Around this time last year, I wrote up a gallery of stocks to watch that had caught investor interest over a week’s worth of trading. In that example, the S&P 500 had gained 3.5% over the previous five days of trading.
As a result, out of my 10 stocks to watch, seven were burning up the track while three were lagging the index.
Now that we’re in 2021, I thought I would do the same thing.
Only this time, I’ll find five winners and losers from the past five days of trading who’ve either outperformed or underperformed the index. For this article, I’ll use May 12 through May 18 (five days and a weekend) and limit the companies to stocks with market capitalizations of $10 billion or higher.
If you’re wondering, the 10 stocks to watch from my article (both good and bad weekly performances) had lights-out returns over the past year.
Between May 12 and May 18, the S&P 500 had a total return of -0.6%. Based on that, here are my five winning stocks and five losing stocks to watch right now.
- NortonLifeLock (NASDAQ:NLOK)
- Occidental Petroleum (NYSE:OXY)
- Ulta Beauty (NASDAQ:ULTA)
- Royal Caribbean (NYSE:RCL)
- Hershey (NYSE:HSY)
- AT&T (NYSE:T)
- Lennar (NYSE:LEN)
- Tesla (NASDAQ:TSLA)
- Chipotle Mexican Grill (NYSE:CMG)
- MSCI (NYSE:MSCI)
Winning Stocks to Watch: NortonLifeLock (NLOK)
Five-day performance: 13.5%
The cybersecurity software and services company got a nice boost on May 12 when BofA analyst Tal Liani upgraded NLOK stock to “buy” from “underperform.” More importantly, the analyst increased its target price by 58%, from $19 to $30. Currently trading below the target, it’s possible future quarterly results could push that higher.
Liani believes that the consumer market, NortonLifeLock’s bread and butter, provides it with a long runway of growth. The company itself expects 2022 revenue growth of at least 8% and adjusted earnings per share of $1.70, which would be 60% higher year-over-year.
“Management believes the consumer cybersecurity market is heavily underpenetrated, which leaves room for growing the subscriber base as well,” Liani wrote. “Lastly, international expansion is another key element, with international sales accounting for 30% of revenues, and management outlined a country-by-country strategy to address the remaining potential.”
NortonLifeLock’s been on a strong run the past five years with an annualized total return of 18.8%. But it looks as though the next five could be equally rewarding for shareholders.
Occidental Petroleum (OXY)
Five-day performance: 5.6%
Investor’s Business Daily commented in early May that the Occidental corporate jet was spotted in Omaha days before Warren Buffett invested $10 billion in the oil company in 2019.
At times in the past couple of years, I’m sure Buffett would have preferred the jet go almost anywhere else except Omaha, as the price of oil tanked. As part of his $10 billion preferred-share investment, Buffett got 83.86 million warrants to buy OXY stock at $59.62.
Starting in 2029, Occidental can redeem the 8% preferreds at a redemption price equal to 105% of the liquidation preference plus any unpaid dividends. The dividends Buffett was paid in 2020 were made in Oxy stock. The Oracle of Omaha sold those shares in August 2020.
Thanks to a rebound in oil prices, Occidental’s got a total return of almost 72% over the past year, significantly higher than the U.S. markets as a whole. However, as I write this, OXY stock is still trading at less than half Buffett’s exercise price.
He’s got until one year after Occidental were to redeem its preferred shares. That means at least another nine years to move into the money.
Ulta Beauty (ULTA)
Five-day performance: 4.7%
The specialty retailer of cosmetics, skin and hair care products, fragrances, and a provider of beauty salon services, reports its Q1 2021 results on May 27. The 27 analysts who cover ULTA estimate $1.90 per share on the bottom line and $1.63 billion in sales on the top line. Both will be marked improvements from a year ago when Covid-19 stay-at-home orders were kicking in.
In mid-May, JPMorgan analysts named Ulta to its list of favorite retail stocks. The bank gives ULTA an overweight rating and has it on its Analyst Focus List. Interestingly, Target (NYSE:TGT) is also a favorite of JPM due to its inventory control and overall strength during the important back-to-school season.
