We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Meridian Bioscience, Gold Fields, Steel Dynamics, Toll Brothers and Owens Corning highlighted as Zacks Bull and Bear of the Day
Read MoreHide Full Article
For Immediate Release
Chicago, IL – March 22, 2021 – Zacks Equity Research Shares of Meridian Bioscience, Inc. as the Bull of the Day, Gold Fields Limited (GFI - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Steel Dynamics, Inc. (STLD - Free Report) , Toll Brothers, Inc. (TOL - Free Report) and Owens Corning (OC - Free Report) .
Meridian Bioscience is a $1 billion provider of diagnostic test kits for gastrointestinal and respiratory infectious diseases. The company is expected to grow sales 28.6% this year to $326 million.
And after reporting a strong beat-and-raise quarter in early February, analysts had to boost their EPS estimates for FY21 (ends September) over 30% from $1.24 to $1.66. Since I last wrote about this 55% rise in profits -- and a spike in VIVO shares above $30 -- the company had a bit of a hiccup with an FDA approval of their latest COVID-19 testing kit.
So I wanted to update investors and followers of the company on what's happening. On February 16, Meridian revealed that the FDA requested additional information on the SARS-CoV-2 molecular diagnostic test on its Revogene platform, for which the company was seeking Emergency Use Authorization (EUA).
At the time, Meridian elected to place shipments of the SARS-CoV-2 test kits on hold while it continued to work with the FDA. This news sent shares down sharply over the next two weeks, exacerbated by the broad pullback in Nasdaq and Biotech stocks.
Since I hold VIVO shares in my Healthcare Innovators portfolio for long-term returns, I often take advantage of over-reactions like this in my TAZR trading portfolio, like we did with Novavax this month to capture a 40% gain in just ten trading days, buying under $160 and letting go above $220.
VIVO at $21 Again -- What a Gift!
But I missed the great opportunities in VIVO down at $21. I should have been paying more attention and listening to one of the biggest Street bulls on VIVO and other diagnostic companies, Steven Mah of Piper Sandler, who put the FDA delay in better perspective.
On February 23, Sandler analyst Mah maintained his Overweight rating on Meridian Bioscience with a $34 price target after the company elected to withdraw its EUA application for its SARS-CoV-2 test on Revogene. He explained how, based on discussions with the FDA, Meridian intends to conduct a new clinical validation study from now to the end of March.
Mah had conservatively modeled only $500,000 in COVID-19 revenue in the current quarter and $5 million total for fiscal 2021, so his estimates were not greatly affected by the slight downward revisions he thinks he might have to make after this quarter. Mah still expects that COVID-19 testing will be a durable revenue source through 2022.
On February 24, another positive analyst, Yi Chen from H.C. Wainwright, lowered the firm's price target on VIVO to $32 from $34 while reiterating a Buy rating on the shares after the FDA requested additional studies for Revogene EUA resubmission. Chen acknowledged that this temporary setback in EUA application and the commercial launch of Revogene SARS-CoV-2 molecular assay may delay the resumption of growth in the Diagnostics segment.
But, with shares falling back to $21, the analyst felt that overall growth rates in the combined business segments justified a higher valuation for such a small player trading at only 3 times sales.
Ready for Bargains During Corrections
I wrote about VIVO in early January and said it wasn't too late for investors to grab hold of this profit rocket near $20 per share...
"Bottom line on VIVO: I always pay attention to small companies growing their sales rapidly as they could become acquisition targets by larger biopharma or MedTech players. Buying VIVO near $20 offers excellent risk/reward, with or without an M&A suitor."
And then in early Feb, right before the company report, I produced a video and article where I talked about why the COVID-19 testing stocks were under-appreciated given their fantastic growth...
Biotech Bonanza: COVID Launches Science at Warp Speed
Well, we just got another shot at $20 so I hope you were paying better attention than me! Looks like I made this recent vlog more for myself than anyone else...
Meridian Bioscience develops, manufactures, distributes, and sells diagnostic test kits primarily for gastrointestinal and respiratory infectious diseases, and elevated blood lead levels worldwide. The company operates through Diagnostics and Life Science segments. They describe their mission as helping providers make better diagnostic decisions with a focus on gastrointestinal, neonatal, pediatrics, and respiratory conditions.
