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Weekly Market Review: Ending the Quarter on a Positive Note

U.S. stocks rebounded more than 2% across the board last week, returning to record highs. Energy and Financial names led the way higher, buoyed by the outlook for a continued cyclical recovery in the second half of 2021.

Bank stocks benefited from a strong showing in the Fed’s latest stress test on Thursday. President Biden also unveiled a $1.2 trillion infrastructure bill Thursday, meant to represent a bipartisan compromise.

In economic action, the preliminary June PMI readings on Wednesday showed an uptick in U.S. manufacturing activity, while the services industry declined sequentially.

The core May PCE price index was also reported on Friday, showing 3.4% year-over-year growth. Earlier in the week, Jerome Powell confirmed on Capitol Hill that the Federal Reserve is not significantly concerned about rising inflationary pressures for the time being.

The Week Ahead

The second quarter comes to a close on Wednesday. Micron (MU) and Walgreen Boots Alliance (WBA) headline a relatively quiet earnings calendar next week.

On the economic front, we’ll get the June reading of Consumer Confidence Tuesday, followed by the ISM Manufacturing index Thursday.

The big news will be the June jobs data on Friday. Economists are calling for the addition of 675,000 non-farm payrolls in the month and for the headline unemployment rate to tick down to 5.7%.

Following the snap-back recovery in stocks last year from Pandemic lows, we believe that investment gains will be harder to come by in 2021.

As a result, deciding what and when to buy can be challenging for any investor.

However, the fact remains that attractive investments are out there, if you’re willing to dig a little deeper.

One such Energy name is worth a closer look and is our Stock of the Week.

Stock of the Week: Matador Resources (MTDR)

The company explores and produces energy commodities, focusing on oil and natural gas shale in the Delaware Basin.

The stock gained nearly 17% last week and we believe this outperformance can continue into the second half of 2021.

Here’s why:

Matador is leveraged to rising commodity prices, which was apparent when management posted quarterly results in April that surpassed expectations.

The company earned $0.71 a share in the first quarter, as revenue fell 28% from a year ago, to $266.8 million.

Production fell 11% sequentially in the period; however, oil and natural gas prices were 39% and 98% higher, respectively. This allowed Matador to post record oil and natural gas revenue and earnings before interest, taxes, depreciation and amortization (EBITDA) in the quarter.

The company is putting its cash flow to good work, as management paid down $100 million of borrowing from its credit line in the first quarter. Matador also initiated a quarterly dividend of $0.025 a share (0.3% yield) in February.

Management is targeting double-digit oil and natural gas production growth this year. The company also generates about 20% of its revenue from a steady midstream operation and the consensus analyst estimates call for Matador to generate 91.1% annual profit growth over the next three years.

In the meantime, the company appears inexpensive at just 12.8x expected full-year earnings of $2.89 a share, which is a discount to the broader market.

It’s additionally worth noting that Matador carries a Smart Score of 9/10 on TipRanks. This proprietary score utilizes Big Data to rank stocks based on 8 key factors that have historically been a precursor of future outperformance.

On top of the positive aspects mentioned already, the Smart Score indicates that shares have seen insider buying, in addition to improving sentiment from analysts, investors and financial bloggers.

FYI: This is just 1 of the 20+ stocks selected for the Smart Investor portfolio. That’s where we share more detailed insights on our weekly stock picks.

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