As fears of recession and the prospect of more aggressive interest rate rises become the talk of the town, investors are turning to Wall Street experts for guidance, namely Leon Cooperman.
Cooperman built his $2.5 billion fortune after founding Omega Advisors, which he now runs as a family office. Cooperman is mostly retired today, but he keeps his fingers on the pulse of the market. And now, he finds that in the midst of weakness, stocks may show the strongest signs of life.
Explaining his stance, Cooperman writes: “I’d rather be in a common stock than I would be in a bond any day of the week, given the relative price of bonds versus equities.” Cooperman goes onto explain that inflation is running at nearly triple the rate of bond returns, resulting in a negative real yield. “It makes no sense, and that makes everything in the stock market look attractive.”
Against this backdrop, Wall Street’s analysts are starting to cut through all the noise, by pointing out their top picks, the stocks they see as best positioned for the second half of 2022.
So let’s see what stocks the analysts are choosing. Using the TipRanks platform, we’ve pulled up details on two equities that have been tapped as ‘top picks’ going into 2H22. Both are Strong Buys, with plenty of potential upside on tap.
Verve Therapeutics (VERV)
Let’s start in the field of cardiovascular health, with a pre-clinical stage biotech company, Verve Therapeutics. This medical research aims to mitigate one of the leading causes of premature death worldwide. Verve is using gene editing to develop a line of once-and-done therapeutic agents with the potential to transform the treatment of coronary heart disease. The company has two drug candidates under development, VERVE-101 and ANGPTL3.
VERVE-101 is a potential treatment for the genetic mutation HeFH, which has been associated causally with high low-density lipid (LDL-C) levels in patients. This condition eventually leads to arterial blockage, the main cause of heart attacks and strokes. VERVE-101 is designed to act as in in vivo liver gene editing treatment, delivering a new copy of the mutated gene into the body, where it can propagate through patient’s genetic material. The drug candidate targets the PCSK9 gene, to result in a life-long lowering of LDL-C levels in the blood. So far, the early pre-clinical results have been encouraging, and the company announced today that the Phase 1b trial is currently underway and enrolling patients in New Zealand.
On the second track, Verve is developing a new drug candidate to target the ANGPTL3 gene. This gene influences the body’s ability to regulate cholesterol and triglycerides, and targeting ANGPTL3 is a promising pathway for the treatment of hyperlipidemia. Verve’s plan for this path is to target the HoFH and HeFH mutations, using an action similar to that for VERVE-101. This track is still at a very early stage, however.
Among the fans is BMO analyst Kostas Biliouris describes the stock as a Top Pick. Backing that, he writes: “Our thesis as top pick is based on: (1) Verve’s differentiated gene editing approach that preclinically demonstrates robust efficacy while its mechanism appears safer than first-gen approaches; (2) Verve’s data that are called ‘too good to be true’ by KOLs and supported by top-notch literature; (3) World-class leadership… and (4) Promising pipeline programs that constitute potential multi-billion dollar commercial opportunities in highly prevalent cardiovascular indications.”
Given that, it should come as no surprise that the BMO analyst rates VERV an Outperform (i.e. Buy), and sets a $48 price target to suggest a one-year upside of 132%. (To watch Biliouris’ track record, click here)
With its unanimous Strong Buy consensus rating, based on 5 positive analyst reviews from the last few weeks, it’s clear that VERV shares have gotten the thumbs up from Wall Street. The stock is selling for $20.66 and its $61 average price target implies a robust 195% upside for the year ahead. (See VERV stock forecast on TipRanks)
The second ‘analyst top pick’ we’ll look at is SunOpta, a food service company with a twist: SunOpta produces, distributes, and markets a range of nutritious snacks, beverages, and additives, all based on plants. SunOpta has lines of fruit products, including fruit snacks and frozen fruits, along with a full line of plant-based beverages like oat milk, soy milk, and almond milk. The same plant-base is used in lines of food ingredients, broths and stocks, and sunflower and roasted snacks. SunOpta moves its products to market through a variety of routes, that include food service providers, co-manufacturing distribution, and private label marketing.
SunOpta saw flat revenues from the end of 2020 through all of last year, but in Q1 of this year the company began to see an increase. The recent 1Q22 report showed a top line of $240.2 million, up ~15% year-over-year. On a sequential basis, from Q4 into Q1, that top line was up 175%, and the company’s gross profit was up 52%. Adjusted EPS came in at 1 cent per diluted share; this was low, but in-line with recent quarters.
The positive results in Q1 were powered by gains in the two main segments, Plant-based Foods and Beverages and Fruit-based Foods and Beverages. The first saw 13.4% year-over-year growth, and the second saw a stronger 18.7% growth. Going forward, SunOpta is guiding toward full-year consolidated 2022 revenue of $890 million to $930 million. This would represent a strong increase from the $812 million achieved last year.
Brian Holland, analyzing this stock for Cowen, sees SunOpta in a fundamentally sound position, and explains why: “The company supplies picks & shovels across several attractive, high growth categories which generally lack vertical integration. Given the company’s recent considerable investments and lack thereof among direct & indirect competitors, strong service levels, and sticky / expanding customer base, aside from execution and macro forces we find management’s targets very credible.”
With ‘credible’ targets and a path toward success, SunOpta earns an Outperform (i.e. Buy) rating from Holland, who also sets a $14 price target and puts the stock on his firm’s ‘Top Picks’ list. At current levels, this indicates room for ~57% growth ahead. (To watch Holland’s track record, click here)
SunOpta shares must have impressed Wall Street generally, because all 5 recent reviews are positive, for a unanimous Strong Buy consensus rating. The stock is currently trading for $8.90 and its $13.60 average price target suggests ~52% 12-month upside potential. (See STKL stock forecast on TipRanks)
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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.