The Diagnostics segment offers testing platforms, including real-time PCR (polymerase chain reaction) amplification under the Revogene brand; isothermal DNA amplification under the Alethia brand; lateral flow immunoassay using fluorescent chemistry under the Curian brand; rapid immunoassay under the ImmunoCard and ImmunoCard STAT! brands; enzyme-linked immunoassays under the PREMIER brand; anodic stripping voltammetry under the LeadCare and PediaStat brands; and urea breath testing for H. pylori under the BreathID brand.
Diagnostic Players Find New Life Under COVID
I have written often in the past few months of specialized diagnostic companies like Quidel and Hologic as they build new revenue streams from SARS-CoV-2 testing. These revenue streams are likely sustainable as the virus mutates and requires modified tests.
And I recently bought shares of VIVO for the Zacks Healthcare Innovators portfolio because I liked the growth outlook for this small player in a rapidly expanding market for rapid diagnostics -- including coronavirus testing which will continue to be part of our lives for years to come, even with vaccines.
While Meridian Bioscience is a David among diagnostic Goliaths, its long and fascinating history surprised me. From the company website...
In 1977, Bill Motto founded Meridian Bioscience on a $500 investment in his Cincinnati home's basement. Meridian's first product was distributing a rapid fungal test developed by the University of Kentucky. While calling on his hospital and research customers, Bill noticed there was no easy, clean way to transport patient samples. He developed the innovative Para-Pak stool transport system to meet this need.
As the product line grew, so did Meridian's research and development, leading to a breakthrough in 1982 with a 10-minute rapid test for strep throat. Before the Meridian test, doctors would have to wait for two to three days for a culture result. Innovation continued as the company brought several cutting edge diagnostic technologies to market, including a DNA testing platform and first-of-their-kind tests for C. difficile, E. coli, H. pylori amongst others.
The new bottom line on VIVO: I continue to hold the shares and would recommend new positions between $23 and $26 looking for new bull market highs above $32 by June.
Disclosure: I own shares of QDEL, HOLX, NVAX and VIVO for the Zacks Healthcare Innovators portfolio.
Are you ready for the bear case for gold and gold mining stocks? While I would love to pick on all the gold-digging dreamers, I found that only two companies in the industry group had a Zacks #5 Rank (Strong Sell) as I write this on Sunday evening: AngloGold Ashanti and Gold Fields.
I went with GFI as the headliner, but it could just as easily have been AU.
Why? Because as you might imagine, since the price of spot gold retreated from new all-time highs above $2,000 hit last August, the earnings momentum of many gold miners also fell back.
And many analyst projections for the diggers into 2022 are looking for a decline in revenues and profits, almost as if their forecast for the price of gold doesn't include a magical trip to $3,000 -- can you imagine?!
Here are 4 important messages I have for gold bulls and their disciples...
1) Yes, the gold miners can and will rally with the yellow metal in big swings over many months. And so there are many great trading opportunities to be had when you catch those momentum swings where the miners catch the tailwinds of the barbarous relic.
But take a look at some monthly charts so you can see that while spot gold just made new ATH (against 2011's $1,900), a LOT of the miners did not make new highs. GFI and AU are prime examples, where their share prices met major resistance at sub-2011 levels near $14 and $34, respectively.
In fact, AU was massively shy of its 2011 highs near $50. Why is that?
Is it because some miners are "over-hedged" where they sold too many forward contracts locking in a lower price for the sale of their gold than we are now seeing?
Yes, this is true for many who are tied to the heavy yellow metal in a rushing river of prospectors.
But there might be other factors keeping the diggers down while the relic rallies. Let's keep exploring...
2) Gold bulls may remember my interview with Maria Bartiromo on CNBC in November of 2009 when gold spiked above $1,100 for the first time ever.
I had looked at gold as a purely monetary phenomenon during the initial stages of QE dollar inflation and concluded that gold could go to at least $2,000 on pure asset perception -- if several central banks and large investment funds viewed the yellow metal as a convertible monetary asset.
My view was based on the unprecedented bond buying from the Fed and how that might affect other central banks who saw their dollar holdings at risk of depreciation.
