June Consumer Price Index (CPI) exceeded expectations by accelerating 9.1% from a year ago, registering its highest since 1981. The latest inflation data indicates that the Federal Reserve will hike interest rates more aggressively to bring the prices down, exacerbating the odds of the economy slipping into a recession.
Due to the challenging macro environment, the S&P 500 index has declined 20.2% year-to-date, while the Nasdaq Composite and Dow Jones have lost 28.1% and 15.3%, respectively. However, the market’s continued decline provides excellent buying opportunities to investors as stocks possessing solid fundamentals are currently trading at attractive prices.
Amid the current risk-off environment, the world’s successful investors are scooping up shares of fundamentally sound companies Occidental Petroleum Corporation (OXY), Amazon.com, Inc. (AMZN), and Incyte Corporation (INCY).
Occidental Petroleum Corporation (OXY)
OXY engages in the acquisition, exploration, and development of oil and gas properties in the United States, Middle East, Africa, and Latin America. The company operates through three segments: Oil and Gas; Chemical; and Midstream and Marketing. It develops, processes, transports and markets oil and condensate, natural gas liquids (NGLs), and natural gas. It also manufactures basic chemicals.
On June 27, OXY’s subsidiary, 1PointFive, and Manulife Investment Management entered a lease agreement for approximately 27,000 acres of timberland in Western Louisiana. This agreement provides 1PointFive with access to subsurface pore space and surface rights to develop and operate a carbon sequestration hub, with access to permanently store industrial carbon emissions.
The agreement is expected to promote the company’s sustainability goals and boost its revenues.
OXY's net sales increased 57.7% year-over-year to $8.35 billion in the fiscal 2022 first quarter ended March 31, 2022. Its income from continuing operations rose 1,530.8% from the prior-year period to $4.88 billion.
The company’s adjusted income attributable to common stockholders and adjusted earnings per share came in at $2.13 billion and $2.12, up 1,664% and 1,513.3%, respectively, year-over-year.
The $9.54 billion consensus revenue estimate for the fiscal 2022 second quarter (ended June 2022) represents a 58.7% improvement from the same period in 2021. Analysts expect OXY’s EPS for the to-be-reported quarter to increase 817.8% year-over-year to $2.94. The company has topped the consensus revenue and EPS estimates in each of the trailing four quarters.
Warren Buffett’s Berkshire Hathaway Inc. (BRK.A) added another 4.3 million shares of OXY, raising its stake to 19.2% in the oil company. Buffett’s Berkshire is OXY’s largest shareholder so far, with its investment at 179.7 million shares.
The stock has gained 100.1% year-to-date and 92.9% over the past year to close the last trading session at $58.01.
OXY’s POWR Ratings reflect this strong outlook. The company has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
OXY has a grade of A for Momentum and a B for Growth and Quality. Within the B-rated Energy-Oil & Gas industry, it is ranked #34 of 97 stocks. To see additional POWR Ratings (Sentiment, Value, and Stability) for OXY, click here.
Amazon.com, Inc. (AMZN)
The retail giant AMZN offers a wide range of products and services to customers in North America and internationally. The company operates through three segments: North America; International; and Amazon Web Services (AWS). It sells merchandise and content through physical and online stores purchased for resale from third-party sellers.
Yesterday, AMZN’s Amazon Web Services (AWS) announced the general availability of three new serverless analytics offerings for Amazon EMR, Amazon MSK, and Amazon Redshift that will help customers analyze vast amounts of data without having to configure, scale, or manage the underlying infrastructure. The new offerings are expected to boost the company’s profitability.
On June 8, AMZN’s AWS announced the general availability of AWS Mainframe Modernization. This new service makes it faster and easier for customers to modernize mainframe workloads by moving them to the cloud and benefitting from the elasticity, superior agility, and cost savings of AWS.
Tata Consultancy Services Ltd, Infosys Ltd. (INFY), and CGI Inc. (GIB) are among the customers and partners using AWS Mainframe Modernization. The new offering might expand the company’s reach and boost its revenue streams.
