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3 “Strong Buy” stocks that are still undervalued
After a year that most of us want to forget, 2021 is developing initially with stability and a steady keel. The elections are certainly behind us, the new Biden administration promises a “no-drama” approach, a tightly divided and non-partisan Congress is unlikely to enact comprehensive laws, reforms or other laws, and COVID vaccines are available for distribution. It’s a recipe for a quiet cycle of news. This makes it a perfect time to buy into the stock market. Investors can read the tea leaves or study the data – regardless of their preferred type of stock analysis – and use this quiet time to make rational decisions about stock movements. Using the TipRanks database, we have identified three stocks that are showing an upward trend. All three hit a profile that value investors should be interested in. They have unanimous Strong Buy consensus ratings and a “perfect 10” from the Smart Score. This score, a unique measure, rates a stock based on 8 factors with a demonstrably high correlation to future outperformance. A ’10’ value indicates a high probability that the stock will rise in the coming year. Finally, all three stocks have double-digit upside potential, indicating that they are still undervalued. UMH Properties (UMH) With UMH Properties we are starting in the Real Estate Investment Trust (REIT) sector. This company, which started in the mobile home industry after World War II, later became the leading manufacturer of prefabricated houses. Today UMH owns and manages a portfolio of 124 manufactured residential communities spread across 8 states in the Northeast and Midwest, totaling well over 23,000 units. As a REIT, UMH has benefited from the nature of prefabricated homes as affordable options in the housing market. UMH sells both the manufactured houses to the residents as well as the land on which the properties stand and rents the houses to the residents. The same company’s real estate earnings, a key metric, rose 8.6% year over year in the third quarter. In the third quarter, UMH posted a year-over-year increase in sales of 16% and amounted to USD 43.1 million compared to USD 37.3 million in the same quarter of the previous year. Funds from Operations, another key metric in the REIT sector, was 11 cents per share, down from 14 cents in Q3 19. The decline was due to the company redeeming $ 2.9 million in Series B preferred stock. REITs need to return income to shareholders, and UMH does it with a dependable dividend and a high yield of 4.7%. Payment of 18 cents per common share is quarterly and has been held steady for over a decade. Compass Point analyst Merrill Ross believes the company is in a solid position to create value for both households and shareholders. “We believe UMH has demonstrated that it can provide tenants or homeowners with more attractive and affordable housing more efficiently than vertical rental housing. As UMH improves its financing costs, it can more effectively communicate with other MH community owners in the public and private sectors and because there is a winning formula for reversing under-managed communities, we believe UMH can consolidate privately owned real estate over the next several years to build on its value-add potential, “said Ross. To do this, Ross rates UMH as a Buy, and their target price of $ 20 implies a 25% uptrend for a year. (To see Ross’ track record, click here.) Overall, the unanimous Strong Buy at UMH is based on 5 recent ratings. The stock is selling for $ 15.92, and the average target price of $ 18.40 suggests it has room for 15% growth from that level. (See UMH stock analysis on TipRanks) Laird Superfood (LSF) Laird Superfood is a newcomer to the stock markets, having only gone public last September. The company manufactures and markets a range of plant-based, nutrient-rich food additives and snacks, and is best known for its specialized dairy-free coffee creams. Laird is aimed at customers looking to add nutrition and a boost of energy to their diet. Since going public in September, the company has reported third-quarter earnings. Revenue was strong at $ 7.6 million, beating forecast by over 26% and up 118% year over year. The company saw online sales growth of 115% year over year. E-commerce now accounts for 49% of the company’s net sales – no surprise during the “Corona year”. The stock’s rating comes from Robert Burleson, a 5-star analyst with Canaccord. Reaffirming its optimistic position, Burleson says, “We continue to see LSF as an attractive platform game for strong demand trends for plant-based, functional foods, taking note of the competitive omni-channel approach and ethos of ingredients in LSF. We anticipate that over time, LSF will be able to make its brand and vertically integrated operations succeed in a variety of plant-based categories, resulting in oversized sales growth and healthy margin expansion. “Burleson is evaluating LSF shares with a purchase price of USD 70 price target. This number shows his confidence in ~ 63% growth over the one year horizon. (To see Burleson’s track record, click here.) Laird didn’t attract much analyst attention, but those who reviewed the stock agree with Burleson’s view. LSF has a unanimous consensus rating for Strong Buy analysts based on 3 recent reviews. The stock’s average target price of $ 62.33 suggests an uptrend of ~ 39% is possible in the coming year. (See LSF stock analysis on TipRanks) TravelCenters of America (TA) Last but not least, TravelCenters of America is a big name in the transportation sector. TravelCenters owns, operates, and sells full-service highway rest stops in the United States – a key niche in a country heavily reliant on long distance travel and where private car ownership has long promoted the mystery of the road trip. In addition to gasoline and diesel fuel, TA’s network of rest stops offers travelers convenience stores and fast food restaurants as well as the expected amenities. The corona crisis was a tough time for TA as lockdown regulations put pressure on travel. The company’s revenue bottomed in the second quarter, falling to $ 986 million, but increased sequentially by 28% to $ 1.27 billion in the third quarter. EPS was also strong at 61 cents, showing an impressive 165% year-over-year growth. Those gains came as the economy began to reopen – and with air travel still constrained, automobiles are becoming the standard for long distance calls, a fact that TravelCenters benefit from. The analyst James Sullivan reports on TravelCenters for BTIG, who rates the share with a buy. His target price of $ 40 indicates an upward trend of 22% in the coming year. (To see Sullivan’s track record, click here.) Sullivan endorsed his stance, noting, “TA is in the process of moving forward from a number of unsuccessful initiatives under the previous management team. The current new management team has strengthened its track record and intends to improve operations by cutting costs and sales-generating measures that are intended to increase margins […] We assume that spending in 2020 will focus on non-revenue generating maintenance and repair items. However, we anticipate spending higher in 2021 and beyond should generate a good ROI … “Overall, TravelCenters shares received a unanimous thumbs up for the share’s Strong Buy consensus rating with 3 purchases. Stocks sell for $ 32.87, and the average target price of $ 38.33 suggests an upside potential of ~ 17%. (See TA Stock Analysis on TipRanks.) To find great ideas for trading stocks at attractive valuations, visit TipRanks ‘Best Stocks to Buy, a newly launched tool that brings together all of TipRanks’ stock insights. Disclaimer: The opinions expressed in this article are solely those of the analysts presented. The content is intended to be used for informational purposes only. It is very important that you do your own analysis before making any investment.