Over the next 18 months, gold did indeed work its way fairly quickly above $1,900. But then what happened?
What happened was that investors began finding that deflation was here to stay. In fact, Fed QE of zero rates and bond buying might actually be pushing on a string to get inflation to return.
Thus bonds and stocks became more valuable assets than gold. So now let's look at the super-attractor luster of stocks making gold look pale by comparison...
3) Software and Biotech are the New Gold to Clobber Inflation
I've been a gold bear for over 5 years. That means I missed the dramatic rallies in both the metal -- from $1,100 to $2,000 -- and the VanEck Gold Miners ETF from $14 to $44.
But I did not care the whole time as I wasn't actively short metals and miners the whole time. More importantly, I made 5-10X that gold move in Software and Biotech stocks.
In 2017, I wrote one of the most important research reports of my career that I called "The Technology Super Cycle." My goal was to explain why inflation was nonexistent and productivity was "missing in action." My call to action was to buy two industries that were crushing inflation with massive productivity gains unseen in the official gov stats.
If you want a copy of that report just email Ultimate@Zacks.com and tell 'em Cooker sent you.
But I'll give you a quick summary now: I learned a long time ago that you beat inflation by simply having exposure to innovative technology disruptors like Square, NVIDIA and The Trade Desk.
And exposure to innovative biotech/medtech disruptors like CRISPR Therapeutics, Align Technology and Invitae.
4) Gold is Doomed as an Asset Class: Strong words, I know. But hear me out.
You must have already imagined that the exponential power of Software and Biotech earnings power will always trounce the value of a heavy gold bar that you must store and/or transport.
Maybe you saw this vlog from me recently when PayPal made a YUGE statement about Bitcoin...
Now, brace yourself. While #FinTech is a huge threat to gold as an asset class, consider the wild possibility that in the next ten years asteroid miners will find more gold than exists on the earth.
I considered that possibility here in this article and related podcasts from 2019...
That's my take on gold and its diggers. Trade them if you can, but don't bank on them for long-term ways to beat inflation. They never will.
If you need to check your biases and feelings here -- as I always do with investing -- check out the fantastic 2016 film Gold with Matthew McConaughey. There you'll get a glimpse of the 1980s "yellow fever" that is no longer relevant in a digitally exponential world.
Disclosure: I own shares of NVDA, SQ, NVTA, SHOP, CRSP, EDIT, BIDU, and TTD -- but not GLD -- for various portfolios.
Additional content:
3 Highly Ranked Undervalued Stocks
This doesn't seem like a time for value because... well, it's not a time for value. Stocks are right around their highs and likely to move further after the stimulus money takes hold and vaccine rollout continues.
However, if you don't mind a little growth getting mixed in with the value, then Zacks' proven metrics can help you find stocks that are going to really capitalize on this rebound. And you can get them at a great price too.
Our Highly-Ranked Undervalued Stocks screen will pick out some of those names. This tool seeks Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy) stocks with Zacks Value Scores of A or B. It also wants stocks in the top 50% of the Zacks Industry Rank.
Below are three names that recently passed the test. Make sure to click above to see all the stocks that made the list today.
Steel Dynamics
When you're working at home in your pajamas because this pandemic closed everything down, then you probably don't need a pile of steel at the moment. But thankfully we're at the tail end of this unprecedented disruption and looking forward to getting back to normal soon, which explains why Steel Dynamics is enjoying pent-up demand for the commodity that shares its name.
STLD is a leading steel producer and metal recycler. It's one of the most diversified steel companies around, which it enhances through acquisitions (e.g. Heartland & United Steel Supply) and investments (e.g. new plant in Sinton, Texas). It's three segments are Steel Operations (74% of 2020 revenues); Metals Recycling Operations (11%); and Steel Fabrication Operations (9%).
The steel producers space is in the Top 2% of the Zacks Industry Rank, as demand is expected to increase with the economy getting back to work. Shares of STLD are up more than 13% so far this year and about 170% over the past 12 months.
The company reported fourth-quarter earnings per share of 97 cents, which eclipsed the Zacks Consensus Estimate by nearly 13%. The beat marked its fifth straight, amassing an average surprise of more than 9.5% over the last four quarters.
