3 “Strong Buy” stocks that are still undervalued
After a year that most of us want to forget, 2021 begins with stability and an even keel. The elections are safely behind us, the new Biden administration promises a ‘no-drama’ approach, a highly divided and hyper-partisan congress is unlikely to issue sweeping, reform or otherwise, and COVID vaccines are ready for distribution. It’s a recipe for a quiet news cycle, making it a perfect time to buy on the stock market. Investors can read the tea leaves or study the data – regardless of their preferred method of stock analysis – and use this period of rest to make rational choices about stock movements. Using the TipRanks database, we collected three stocks that form a bullish case. All three meet a profile that should interest value investors. They have unanimous Strong Buy consensus ratings, along with a ‘perfect 10′ from the Smart Score. That score, a unique measure, evaluates a stock based on 8 factors with a proven high correlation to future overperformance. A ’10’ score indicates that there is a good chance that the stock will increase in the coming year. And finally, all three of these stocks present double digit upside potential, indicating that they are still undervalued. UMH Properties (UMH) We start in the real estate investment (REIT) sector, with UMH Properties. This company, which started in the mobile home industry after WWII, later became the foremost builder of produced housing. Today, UMH owns and manages a portfolio of 124 manufactured residential communities across 8 Northeast and Midwest states, with more than 23,000 units in total. As a REIT, UMH has taken advantage of the nature of manufactured homes as affordable options in the housing market. UMH sells both the manufactured homes to residents, while it rents out the plots on which the properties are located, and rents homes to residents. Equity income from the company, a key measure, grew 8.6% year-over-year in the third quarter. Also in the third quarter, UMH reported a 16% year-on-year increase in revenue, at $ 43.1 million compared to $ 37.3 million in the quarter a year ago. Funds from Operations, another key measure in the REIT industry, came in at 11 cents a share, up from 14 cents in 3Q19. The decline came when the company repaid $ 2.9 million in Series B Preference Shares. REITs are required to return income to shareholders, and UMH achieves this with a reliable dividend and a high return of 4.7%. The payment, at 18 cents per common share, is paid quarterly and has been kept stable for over ten years. Compass Point analyst Merrill Ross believes the company is well positioned to create value for both households and shareholders. “We believe that UMH has proven that it can provide attractive, affordable housing to both tenants and homeowners in a more efficient way than was possible with vertical rental properties. As UMH improves its borrowing costs, it can compete more effectively with other owners of the MH community in the public and private spheres, and because it has a successful formula for reversing under-managed communities, we think UMH can own private properties in the coming years consolidate to build on its potential for value creation, ” said Ross. Buy, and its $ 20 price target implies a 25% year up. (To view Ross’s track record click here) Overall, the unanimous Strong Buy on UMH is based on 5 recent reviews. The stock is selling for $ 15.92 and the $ 18.40 average price target suggests there is room for 15% growth from that level. (See UMH Stock Analysis on TipRanks) Laird Superfood (LSF) Laird Superfood is a newcomer to the stock markets and only went public last September. The company manufactures and markets a range of plant-based, nutritious food additives and snacks, and is best known for its line of specialty non-dairy coffee creamers. Targeting customers looking to add nutrition and an energy boost to their diet, Laird has reported third-quarter earnings since its IPO in September. Sales were strong at $ 7.6 million, more than 26% higher than forecast and 118% higher than a year ago. The company also reported 115% year-on-year growth in online sales. E-commerce now makes up 49% of the company’s net sales – no surprise during the ‘corona year’. The review on the stock comes from Robert Burleson, a five-star analyst from Canaccord. Burleson reiterates its optimistic stance, saying, “We continue to view LSF as an attractive platform to respond to strong demand trends for plant-based functional foods, noting its competitively differentiated omnichannel approach and ingredient ethos. Over time, we expect LSF will be able to leverage its brand and vertically integrated operation to success in a wide variety of plant-based categories, driving excessive sales growth and healthy margin expansion. Burleson assesses LSF shares a purchase in addition to a $ 70 price target. This figure indicates his confidence in ~ 63% growth over the one-year horizon. (To view Burleson’s track record, click here) Laird hasn’t caught much of the attention of analysts, but those who reviewed the stock agree with Burleson’s assessment. LSF has a unanimous consensus rating from Strong Buy analysts, based on 3 recent reviews. The $ 62.33 average price target suggests room for ~ 39% gains in the coming year. (See LSF Stock Analysis on TipRanks) TravelCenters of America (TA) Last but not least is TravelCenters of America, a big name in the transportation industry. TravelCenters owns, operates and competes full-service highway stops in the US – an important niche in a country that relies heavily on long-haul transportation and where private car ownership has long encouraged the ‘road trip’ mystique. TA’s network of rest stops offers travelers convenience stores and fast food outlets in addition to gasoline and diesel and the expected amenities. The corona crisis has been a tough time for TA as lockdown regulations put pressure on travel. The company’s revenues bottomed out in the second quarter and fell to $ 986 million, but were consecutively up 28% to $ 1.27 billion in the third quarter. Earnings per share were also strong at 61 cents, showing impressive growth of 165% year-on-year. These benefits came when the economy reopened – and because air travel is still limited, cars are becoming the standard for long haul, a circumstance that benefits TravelCenters. Analyst James Sullivan treats TravelCenters for BTIG, which rates the stock as a buy, and his $ 40 price target suggests a 22% rise for the coming year. (To view Sullivan’s track record, click here) To support his position, Sullivan noted, “TA is in the process of completing a series of unsuccessful initiatives under the previous management team. The current new management team has strengthened the balance sheet and plans to improve operations by taking both cost savings and revenue-generating measures that should increase margins […] While we expect spending for 2020 to be focused on non-revenue-generating maintenance and repair items, in 2021 and beyond, we expect higher spending to generate good ROI … ”All in all, TravelCenters shares get a unanimous thumbs-up up, with the support of 3 Buys’ Strong Buy consensus assessment of the stock. The stock is selling for $ 32.87 and the $ 38.33 average price target suggests ~ 17% upside potential. (See TA Stock Analysis on TipRanks) To find great ideas for stocks trading at attractive valuations, check out TipRanks ‘Best Stocks to Buy, a newly launched tool that brings together all of TipRanks’ insights on stocks. Disclaimer: The opinions expressed in this article are solely those of the recommended analysts. The content is provided for informational purposes only. It is very important to conduct your own analysis before making an investment.