In November, Ulta announced that it would open 1,000-square-foot shops within Target. They will be staffed by the discount retailer with training from Ulta.
Both Ulta CEO Mary Dillon and Target CEO Brian Cornell believe the arrangement will help drive traffic to both stores. Two of the best CEOs in retail, this partnership is sure to be a success, making ULTA one of our stocks to watch.
Royal Caribbean (RCL)
Five-day performance: 4.6%
It wasn’t just Royal Caribbean that had a good five days of trading. All of the cruise operators did. Carnival (NYSE:CCL) and Norwegian Cruise Line Holdings (NYSE:NCLH) were up 8.2% and 5.7%, respectively. I happen to prefer RCL over the other two.
The cruise operator got excellent news in late April when the Centers for Disease Control and Prevention clarified its position on cruise ships setting sail from American ports of call this summer. Royal Caribbean figures it can restart its U.S. cruise departures in mid-July.
Considering it lost $1.1 billion in its latest quarter, the news couldn’t have come at a better time. Plus, its balance sheet is currently bolstered by more than $5 billion in cash. As cruise-goers appear to be ready to spend more on cruises than in past years, they should be able to get back to pre-Covid revenues by the end of 2022, perhaps earlier.
In 2020, while RCL was getting pummeled, I continued to say it was a long-term winner. Up almost double in the past year, RCL should top $100 before the end of 2021.
Hershey (HSY)
Five-day performance: 2.3%
I know what you’re thinking. When considering stocks to watch, why include a company that gained a measly 2.3% over the past five days? Especially when there were 46 stocks ($10 billion market cap or higher) with a better return?
Simple. I like the job CEO Michele Buck has done since taking the top job in March 2017. It’s why I included Hershey on my October 2020 list of companies with top-notch women CEOs. Since that article, HSY stock is up 18% since.
In late April, Buck said that she expects Halloween to be very strong this coming October as vaccinations make it possible for trick-or-treaters to get out in the evening air to collect their annual haul of candy and chocolate. I, for one, will be loading up this year.
“Consumers are participating in seasons, they are telling us they’re doing more movie nights at home, they’re making more s’mores at home [and] at the same time, we’re seeing growth in our food service and our own retail businesses, which are away from home,” Buck told CNBC.
As a result, HSY sees higher earnings and sales in 2021 than originally expected. It’s good to know consumers haven’t lost their taste for sweets during the pandemic.
Losing Stocks to Watch: AT&T (T)
Five-day performance: -8.4%
Back in July 2018, I wrote about the 7 Reasons AT&T Is Going to Blow the Time Warner Merger. At the time, the Department of Justice was trying to block the mega-merger.
In hindsight, I’m sure long-time shareholders wish the DOJ had been successful in blocking the acquisition. It’s been both a time waster and a serious blow to AT&T’s reputation with dividend investors.
CNBC host Jim Cramer has been very critical of the mistakes made by AT&T.
“I am not calling it a transformational deal. I am calling it the denouement of a ridiculously stupid deal, the $85 billion acquisition of Time Warner, a deal that closed less than three years ago,” Cramer stated in his Real Money column on May 17, the day AT&T threw in the towel on WarnerMedia.
The reality is that T paid $85 billion for WarnerMedia. It’s getting $43 billion in cash, debt, and WarnerMedia retains some of the debt. AT&T shareholders will also own 71% of the new business.
The downside is that AT&T will cut the dividend in half.
All these dividend chasers are left holding squat and hoping for dear life that the merged entity can deliver at least $42 billion in additional value to get back to square one before the ridiculously stupid merger took place.
It was one of the dumbest deals of the 21st century.
Lennar (LEN)
Five-day performance: -7.9%
Lennar makes our list of stocks to watch because over the past five days, the homebuilder lost almost 8% of its value. The iShares U.S. Home Construction ETF (BATS:ITB), which has a Lennar weighting of 12.2%, lost 5.4% over the past five days.
Let’s call it a cooling-off period. The ITB has an annualized total return of 75.9% over the past year and is up 25.8% year-to-date. Over the past decade, it’s got an annualized total return of 19%, 468 basis points better than its consumer cyclical peers.