Net sales of $2.6 billion improved 10% year over year and topped the Zacks Consensus Estimate by 4%. Domestic steel production continued to rise through the quarter with the automotive sector seeing the strongest recovery, while the construction sector is also hanging in there.
Looking forward, STLD expects sustained customer demand and pricing strength in 2021. So it's not a surprise that the Zacks Consensus Estimate for this year has soared more than 57% over the past month to $6.25. Expectations for 2022 are currently only $3.08, but that has gained more than 17% in the same amount of time and should continue to improve in a more cooperative environment.
Toll Brothers
This pandemic has really reinforced the importance of the home, which explains why the building products – home builders space is in the top 13% of the Zacks Industry Rank.
If you're finally ready to buy a house... and you can afford it... then you might want to check out the country's leading luxury homebuilder Toll Brothers. Because an open floor plan and a bedroom for each of the kids is so much better when it also comes with a waterfall out by the pool, a screening room with a lavish sports bar and closets with enough space to park a car or two.
Shares of TOL have surged more than 250% over the past 12 months, as people take advantage of historically low interest rates to either upgrade their current residence or buy their first one. A whole new generation of people are coming of age and starting families.
According to TOL, the strong housing market is being driven by a tight supply of homes for sale, favorable demographic trends, low mortgage rates and more appreciation for home ownership.
Such factors led to a strong fiscal first quarter performance, which included earnings per share of 76 cents crushing the Zacks Consensus Estimate by more than 55%. TOL has beaten expectations in each of the last four quarters with an average surprise of 33.6%. Revenues of $1.56 billion surpassed our estimate by 18%.
Both the top and bottom lines also improved year over year by 17.4% and 85.4%, respectively.
Looking forward, TOL now expects deliveries of between 10,000 and 10,400 in fiscal 2021, which is up from earlier expectations of 9,600 to 10,200. The company also raised its quarterly dividend payout by 54% recently.
Earnings estimates have really taken off in the past month. The Zacks Consensus Estimate for this fiscal year (ending October 2021) is up 8.3% in that time to $4.96. Expectations for next fiscal year (ending October 2022) surged 18.2% to $6.49. Therefore, analysts currently expect year-over-year profit growth of more than 30%.
Owens Corning
Since the homebuilders are doing so well right about now, we might as well look at the construction materials space. Guess what... they're doing pretty good too! The building materials – misc space is in the top 39% of the Zacks Industry Rank.
One of the big players in this space is Owens Corning, a world leader in building materials systems and compositive solutions. More specifically, it's a market-leading innovator in glass fiber technology, which is used to support composite materials in all types of applications. It's three reportable segments are roofing (38.2% of total 2020 sales); insulation (37%) and composites (27.8%).
Shares are up nearly 21% so far in 2021 and have soared almost 165% over the past year.
OC enjoyed improved customer demand in most of its end markets during the fourth quarter, which explains why the company has been able to beat the Zacks Consensus Estimate for seven straight reports now.
Earnings per share of $1.90 topped our expectation by more than 36%, while also improving year over year by more than 68%. Over the past four quarters, the company has an impressive average earnings surprise of about 77%.
Net sales of $1.93 billion improved upon the Zacks Consensus Estimate by 6.6% and rose 14% from last year. Results were helped by higher demand for its products, along with a strong manufacturing performance and improved operating efficiencies.
Looking forward, OC expects strength in the U.S. housing market, as well as recovery of commercial and industrial markets. Analysts seem to agree as earnings estimates have moved solidly higher over the past 30 days.
The Zacks Consensus Estimate for this year is up 16.5% in that time to $6.55, while next year has advanced 11.7% to $7.16. Therefore, expectations currently call for year-over-year profit growth of 9.3%.
Bitcoin, Like the Internet Itself, Could Change Everything
Blockchain and cryptocurrency has sparked one of the most exciting discussion topics of a generation. Some call it the "Internet of Money" and predict it could change the way money works forever. If true, it could do to banks what Netflix did to Blockbuster and Amazon did to Sears. Experts agree we're still in the early stages of this technology, and as it grows, it will create several investing opportunities.
