U.S. stocks fell across the board Friday, capping off a weekly loss of more than 1%. Financial names led the way lower, while the Energy sector continued to rally.
Energy benefited from higher crude oil prices. Last week ended at $115 a barrel, as the battle between Russia and Ukraine waged on. Elsewhere, investors bought U.S. treasury bonds, pushing the yield on the benchmark 10-year note to 1.74%.
In economic action, the Institute for Supply Management (ISM) said Tuesday that U.S. manufacturing activity increased in February. Two days later, ISM had an equally negative report for the services sector.
The U.S. also posted solid February jobs data on Friday. The economy added 678,000 non-farm payrolls, while the headline unemployment rate fell to 3.8%.
Strong employment data, coupled with rising inflationary pressures, has led investors to price in several interest rate hikes for 2022. The next key Federal Reserve decision is scheduled for March 16.
The Week Ahead
Ciena (CIEN) and Oracle (ORCL) highlight a relatively quiet earnings calendar this week.
On the economic front, inflation will be the key focus in the coming week. On Thursday, the U.S. Bureau of Labor Statistics will release February consumer prices (CPI). The following day, the University of Michigan will release the preliminary March consumer sentiment survey, which also contains an important inflation component.
Following the snap-back recovery in stocks over the past several quarters from Pandemic lows, we believe that investment gains will be harder to come by in 2022, given a slowing growth outlook and the prospect of higher interest rates. 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 Commodity name is worth a closer look and is our Stock of the Week.
Stock of the Week: Teck Resources (TECK)
The company mines for steelmaking coal, copper, zinc, and other commodities.
The stock gained more than 12% last week. We believe this outperformance can continue in the first half of 2022. Here’s why:
We view Teck as a natural hedge to rising inflationary pressures. Its earnings power was on display last month when management delivered solid quarterly results.
The company earned $1.98 a share in the fourth quarter of 2021, exceeding the consensus analyst estimate. Revenue also grew 70% from a year ago and upside in the period was driven by higher prices for coal and copper.
Teck generated nearly $5 billion of operating cash flow last year and has pledged to return some to investors. Management said last month that it will buy back $100 million worth of shares annually.
The company also boosted its quarterly dividend by 150% (0.9% yield) and will pay out a special dividend at the end of the month.
Despite the solid results, Teck is currently valued at just 6.1x expected earnings over the next four quarters. This represents a steep discount to the broader market.
In the meantime, the stock carries a Smart Score of 10/10 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 improving sentiment from analysts, hedge funds, financial bloggers, and individual investors.
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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