2022 with Soaring Gas Prices appeared first on Investment U.nasdaq stocks pandemic etf spread oil russia ukraine
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