Since February 19, stock markets have been falling, with the series of roller coaster sessions leaving investors reeling. In the last two weeks, markets fell in six out of ten trading sessions, and the drops were larger than the gains. The S&P 500 finished Friday’s trading session down by 4.4%, and hit a three-year low.
Falling markets, however difficult they may be for traders’ portfolio values and companies’ market caps, can be accommodated. Investors can get used to lower stock prices, or can switch to bearish strategies to cope. The bigger question now is, will the economy as a whole get pushed into a recession, and if so, how long will it last?
These questions are urgent. Goldman Sachs is sounding a red alert, warning of a possible 24% contraction in the US economy for Q2 2020. Not every business sector lends itself to remote work, and those workers don’t have the opportunity now to go out and spend – while the services supported and provided by ‘nonessential workers’ are shutting down. Coronavirus may not be a particularly dangerous disease for everyone, but it’s clearly having an enormous impact.
Impact, however, does not have to mean irreparable damage. You can rescue your portfolio, with some judicious stock choices. We’ve used the TipRanks Insiders’ Hot Stocks tool to find out which stocks the market’s insiders are snapping up, with a view to the long-term and the post-coronavirus recovery. Here are three of their favorite choices.
FedEx Corporation (FDX)
Government-ordered shutdowns and quarantines are hurting FedEx for the obvious reasons. The shipping company is seeing less business – stores are ordering less stock, people facing layoffs are placing fewer online orders. As manufacturing begins to return in Asia, conditions are worsening in Europe. Uncertainty is the word of the day for FedEx.
The company’s fiscal Q3 report, covering the period ending February 29, showed a miss on earnings. The $1.41 reported was 5.4% below the $1.49 expected, and less than half the $3.03 shown in the year-ago quarter. Revenues did better, as the $17.5 billion reported was up 2.8% from the year before. The strong revenues reassured investors, and the stock gained after the report; nevertheless, FDX shares are down 27% so far this year.
On a positive note, FDX has kept its 18-year record of reliable dividend payments. The company maintained its 65-cent quarterly payment, announced on March 6 and due out on April 1. The annualized payment of $2.60 gives a yield of 2.34%, higher than the ~2% average among S&P listed peer companies – and far higher than bond yields.
Additionally, at least one insider is bullish on FDX. Board of Directors member John Edwardson has been snapping up shares for the last six months – and his most recent purchase, just last week, was significant to say the least– he shelled out $560,200 for 5,000 shares. This brings his total holding in FedEx to more than 82,000 shares, worth over $9 million. Clearly, Edwardson sees the advantages outweighing the negatives here.
Some of Wall Street’s top analysts would agree. Writing for Cowen, 5-star analyst Helane Becker sees long-term benefits for FedEx: “Social distancing is accelerating the growth of ecommerce, a trend FedEx is well positioned to benefit from. The continued restriction of passenger air travel to certain regions has resulted in reduced belly capacity, leaving an opening for shippers like FedEx to grab share… the company notes Asia manufacturing has started to come back, which should drive increased demand for FedEx's international export service…”
Becker shows some caution by reducing her price target to $156, but still sees an impressive 40% upside potential for the coming year, and maintains her Buy rating on the stock. (To watch Becker’s track record, click here)
Credit Suisse analyst Allison Landry, also rated 5-stars by TipRanks, is more bullish, backing her Buy rating with a price target of $159 – suggesting an upside of 43%. (To watch Landry’s track record, click here)
In her comments on the stock, Landry writes, “[W]e think it is prudent that FDX pulled its FY20 guidance. While it is too early to call for a bottom in either earnings or for the stock here, we do think that FDX is well positioned as an early beneficiary from COVID-driven supply chain disruptions – particularly as it relates to a tightening of int’l airfreight capacity… we think this sets up well for Express margin improvement next year.”
Overall, FDX shares have a Moderate Buy rating from the analyst consensus, based on 19 reviews. These include 9 Buys and 10 Holds. Shares are priced at $111.06, and the average price target, $139.40, indicates room for a potential 26% upside growth in the coming year. (See FedEx stock analysis on TipRanks)
Repay Holdings Corporation (RPAY)
This holding company controls subsidiaries in the financial sector, mainly acting as a payment processor for US customers. RPAY was an inactive stock through much of 2019, as the company was conducting a merger with Thunder Bridge. In a deal worth $580.7 million, Thunder Bridge acquired Repay and the combined entity began trading as RPAY, on NASDAQ, in the last week of July.