For those who believe there is a housing bubble right around the corner, consider Ben Carlson’s Fortune article from April. It suggests home loans are mostly being made by people with good credit scores and large down payments, the opposite of the subprime meltdown in 2008.
If you combine this fact with the reality that the housing supply isn’t nearly as abundant as it ought to be, you get the picture of a supply issue rather than one of excess demand.
Here’s what Lennar Executive Chairman Stuart Miller had to say in its Q1 2021 conference call in March.
So, from a macro perspective, the housing market remains strong. Demand has continued to strengthen as the millennial generation, which had previously postponed its entry into the housing market, has now continued to drive family formation, while at the same time, the supply of new and existing homes remains constrained.
Take advantage of these pullbacks. The housing boom hardly seems ready to end anytime soon.
Tesla (TSLA)
Five-day performance: -6.4%
Innovation costs money. That’s especially true when it comes to the electrification of transportation. It took Tesla 15 years to post its first annual profit after Elon Musk took control of it in 2004.
After running up huge returns in 2020, Tesla is off almost 27% in the past three months due to many different reasons, including the fact Michael Burry, the man behind the Big Short, has taken a short position using put options on 800,100 shares of TSLA stock.
And while Musk has gone hot and cold over Bitcoin (CCC:BTC-USD), Tesla shareholders ought to be more worried about the bureaucratic nightmare happening across the pond in Germany as it tries to get its Berlin Gigafactory built.
“Although things looked good regarding the Tesla facility up to a few weeks ago, a different reality can lie behind a facade,” says Berlin-based auto analyst Matthias Schmidt.
The new Berlin airport, which is very close to the Tesla factory, took almost a decade to get regulatory approval from the German authorities. If Tesla takes that long, Musk can forget about becoming the richest person in the world.
I’m a fan of Musk’s innovative bent, but 2021 could turn out to be one of his most challenging years on record. That makes Tesla one of our stocks to watch.
Chipotle Mexican Grill (CMG)
Five-day performance: -4.9%
A piece of news that probably got lost in the shuffle was Chipotle’s March announcement that it plans to accelerate its expansion into Canada. Over the next year, it will open eight more locations in Canada, including one Chipotlane, the company’s digital drive-up. The openings will be the first since October 2018.
As a Canadian, all I can say is, it’s about time.
“Given the rising popularity of Chipotle’s real food in Canada, we believe there is a massive growth opportunity in this international market,” said Anat Davidzon, Chipotle’s managing director – Canada. “Our team is focused on continuing to find ways to increase access to Chipotle for our Canadian fans.”
With only 23 Chipotle locations in four Canadian cities at the moment (Toronto, Vancouver, Ottawa and London) there is plenty of room for expansion. Hopefully, they’ll open one in Halifax in the next couple of years.
In the meantime, Chipotle stock has recovered nicely in recent years. A $5,000 investment three years ago is worth $15,338 today. That’s tasty.
Keep in mind CMG isn’t cheap at almost 6x sales. However, compared to McDonald’s (NYSE:MCD) at 8.9x sales, it’s a bargain.
MSCI (MSCI)
Five-day performance: -3.8%
I don’t know if it’s just me and my self-diagnosed dyslexia, but I always seem to get MSCI confused with S&P Global (NYSE:SPGI). They’re both financial services companies, they both have four-letter stock symbols, and over the past five days of trading, they’re both down a lot more than the index.
And not to be too easy on me, but both companies have index businesses that generate significant revenue and profits for their shareholders. In the past, I’ve recommended both stocks.
In May 2020, I recommended MSCI stock as one of seven stocks to buy from the TrimTabs All Cap US Free-Cash Flow ETF (BATS:TTAC). I picked MSCI because its free cash flow had almost doubled from $360 million in 2017 to $660 million in 2019.
Well, in the trailing 12 months, it was $863 million, a compound annual growth rate of 31% over the past 3.25 years. Frankly, I don’t think you can go wrong owning either MSCI or SPGI.
However, over the past five years, the former has doubled the performance of the latter. Take that to the bank.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