Zacks' has just revealed 3 companies that can help investors capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Meridian Bioscience, Gold Fields, Steel Dynamics, Toll Brothers and Owens Corning highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – March 22, 2021 – Zacks Equity Research Shares of Meridian Bioscience, Inc. as the Bull of the Day, Gold Fields Limited (GFI - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Steel Dynamics, Inc. (STLD - Free Report) , Toll Brothers, Inc. (TOL - Free Report) and Owens Corning (OC - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Meridian Bioscience is a $1 billion provider of diagnostic test kits for gastrointestinal and respiratory infectious diseases. The company is expected to grow sales 28.6% this year to $326 million.
And after reporting a strong beat-and-raise quarter in early February, analysts had to boost their EPS estimates for FY21 (ends September) over 30% from $1.24 to $1.66. Since I last wrote about this 55% rise in profits -- and a spike in VIVO shares above $30 -- the company had a bit of a hiccup with an FDA approval of their latest COVID-19 testing kit.
So I wanted to update investors and followers of the company on what's happening. On February 16, Meridian revealed that the FDA requested additional information on the SARS-CoV-2 molecular diagnostic test on its Revogene platform, for which the company was seeking Emergency Use Authorization (EUA).
At the time, Meridian elected to place shipments of the SARS-CoV-2 test kits on hold while it continued to work with the FDA. This news sent shares down sharply over the next two weeks, exacerbated by the broad pullback in Nasdaq and Biotech stocks.
Since I hold VIVO shares in my Healthcare Innovators portfolio for long-term returns, I often take advantage of over-reactions like this in my TAZR trading portfolio, like we did with Novavax this month to capture a 40% gain in just ten trading days, buying under $160 and letting go above $220.
VIVO at $21 Again -- What a Gift!
But I missed the great opportunities in VIVO down at $21. I should have been paying more attention and listening to one of the biggest Street bulls on VIVO and other diagnostic companies, Steven Mah of Piper Sandler, who put the FDA delay in better perspective.
On February 23, Sandler analyst Mah maintained his Overweight rating on Meridian Bioscience with a $34 price target after the company elected to withdraw its EUA application for its SARS-CoV-2 test on Revogene. He explained how, based on discussions with the FDA, Meridian intends to conduct a new clinical validation study from now to the end of March.
Mah had conservatively modeled only $500,000 in COVID-19 revenue in the current quarter and $5 million total for fiscal 2021, so his estimates were not greatly affected by the slight downward revisions he thinks he might have to make after this quarter. Mah still expects that COVID-19 testing will be a durable revenue source through 2022.
On February 24, another positive analyst, Yi Chen from H.C. Wainwright, lowered the firm's price target on VIVO to $32 from $34 while reiterating a Buy rating on the shares after the FDA requested additional studies for Revogene EUA resubmission. Chen acknowledged that this temporary setback in EUA application and the commercial launch of Revogene SARS-CoV-2 molecular assay may delay the resumption of growth in the Diagnostics segment.
But, with shares falling back to $21, the analyst felt that overall growth rates in the combined business segments justified a higher valuation for such a small player trading at only 3 times sales.
Ready for Bargains During Corrections
I wrote about VIVO in early January and said it wasn't too late for investors to grab hold of this profit rocket near $20 per share...
"Bottom line on VIVO: I always pay attention to small companies growing their sales rapidly as they could become acquisition targets by larger biopharma or MedTech players. Buying VIVO near $20 offers excellent risk/reward, with or without an M&A suitor."
And then in early Feb, right before the company report, I produced a video and article where I talked about why the COVID-19 testing stocks were under-appreciated given their fantastic growth...
Biotech Bonanza: COVID Launches Science at Warp Speed
Well, we just got another shot at $20 so I hope you were paying better attention than me! Looks like I made this recent vlog more for myself than anyone else...
Flush Draw: How to Beat the Algos When They Run the Stops
Meridian Under the Microscope
Meridian Bioscience develops, manufactures, distributes, and sells diagnostic test kits primarily for gastrointestinal and respiratory infectious diseases, and elevated blood lead levels worldwide. The company operates through Diagnostics and Life Science segments. They describe their mission as helping providers make better diagnostic decisions with a focus on gastrointestinal, neonatal, pediatrics, and respiratory conditions.
