Let’s talk about what it takes to build a successful portfolio. At bottom, there’s really only one thing investors need to do – and that’s buy into the right stocks. Get the right stocks in the portfolio, and it will be primed for success no matter what.
Of course, recognizing those right stocks is the trick. But modern data analytics can come to the rescue, in the form of the TipRanks Smart Score. This AI-powered algorithm collects and collates the reams of data generated by the stock market, and puts it into a usable format. Remember, there are thousands of listed companies and thousands of traders dealing in their shares, and tens of millions of daily trades, so this is no light task.
The usable format is a simple score, on a scale of 1 to 10, rating every stock in comparison to a set of factors that have been shown to match up with future outperformance. The Smart Score shows each stock’s likely path forward – and the ‘Perfect 10’ means that this is a stock that is ticking all the right boxes, and deserves some extra attention from investors.
So let’s give a couple of Perfect 10s the attention they deserve. These are both Strong Buy stocks, according to the TipRanks data, with some recent love from the Wall Street analysts. Here are the details.
TETRA Technologies (TTI)
First up is TETRA technologies, a services and solutions company in the energy industry. Specifically, what TETRA does is provide water and fluid management solutions for companies operating in the oil patch. TETRA can work with calcium chloride, completion fluids, frac flowback, and water management, providing oil and gas extraction firms with the expertise needed to capture, retain, and properly reuse or dispose of these fluids. The company is also developing the expertise and products needed to deal with the fluids and chemicals used in building and operating large-scale batteries and energy storage devices.
From its headquarters in Texas, TETRA operates in two main divisions. Completion Fluids and Products handles primarily the manufacture and marketing of clear brine fluids, additives, and associated products and services to the energy extraction industry for use in well drilling, completion and workover ops, with a focus in the US and some Latin American, European, Asian, and African countries. The company’s Water and Flowback Services division offers comprehensive water management services to oil and gas operators. This division also provides services to support fracking operations, including frac flowback, production well testing, and offshore rig cooling.
While there are strong political and social pressures boosting a ‘green’ energy economy, the fact is that the world still runs on fossil fuels – and that makes companies like TETRA indispensable. The firm leveraged this basic fact to generate company-record revenues in 2Q23, its last reported quarter, with a top line of $175.5 million, up 25% year-over-year and 20% quarter-over-quarter – and beating the forecast by $2.93 million. At the bottom line, the company’s non-GAAP adjusted EPS of 13 cents per share was nearly triple the 5 cents reported in 2Q22, more than 4x higher than the 3 cents from 1Q23, and was 4 cents ahead of the estimates. Also of note, TETRA’s adjusted free cash flow grew from $6.42 million in the prior-year quarter to $17.71 million in the current report.
For Benchmark analyst Kurt Hallead, TETRA is an essential business in a vital industry, setting it up for steady work: “TTI is a leading player in the treatment and recycling of water produced from oil and gas operations in the US. This is a substantial market with 24bn gallons of water that needs to be treated annually. The primary driver of this business is US frac activity which is poised for a cyclical rebound in 2024.”
Hallead goes on to explain just why TETRA should continue to post gains going forward, writing, “This business in in a strong position to benefit from growth in deepwater drilling through the end of the decade. TTI has 30% share in the high value completion fluids market and a joint marketing agreement with Halliburton for its high margin CS Neptune product that is used in deep, high pressure offshore wells.”
Quantifying his stance, the 5-star analyst rates TETRA’s shares as a Buy, and his $8 price target implies a one-year upside potential of 42%. (To watch Hallead’s track record, click here)
TETRA boasts a Strong Buy consensus rating from the Street, based on 3 unanimously positive reviews. The shares are selling for $5.64 and the average price target, at $8, matches Hallead’s objective. (See TTI stock forecast)
Novo Nordisk (NVO)
The second stock we’ll look at, Novo Nordisk, is a Danish-based biopharmaceutical firm with a focus on the treatment of diabetes and its complications. The company operates mainly at the commercial stage, and has a large portfolio of medications approved and on the market. The largest category of approved meds is in the treatment of diabetes, where the company has a line-up of 20 different drugs available. Supplementing this array, Novo Nordisk also produces and markets anti-obesity drugs, hemophilia medications, growth disorder medications, and several hormone replacement therapies.
The company’s share value has been on the rise this year, up by 36% year-to-date, buoyed by positive developments in the pipeline. The stock jumped in August, when the company announced results from its SELECT clinical trial, a Phase 3 study of semaglutide as a preventative for major adverse cardiac events. The study followed more than 17,000 patients ages 45 and up with diagnosed histories of obesity and cardiovascular disease, and no prior history of diabetes. The results announced were strongly positive, showing a ‘statistically significant and superior reduction’ in the targeted cardiac events.
Elsewhere, also in August, Novo Nordisk announced it had entered into an agreement to acquire the private biosciences firm Inversago. The proposed deal is worth up to US$1.075 billion in cash, and would bring Inversago’s line-up of obesity, diabetes, and metabolic disease medications under NVO’s umbrella.
In August, the company also released its Q2 financial results, which showed a top line of DKK 54.3 billion ($7.71 billion), amounting to a 31.6% yoy increase, and a bottom line EPS of DKK 8.63 ($1.23). The company expects its full-year growth for sales to between 27%–33% on a forex-adjusted basis.
5-star analyst John Eade, of Argus, is impressed here, noting the company’s strong growth and continued ability to generate profits. He writes, “Novo Nordisk has a record of impressive growth and profitability. Over the past five years, the company has generated 35% compound annual growth in sales, 58% growth in operating profit, and 65% growth in net profit. It has also increased its dividend at an 11% compound annual rate. The operating margin over the past five years has averaged 42.5%, while ROIC has averaged 88%.”
Of the stock’s forward path, Eade goes on to say, “NVO shares have been in a bullish pattern of higher highs and higher lows since September 2022. On valuation, the shares trade at a premium to the Big Pharma peer group, which we think is warranted given the company’s strong track record and growth outlook.”
Eade’s outlook is summed up by his Buy rating, and by the $110 price target that suggests an upside potential of 19% in the next 12 months. (To watch Eade’s track record, click here)
Once again, we’re looking at a stock with a Strong Buy consensus rating that is based on 3 unanimous positive reviews. Boosted by a colleague’s very bullish take, the average price target of $162 implies a gain of 80% over the next year. (See NVO stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a 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.
