It’s hard to believe it has already been more than three months since I was introduced to InvestorPlace.com’s Best Stocks for 2017 contest. As I mentioned then, picking just one stock to outperform for the year ahead is a daunting task, but it was a challenge I was more than willing to take on! I’m very pleased to say that my top-down strategy, which puts a heavy focus on industry groups, pointed me in the right direction.
My pick for the best stock of the year is Albemarle Corporation (NYSE:ALB), a global specialty chemicals company that is a leader in lithium, bromine, refining catalysts and applied surface treatments. It’s one of three major global players in the lithium sector and owns lithium brine operations in Chile and the United States, as well as a stake in a mine in Australia.
How ALB Stock Has Been Faring
Albemarle has spent the first quarter hard at work expanding its lithium business to keep up with rising demand around the globe. In January, it amended an existing agreement with the Chilean Economic Development Agency to extend the terms out 27 years.
The agreement is expected to more than triple the lithium quota in Chile.
Then in March, ALB stock’s Talison joint venture in Australia approved an expansion of its lithium production at its Greenbushes mine, which will double the current output.
From a top-down view, chemical companies with exposure to lithium will continue to be the best-positioned in the current environment, and I like that Albemarle is at the forefront of the industry. Plus, a strengthening global economy will boost the chemical sector overall.
ALB stock has also kept up its solid earnings track record, reporting fourth-quarter numbers that beat the Street in February. Adjusted earnings of 78 cents a share were better than the expected 75 cents a share, and revenue of $696.7 million bested estimates of $646.4 million.
On the conference call, management said that ALB’s 2016 performance and strategic initiatives have positioned it well for strong growth in 2017. For the full year, they guided for earnings of $4-$4.25 a share, a 17% year-over-year increase at the midpoint, on revenue of $2.8 billion-$2.95 billion. And the growth isn’t limited to just next year. Looking out even further to 2018, management expects to increase profit by another 16%.
In the end, I think those estimates are too low and suspect the company will continue its trend of beating the Street’s expectations. The latest report from ALB stock was taken very well by the market and the stock soared to a new all-time high the following day.
The Albemarle Stock Chart
Looking at ALB from a technical perspective, you can see that the shares have been consolidating their gains following the post-earnings rally:
The breakout to new highs has been confirmed, as the stock has not pulled back since its gap to the upside, and that’s even more bullish when you consider the fact that ALB stock has been trending higher even as it consolidates.
Albemarle has gotten off to a great start in 2017 — it’s up 23% year to date! — and I expect the higher highs to keep on coming.
ALB stock remains a favorite of mine for this year and beyond.
Matthew McCall is founder and president of Penn Financial Group, an investment advisory firm. Matt also is Editor of FUTR Stocks and the ETF Bulletin. Earlier this year, Matt and Hilary Kramer teamed up on Breakout Stocks where Matt serves as the Co-Editor. Most recently, Matt and Hilary joined forces again. This time, they are helping individual investors make money trading ETFs. For more on their latest project, visit www.etfedgesummit.com.