The Diagnostics segment offers testing platforms, including real-time PCR (polymerase chain reaction) amplification under the Revogene brand; isothermal DNA amplification under the Alethia brand; lateral flow immunoassay using fluorescent chemistry under the Curian brand; rapid immunoassay under the ImmunoCard and ImmunoCard STAT! brands; enzyme-linked immunoassays under the PREMIER brand; anodic stripping voltammetry under the LeadCare and PediaStat brands; and urea breath testing for H. pylori under the BreathID brand.
Diagnostic Players Find New Life Under COVID
I have written often in the past few months of specialized diagnostic companies like Quidel and Hologic as they build new revenue streams from SARS-CoV-2 testing. These revenue streams are likely sustainable as the virus mutates and requires modified tests.
And I recently bought shares of VIVO for the Zacks Healthcare Innovators portfolio because I liked the growth outlook for this small player in a rapidly expanding market for rapid diagnostics -- including coronavirus testing which will continue to be part of our lives for years to come, even with vaccines.
While Meridian Bioscience is a David among diagnostic Goliaths, its long and fascinating history surprised me. From the company website...
In 1977, Bill Motto founded Meridian Bioscience on a $500 investment in his Cincinnati home's basement. Meridian's first product was distributing a rapid fungal test developed by the University of Kentucky. While calling on his hospital and research customers, Bill noticed there was no easy, clean way to transport patient samples. He developed the innovative Para-Pak stool transport system to meet this need.
As the product line grew, so did Meridian's research and development, leading to a breakthrough in 1982 with a 10-minute rapid test for strep throat. Before the Meridian test, doctors would have to wait for two to three days for a culture result. Innovation continued as the company brought several cutting edge diagnostic technologies to market, including a DNA testing platform and first-of-their-kind tests for C. difficile, E. coli, H. pylori amongst others.
The new bottom line on VIVO: I continue to hold the shares and would recommend new positions between $23 and $26 looking for new bull market highs above $32 by June.
Disclosure: I own shares of QDEL, HOLX, NVAX and VIVO for the Zacks Healthcare Innovators portfolio.
Bear of the Day:
Are you ready for the bear case for gold and gold mining stocks? While I would love to pick on all the gold-digging dreamers, I found that only two companies in the industry group had a Zacks #5 Rank (Strong Sell) as I write this on Sunday evening: AngloGold Ashanti and Gold Fields.
I went with GFI as the headliner, but it could just as easily have been AU.
Why? Because as you might imagine, since the price of spot gold retreated from new all-time highs above $2,000 hit last August, the earnings momentum of many gold miners also fell back.
And many analyst projections for the diggers into 2022 are looking for a decline in revenues and profits, almost as if their forecast for the price of gold doesn't include a magical trip to $3,000 -- can you imagine?!
Here are 4 important messages I have for gold bulls and their disciples...
1) Yes, the gold miners can and will rally with the yellow metal in big swings over many months. And so there are many great trading opportunities to be had when you catch those momentum swings where the miners catch the tailwinds of the barbarous relic.
But take a look at some monthly charts so you can see that while spot gold just made new ATH (against 2011's $1,900), a LOT of the miners did not make new highs. GFI and AU are prime examples, where their share prices met major resistance at sub-2011 levels near $14 and $34, respectively.
In fact, AU was massively shy of its 2011 highs near $50. Why is that?
Is it because some miners are "over-hedged" where they sold too many forward contracts locking in a lower price for the sale of their gold than we are now seeing?
Yes, this is true for many who are tied to the heavy yellow metal in a rushing river of prospectors.
But there might be other factors keeping the diggers down while the relic rallies. Let's keep exploring...
2) Gold bulls may remember my interview with Maria Bartiromo on CNBC in November of 2009 when gold spiked above $1,100 for the first time ever.
I had looked at gold as a purely monetary phenomenon during the initial stages of QE dollar inflation and concluded that gold could go to at least $2,000 on pure asset perception -- if several central banks and large investment funds viewed the yellow metal as a convertible monetary asset.
My view was based on the unprecedented bond buying from the Fed and how that might affect other central banks who saw their dollar holdings at risk of depreciation.
Over the next 18 months, gold did indeed work its way fairly quickly above $1,900. But then what happened?
What happened was that investors began finding that deflation was here to stay. In fact, Fed QE of zero rates and bond buying might actually be pushing on a string to get inflation to return.