AMZN's net sales increased 7.3% year-over-year to $116.44 billion, while its net service sales grew 17.6% year-over-year to $59.98 billion in the fiscal 2022 first quarter ended March 31, 2022. Its net other income was valued at $8.69 billion for the first quarter.
The company’s net cash provided by investing activities and net cash provided by financing activities came in at $906 million and $1.99 billion, respectively.
Analysts expect AMZN's revenue for the fiscal 2022 third quarter (ending September 2022) to come in at $128.31 billion, representing a 15.8% rise from the same period in 2021. Also, Street expects the company's EPS for the next quarter to come in at $0.40, representing a growth of 29.4% year-over-year.
David Tepper, the co-founder of Appaloosa Management L.P. and a successful hedge fund manager, upped his stake in AMZN by nearly 20% in the first quarter. According to Tepper, AMZN’s stock looks attractive at current levels as it hovers near its lowest point since September.
The stock has gained 6.4% over the past month and closed the last trading session at $110.40.
AMZN has a grade of B for Quality. Within the Internet industry, it is ranked #36 of 66 stocks. Click here to access additional POWR Ratings (Momentum, Stability, Growth, Value, and Sentiment) for AMZN.
Incyte Corporation (INCY)
INCY is a biopharmaceutical company that focuses on discovering, developing, and commercializing proprietary therapeutics in the United States and internationally. The company provides JAKAFI, a drug for treating myelofibrosis and polycythemia vera, PEMAZYRE, a kinase inhibitor to treat bile duct cancer, and ICLUSIG, a kinase inhibitor to treat chronic myeloid leukemia.
On June 14, INCY and Eli Lilly and Company (LLY) announced that the U.S. Food and Drug Administration (FDA) approved OLUMIANT® (baricitinib), a once-daily pill, as the first and only systematic treatment for adults with severe alopecia areata (AA). It is available as 4-mg, 2-mg, and 2-mg tablets. This development is expected to boost the company’s growth and revenues.
In May, INCY announced that the European Commission (EC) approved Jakavi® (ruxolitinib) for treating acute and chronic graft-versus-host disease.
“With the approval of this new indication for Jakavi, patients in Europe with acute or chronic GVHD who do respond to first-line steroid therapies have a new option that could redefine treatment for their condition,” said Peter Langmuir, M.D., Group Vice President, Oncology Targeted Therapies, Incyte.
In the fiscal 2022 first quarter ended March 31, 2022, INCY's revenue grew 21.3% year-over-year to $733.24 million. Its income from operations increased 18% from the prior-year period to $116.54 million. As of March 31, 2022, the company’s cash, cash equivalents, and marketable securities stood at $2.54 billion, compared to $2.35 billion as of December 31, 2021.
Analysts expect INCY's revenue for the fiscal year 2022 (ending December 2022) to come in at $3.37 billion, representing a 12.9% rise from the prior year. Also, Street expects the company's EPS for the current year to come in at $3.11, representing a growth of 12.8% year-over-year. The company has surpassed the consensus revenue estimates in three of the trailing four quarters.
Baker Bros. Advisors LP, a biotech investment firm founded by Julian and Felix Baker, is bullish about INCY. It added 2.5 million shares of the biotech giant in the first quarter and currently owns a 16.5% stake in the company. And INCY is Baker Bros. Advisors’ second-largest holding.
The stock has gained 17.2% over the past month and 8.2% year-to-date to close the last trading session at $79.41.
INCY's POWR Ratings reflect a promising outlook. The stock has an overall grade of B, which translates to a Buy in our proprietary rating system.
INCY has a grade of B for Value and Quality. Within the Biotech industry, it is ranked #13 of 409 stocks. Click here to see additional POWR Ratings (Momentum, Stability, Growth, and Sentiment) for INCY.
OXY shares fell $0.61 (-1.05%) in premarket trading Thursday. Year-to-date, OXY has gained 100.96%, versus a -19.65% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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