The best-undiscovered stocks or hidden gems are often companies that aren’t covered by many analysts or don’t have a significant average daily volume. Some of the best prospects don’t always come from the S&P 500 (SPX). Often, it’s the smaller, mid-cap stocks that provide some of the best opportunities.
As a result, I’ll be looking for stocks from the S&P MidCap 400, whose market capitalizations range from $4.6 billion to $12.7 billion. They’ll also be covered by less than 10 analysts and be rated overweight or higher by those analysts.
Year-to-date, the S&P MidCap 400 is up 1.4%, considerably less than the 8.2% return for the S&P 500 but ahead of the S&P SmallCap 600, down nearly 2% year-to-date. Midcaps often fall between the performance of the two indexes, so the results so far in 2023 aren’t all that surprising.
My stock screen produced 21 possible hidden-gem stocks to buy now. All of them are overlooked, making them the best hidden gem stocks to buy now.
1. Marriott Vacations Worldwide (NYSE:VAC)
Marriott Vacations International is the best-known of the three names on my list. It was spun off from Marriott International (NASDAQ:MAR) in 2011. It operates and sells timeshare investments at more than 120 resorts worldwide.
According to its Q1-2023 presentation, there are more than 700,000 owner families and approximately 1.6 million Interval International members who can exchange their timeshare stays for a Marriott Vacation resort stay and vice versa.
Before it was spun off, it had just three resort brands. Now, it has seven resorts generating significant free cash flow. In 2023, it expects to generate at least $600 million in adjusted free cash flow.
In the U.S., the addressable market is approximately 43 million households with a median annual income of $125,000 and a median net worth of $1.5 million. As a result, it has significant upside potential. In addition, approximately 85% of its timeshare sales are from guests at its resorts, significantly reducing customer acquisition costs.
Based on its $4.8 billion market cap, it has a free cash flow yield of 12.5%. Anything above 8% is in value territory.
What is the Price Target for VAC Stock?
On TipRanks, VAC stock comes in as a Strong Buy based on five unanimous Buy ratings assigned in the past three months. The average VAC stock price target of $195.40 implies 51.3% upside potential.
2. Inari Medical (NASDAQ:NARI)
Inari manufactures FlowTriever, a minimally-invasive thrombectomy device that lowers the mortality risk from 6.5% for standard treatments, such as blood thinners, down to less than 1%. The Food and Drug Administration (FDA) first approved the company’s product to treat pulmonary embolism in May 2018.
“The FlowTriever System is an exciting advancement in the treatment of acute pulmonary embolism patients,” stated Wissam Jaber, MD, Emory University Hospital and FLARE Clinical Study Investigator.
In Q1 2023, the company generated $116.2 million in revenue, 7.8% sequentially higher than Q4 2022 and 33.9% higher than a year earlier. Its net loss in the first quarter was $2.22 million, 29% lower than $3.13 million in Q1 2022. It finished the first quarter with no long-term debt and more than $328 million in cash. It expects $483 million in revenue in 2023 at the midpoint of its guidance. That’s 74% higher than in 2022.
Trading for less than 10x sales, FlowTriever’s long-term prospects make NARI stock a growth and value play.
What is the Price Target for NARI Stock?
On TipRanks, NARI stock earns a Strong Buy consensus rating based on four Buys and one Hold rating assigned in the past three months. The average NARI stock price target of $195.40 implies 21.8% upside potential.
3. Crane NXT (NYSE:CXT)
NXT stock is up over 40% year-to-date. It is a former subsidiary of Crane Co. (NYSE:CR), a Connecticut-based industrial products company. In April, it separated its Payment and Merchandising Technologies business.
The separation was first announced in March 2022. Crane Currency’s (part of Crane NXT) products help other businesses protect currency and other high-value products. It also provides technology solutions to authenticate payment transactions through Crane Payment Innovations.
Together, they generated $1.33 billion in sales last year with adjusted operating margins of 28%. Its core businesses have an addressable market of $7 billion, with adjacent markets worth an additional $21 billion. Between 2023 and 2027, it plans to use nearly 90% of its operating cash flow for mergers and acquisitions.
In 2020, its free cash flow was $110 million. In 2022, it had grown to $275 million, or more than double over just two years. In the future, it expects to convert about 100% of its operating cash flow to free cash flow.
What is the Price Target for CXT Stock?
Four analysts cover CXT stock, and three rate it a Buy, giving it a Strong Buy rating. The average CXT stock price target is $111.25, 122.46% higher than where it’s currently trading.
All in all, CXT looks like an excellent spinoff Buy.