Thus bonds and stocks became more valuable assets than gold. So now let's look at the super-attractor luster of stocks making gold look pale by comparison...
3) Software and Biotech are the New Gold to Clobber Inflation
I've been a gold bear for over 5 years. That means I missed the dramatic rallies in both the metal -- from $1,100 to $2,000 -- and the VanEck Gold Miners ETF from $14 to $44.
But I did not care the whole time as I wasn't actively short metals and miners the whole time. More importantly, I made 5-10X that gold move in Software and Biotech stocks.
In 2017, I wrote one of the most important research reports of my career that I called "The Technology Super Cycle." My goal was to explain why inflation was nonexistent and productivity was "missing in action." My call to action was to buy two industries that were crushing inflation with massive productivity gains unseen in the official gov stats.
If you want a copy of that report just email Ultimate@Zacks.com and tell 'em Cooker sent you.
But I'll give you a quick summary now: I learned a long time ago that you beat inflation by simply having exposure to innovative technology disruptors like Square, NVIDIA and The Trade Desk.
And exposure to innovative biotech/medtech disruptors like CRISPR Therapeutics, Align Technology and Invitae.
4) Gold is Doomed as an Asset Class: Strong words, I know. But hear me out.
You must have already imagined that the exponential power of Software and Biotech earnings power will always trounce the value of a heavy gold bar that you must store and/or transport.
Maybe you saw this vlog from me recently when PayPal made a YUGE statement about Bitcoin...
Digital Gold: PayPal, Square, and the Fed Send Bitcoin Soaring
Now, brace yourself. While #FinTech is a huge threat to gold as an asset class, consider the wild possibility that in the next ten years asteroid miners will find more gold than exists on the earth.
I considered that possibility here in this article and related podcasts from 2019...
Why Gold is Headed to Zero -- And What You Should Buy Instead
That's my take on gold and its diggers. Trade them if you can, but don't bank on them for long-term ways to beat inflation. They never will.
If you need to check your biases and feelings here -- as I always do with investing -- check out the fantastic 2016 film Gold with Matthew McConaughey. There you'll get a glimpse of the 1980s "yellow fever" that is no longer relevant in a digitally exponential world.
Disclosure: I own shares of NVDA, SQ, NVTA, SHOP, CRSP, EDIT, BIDU, and TTD -- but not GLD -- for various portfolios.
Additional content:
3 Highly Ranked Undervalued Stocks
This doesn't seem like a time for value because... well, it's not a time for value. Stocks are right around their highs and likely to move further after the stimulus money takes hold and vaccine rollout continues.
However, if you don't mind a little growth getting mixed in with the value, then Zacks' proven metrics can help you find stocks that are going to really capitalize on this rebound. And you can get them at a great price too.
Our Highly-Ranked Undervalued Stocks screen will pick out some of those names. This tool seeks Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy) stocks with Zacks Value Scores of A or B. It also wants stocks in the top 50% of the Zacks Industry Rank.
Below are three names that recently passed the test. Make sure to click above to see all the stocks that made the list today.
Steel Dynamics
When you're working at home in your pajamas because this pandemic closed everything down, then you probably don't need a pile of steel at the moment. But thankfully we're at the tail end of this unprecedented disruption and looking forward to getting back to normal soon, which explains why Steel Dynamics is enjoying pent-up demand for the commodity that shares its name.
STLD is a leading steel producer and metal recycler. It's one of the most diversified steel companies around, which it enhances through acquisitions (e.g. Heartland & United Steel Supply) and investments (e.g. new plant in Sinton, Texas). It's three segments are Steel Operations (74% of 2020 revenues); Metals Recycling Operations (11%); and Steel Fabrication Operations (9%).
The steel producers space is in the Top 2% of the Zacks Industry Rank, as demand is expected to increase with the economy getting back to work. Shares of STLD are up more than 13% so far this year and about 170% over the past 12 months.
The company reported fourth-quarter earnings per share of 97 cents, which eclipsed the Zacks Consensus Estimate by nearly 13%. The beat marked its fifth straight, amassing an average surprise of more than 9.5% over the last four quarters.
