Weekly Performance Review Jan. 25th – 29th, 2021

Stocks logged their largest weekly loss in three months last week as volatile trading in certain pockets of the market continued, raising concerns about speculative excesses.  Fourth-quarter GDP data revealed that U.S. growth moderated after record third-quarter growth, as consumers grew more cautious about spending. On the other hand, other parts of the economy, like housing and business investment, performed well. Growth is likely to slow further this quarter, but activity and employment should start rebounding, particularly with the benefit of the $900 billion fiscal stimulus that was passed in December. Despite the extreme swings in some heavily shorted stocks and the negative equity-market returns for January, the fundamental conditions and outlook have not changed, in our view. The economy is still poised to gain momentum later this year, and the combination of central-bank and government stimulus will remain a tailwind for the economy and stock market as we advance.

2020 is over, but this past week added to the list of unique market behaviors that started last year. GameStop (up 1625% in January) and “short squeeze” became household names overnight, as the stock of a video-game retailer skyrocketed and the narrative around small day traders versus massive hedge funds captured nearly all the attention in recent days. 

If history is a guide – and we think it will be – GameStop will not maintain its grip on the headlines or repeat its parabolic share-price ascent indefinitely, nor will it remain the driving force behind overall stock-market moves. We do, however (specific mechanics of “short squeezes” aside), think it represents a broader condition of the market, one in which speculation and animal spirits have produced abnormal returns in certain investments.

Is this the canary in the coal mine for a stock-market bubble?  We don’t think so. Should this be ignored? Again, we don’t think so.  We think the factors that guide markets over longer periods of time continue to point to an encouraging outlook for 2021 and coming years. But, in our view, the events in recent days also signal a level of sentiment in the market that will likely contribute to more frequent bouts of indigestion, producing a choppier path compared with the market’s smoother trek over the past several months.

As for the past week in trading, all the major indices suffered losses of more than 3%. Here’s a look at how the WSWD trades did for the week.

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01-25-2021_MLM down 6.99%

Biden’s win should help to speed along a major boost in infrastructure spending, making Martin Marietta Materials (MLM) one of the best stocks to buy for the new administration.

Of 12 analysts offering recommendations, 4 rate the stock a Strong Buy, 1 rates it a Moderate Buy and 7 rate it a Hold.  There are no Sell ratings for MLM stock.  

01-26-2021_SNAP down 1.42%

Snap Inc. (SNAP) will be looking to display strength as it nears its next earnings release, which is expected to be February 4, 2021. The company is expected to report EPS of $0.07, up 133.33% from the prior-year quarter.

Investors might also notice recent changes to analyst estimates for SNAP. Recent revisions tend to reflect the latest near-term business trends. With this in mind, we can consider positive estimate revisions a sign of optimism about the company’s business outlook.

01-27-2021_GSK down 3.99%

With a trailing twelve month price to earnings ratio of 12.93, GlaxoSmithKline (GSK) seems to have plenty of runway ahead in the mid term.  Of 7 analysts offering recommendations for the stock, 3 rate it a Buy and 4 rate GSK a Hold.  There are no Sell ratings for the stock. 

Argus Research’s Eade “Buy” calls GSK‘s price a buying opportunity and has a 12-month price target of $50 on the stock. He also calls out an attractive 5.23% dividend yield and says GSK shares trade below industry averages.

UBS’s Sutcliffe also sees GSK as a Buy.  “The HIV business experienced a recent flattening of US sales, but new products mean the franchise has now returned to modest growth,” she writes. “Launch of a new injectable should further boost growth and we see mid-single-digit HIV sales CAGR through 2023.”  

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01-28-2021_CVLT up 2.87%

In September, CommVault announced it would make several products – New Commvault Disaster Recovery, Commvault Backup & Recovery and Commvault Complete Data Protection – available to general customers.  Disaster Recovery, for instance, lets customers quickly launch backups of their workloads in the event of an outage.

Of six analysts covering CVLT three call the stock a Strong Buy, putting it among Wall Street’s top small-cap tech stocks at the moment.  There is one Buy rating, two Hold ratings and no Sell ratings for the stock.  William Blair analyst Jason Ader (Outperform) likes that a higher percentage of software revenue now comes from cloud subscriptions.  

“We continue to see a favorable risk/reward for the stock, and believe that the company’s deep technology portfolio, installed base, and recurring revenue profile continue to be underappreciated by investors,” he says.  

01-29-2021_NVRO down 1.05%

Shares in Nevro Corp (NVRO) stumbled recently after the medical devices company issued some disappointing preliminary fourth-quarter results and took a shot from a short seller.

And yet, the analysts covering the company didn’t budge.

The 15 analysts tracked by S&P Global Market Intelligence are almost entirely behind the bull case, with 10 Strong Buys, 2 Buys and 2 Holds. But NVRO does stand out among the pros’ best small-cap stocks for 2021 because of its modest $176.36 average price target, which implies just 7% upside from current prices.

One factor pushing analyst estimates higher is Nevro Corp’s presentation earlier this month, at the 2021 North American Neuromodulation Society (“NANS”). The company announced positive results from data supporting the use of HF10® therapy for patients with chronic pain. The presentations also included the results of Painful Diabetic Neuropathy (“PDN”) and Non-Surgical Refractory Back Pain (“NSRBP”) randomized clinical trials.

The company is to report earnings on February 24th.