Business remained strong after the merger, and the company reported solid results in Q4. Revenues came in at $49.3 million, up 45% from the year before, and EPS was reported at 20 cents. Repay also reported a 72% increase in card payment volume, to $3.4 billion, a key metric for a payment processor.
RPAY shares have seen two major informative insider purchases in recent days. Richard Thornburgh and Paul Garcia, both members of the Board of Directors, bought up over 82,000 shares between them. Thornburgh made the smaller purchase, of 16,600 shares for $258,000. Garcia’s purchase, of 65,600 shares, came to $998,000. Together, the purchases have skewed the insider sentiment on this stock strongly positive.
Robert Napoli, 5-star analyst with William Blair, sees Repay in a strong position despite the economic dislocations caused by the COVID-19 epidemic. He writes, “Repay believes it is gaining market share due to the disruption from COVID-19. While the lending market may decline, Repay's lender clients are increasingly looking to make it easier for their borrowers to repay loans electronically. In addition, in a market environment where prime lenders are likely to tighten credit standards, more borrowers may not qualify for prime loans and move into the non-bank market, Repay's focus.”
As a result, Napoli reiterated his Buy rating on the stock, although he declined to set a definite price target. (To watch Napoli’s track record, click here)
Writing for Credit Suisse, Timothy Chiodo is also bullish here. He gives RPAY shares a $17 price target, suggesting a 12-month upside potential of 45%, and reiterates his Buy rating. (To watch Chiodo’s track record, click here)
Commenting on the stock, Chiodo writes, “We remain bullish on RPAY, with our stance grounded in expectations for further debit penetration of existing verticals, entry into new verticals, and persistent gross profit growth…”
Wall Street is upbeat about this stock, and that shows in the analyst consensus. With a unanimous 5 Buy-side reviews, RPAY has a Strong Buy consensus rating. Shares are priced at a bargain, $11.75, and the $19.50 average price target implies room for 66% growth to the upside in the coming year. (See Repay stock analysis on TipRanks)
Essential Properties Realty Trust, Inc. (EPRT)
The last stock on our list is a real estate investment trust. These companies, which buy, own, manage, and lease assorted properties, make their profits on management fees and rents. They are also popular among income-minded investors – tax code regulations require that they return a high percentage of profits to shareholders, and so they typically show high dividend yields no matter the economic conditions.
EPRT is no exception. The annualized dividend, 92 cents per share, gives the stock a yield of 7.25%, which is far higher than investors can find elsewhere, either in the stock market or in the bond market. EPRT’s next payment is due on April 15.
In addition to a strong dividend, EPRT also boasts a strongly positive insider sentiment. Anthony Dobkin, Board member and interim CFO of the company, purchased over $343,000 worth of shares last week, a holding totaling 40,000 shares. Also buying in was executive VP Scott Estes, who also picked up 40,000 shares. In all, EPRT has seen over $830,000 in insider purchases in the last few days. Investors can take note.
That being said, EPRT faces a potential risk, as its model is based on leasing properties to middle-market service-oriented companies. However, the company boasts a strong portfolio and firm position in its field. 4-star analyst John Massocca, of Ladenburg Thalmann, noted that EPRT’s current properties are fully leased and secured for the long term: “As of December 31, 2019, the REIT owned 1,000 freestanding net lease properties leased to 205 tenants operating 265 different concepts in 16 distinct industries across 44 states. These properties were 100% leased at 4Q'19 end and had a weighted average remaining lease term of 14.6 years.”
In light of the company’s reliable income stream, Massocca reiterated his Buy rating but reduced the price target by 50 cents. The $27 price target still implies an impressive 113% upside potential for the stock over the next 12 months. (To watch Massocca’s track record, click here)
EPRT holds a Moderate Buy consensus rating, as both of its most recent reviewers rated the stock a Buy. It’s currently selling for a discounted $12.69, and the average price target of $27 means the upside potential matches Massocca’s forecast. (See EPRT stock-price forecast on TipRanks)