Net sales of $2.6 billion improved 10% year over year and topped the Zacks Consensus Estimate by 4%. Domestic steel production continued to rise through the quarter with the automotive sector seeing the strongest recovery, while the construction sector is also hanging in there.
Looking forward, STLD expects sustained customer demand and pricing strength in 2021. So it's not a surprise that the Zacks Consensus Estimate for this year has soared more than 57% over the past month to $6.25. Expectations for 2022 are currently only $3.08, but that has gained more than 17% in the same amount of time and should continue to improve in a more cooperative environment.
Toll Brothers
This pandemic has really reinforced the importance of the home, which explains why the building products – home builders space is in the top 13% of the Zacks Industry Rank.
If you're finally ready to buy a house... and you can afford it... then you might want to check out the country's leading luxury homebuilder Toll Brothers. Because an open floor plan and a bedroom for each of the kids is so much better when it also comes with a waterfall out by the pool, a screening room with a lavish sports bar and closets with enough space to park a car or two.
Shares of TOL have surged more than 250% over the past 12 months, as people take advantage of historically low interest rates to either upgrade their current residence or buy their first one. A whole new generation of people are coming of age and starting families.
According to TOL, the strong housing market is being driven by a tight supply of homes for sale, favorable demographic trends, low mortgage rates and more appreciation for home ownership.
Such factors led to a strong fiscal first quarter performance, which included earnings per share of 76 cents crushing the Zacks Consensus Estimate by more than 55%. TOL has beaten expectations in each of the last four quarters with an average surprise of 33.6%. Revenues of $1.56 billion surpassed our estimate by 18%.
Both the top and bottom lines also improved year over year by 17.4% and 85.4%, respectively.
Looking forward, TOL now expects deliveries of between 10,000 and 10,400 in fiscal 2021, which is up from earlier expectations of 9,600 to 10,200. The company also raised its quarterly dividend payout by 54% recently.
Earnings estimates have really taken off in the past month. The Zacks Consensus Estimate for this fiscal year (ending October 2021) is up 8.3% in that time to $4.96. Expectations for next fiscal year (ending October 2022) surged 18.2% to $6.49. Therefore, analysts currently expect year-over-year profit growth of more than 30%.
Owens Corning
Since the homebuilders are doing so well right about now, we might as well look at the construction materials space. Guess what... they're doing pretty good too! The building materials – misc space is in the top 39% of the Zacks Industry Rank.
One of the big players in this space is Owens Corning, a world leader in building materials systems and compositive solutions. More specifically, it's a market-leading innovator in glass fiber technology, which is used to support composite materials in all types of applications. It's three reportable segments are roofing (38.2% of total 2020 sales); insulation (37%) and composites (27.8%).
Shares are up nearly 21% so far in 2021 and have soared almost 165% over the past year.
OC enjoyed improved customer demand in most of its end markets during the fourth quarter, which explains why the company has been able to beat the Zacks Consensus Estimate for seven straight reports now.
Earnings per share of $1.90 topped our expectation by more than 36%, while also improving year over year by more than 68%. Over the past four quarters, the company has an impressive average earnings surprise of about 77%.
Net sales of $1.93 billion improved upon the Zacks Consensus Estimate by 6.6% and rose 14% from last year. Results were helped by higher demand for its products, along with a strong manufacturing performance and improved operating efficiencies.
Looking forward, OC expects strength in the U.S. housing market, as well as recovery of commercial and industrial markets. Analysts seem to agree as earnings estimates have moved solidly higher over the past 30 days.
The Zacks Consensus Estimate for this year is up 16.5% in that time to $6.55, while next year has advanced 11.7% to $7.16. Therefore, expectations currently call for year-over-year profit growth of 9.3%.
Bitcoin, Like the Internet Itself, Could Change Everything
Blockchain and cryptocurrency has sparked one of the most exciting discussion topics of a generation. Some call it the "Internet of Money" and predict it could change the way money works forever. If true, it could do to banks what Netflix did to Blockbuster and Amazon did to Sears. Experts agree we're still in the early stages of this technology, and as it grows, it will create several investing opportunities.
Zacks' has just revealed 3 companies that can help investors capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly.
See 3 crypto-related stocks now >>
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com
https://www.zacks.com
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.