The markets have delivered one of the worst years in the past several decades. As a result, investors are left searching for under-the-radar stocks that have been passed over due to all the bad news.
What constitutes an under-the-radar stock? Is it a lack of volume or merely a company followed by very few analysts? I think it’s a little of both.
According to Finviz.com, there are 33 S&P 500 stocks (market cap of $2 billion or greater) that are up 20% or more year-to-date through Oct. 13. Of those, 18 are in the energy sector. That leaves me with 15 that aren’t energy related.
I’ve never been particularly interested in the energy sector, so I’d like to choose seven under-the-radar stocks that aren’t in this sector. To widen the search, I’ll go beyond the index. Excluding energy, I’m left with 80 options.
I’ll select seven that have a low average daily volume and are growing both the top and bottom lines.
Wish me luck.
| AMR | Alpha Metallurgical Resources | $152.80 |
| WWE | World Wrestling Entertainment | $75.71 |
| ELF | Elf Beauty | $39.38 |
| PLMR | Palomar Holdings | $92.60 |
| CORT | Corcept Therapeutics | $27.22 |
| PSN | Parsons Corporation | $40.52 |
| AZPN | Aspen Technology | $106.90 |
Alpha Metallurgical Resources (AMR)
In the case of Alpha Metallurgical Resources (NYSE:AMR), the expectations have been set very high. Its stock is up 145% YTD and 168% over the past year.
The miner’s metallurgical coal ultimately makes it into some of the world’s finest steel. It operates 21 mines worldwide with coal reserves of more than 725 million. Approximately 25% of its exported coal is sold to customers in India, which is expected to see 5% compound annual growth in steel production through 2050.
In 2021, Alpha produced 16.2 million tons of coal generating revenue of $2.25 billion. It accounts for 21% of the U.S. production of metallurgical coal. Approximately 76% of its coal is exported to 24 countries.
Alpha is laser-focused on capital allocation. In June, it repaid the company’s entire term loan balance. It now has zero long-term debt. That allows it to act more quickly on new projects. It also allows it to repurchase more of its stock.
In the first six months of 2022, it has repurchased $195 million. In May, the company initiated a quarterly dividend. Its quarterly payment of $0.392 yields 1%.
In September, Alpha stated that it would produce 4.5 million tons of metallurgical coal for its U.S. customers in calendar 2023. Having secured a good piece of its 2023 business, investors should be comfortable betting on Alpha in the years ahead.
World Wrestling Entertainment (WWE)
It’s been a long time since I’ve picked World Wrestling Entertainment (NYSE:WWE) for my sports-viewing entertainment, let alone recommending its stock.
However, the company’s Senior Vice President Scott Zanghellini hinted recently that the wrestling and entertainment company was looking at gaming for its next big investment. According to Zanghellini, about 60% of its fans play video games seven hours or more a week. It’s a natural extension for the company given its audience.
Earlier this month, WWE hit its highest share price in more than three years. Its stock has been one of the biggest surprises in 2022, up more than 51% YTD.
Apparently, investors liked the idea of former CEO Vince McMahon retiring from the company, replaced by his daughter Stephanie McMahon and Nick Khan as co-CEOs. It didn’t hurt that rumors were going around that the company was on the selling block.
Although Vince McMahon still owns 37% of the stock, the fact its market cap has increased by nearly 24% since he stepped down. I highly doubt he’d do anything to hurt WWE’s share price.
Trading at 5.22x sales, it’s not cheap by any means, but it’s on a roll. How many stocks can say that these days?
Elf Beauty (ELF)
Elf Beauty (NYSE:ELF) has come a long way from its $8 lows in the March 2020 correction. Up 20% YTD, the multi-brand beauty products company is doing very well in 2022.
Elf reported Q1 2023 results in August. As a result of the strong showing, it raised its fiscal 2023 outlook. It now expects sales of at least $448 million, $16 million higher than its previous estimate at the low-end of its range.
This works out to 15% growth year-over-year, at the midpoint of its guidance. As for adjusted net income, it expects to earn at least $47.0 million in 2023, $3.5 million higher than its previous estimate.
As CEO Tarang Amin stated in its Q1 2023 press release, it was the company’s 14th consecutive quarter of net sales growth. That’s 3.5 years of constant growth. What’s not to like?
As for its balance sheet, it’s rock solid. As of June 30, it had net debt of just $17.5 million. That’s excellent for a $2 billion market cap.
I’ve always liked Estee Lauder’s business. EL will have to make room for Elf Beauty on my watchlist.
Palomar Holdings (PLMR)
Palomar Holdings (NASDAQ:PLMR) provides specialty insurance for individuals and businesses.
On the business side, it provides earthquake insurance, flood insurance, hurricane insurance, inland marine insurance and general casualty insurance. On the residential side, it provides earthquake, flood, and hurricane insurance.
Given Hurricane Ian’s devastation, you would think its stock would be cratering. It’s not. It’s up nearly 7% in the past month and 47% YTD.
The company uses proprietary data analytics and technology to provide its customers with customized insurance products and pricing.
Palomar’s current business strategy is to double its adjusted underwriting income over an intermediate time frame. It plans to use data analytics, underwriting acumen, and technology to create flexible value-based products for its customers.
It seems to be working.
In the second quarter, its adjusted net income was $18.7 million, 42% higher than $13.2 million a year earlier, on $218.7 million in gross written premiums. Its net written premiums increased 23.5% to $96.1 million.
The company’s adjusted combined ratio, which indicates how profitable its underwriting was in a particular period, was 69.1% in the second quarter, 470 basis points better than a year earlier. Under 100% indicates profitable underwriting.
As a result of its strong earnings, it increased its 2022 adjusted net income guidance from $82.5 million previously at the midpoint of its guidance to $87.5 million.
Analysts consider it a Buy.
Corcept Therapeutics (CORT)
Corcept Therapeutics (NASDAQ:CORT) creates and commercializes medications that treat severe diseases by controlling the effects of cortisol, a stress hormone.
The first time I heard the word cortisol was when my mom got sick after my dad died a few years ago. I had no idea what it was, but it sure was playing with my mom’s overall wellness. Corcept works to help people like my mom better deal with the diseases they’re facing.
Cushing’s Syndrome occurs when your cortisol levels get too high. There are approximately 20,000 diagnosed patients in the U.S. with 3,000 new cases per year. The company’s drug Korlym helps decrease symptoms of excess cortisol activity such as high blood sugar.
Korlym is the company’s sole commercial product and has been since 2015. In the second quarter, it generated $103.4 million in revenue, 12.9% higher than a year earlier. It expects annual 2022 revenue of $415 million at the midpoint of its guidance, 13.4% higher than in 2021. Its net income was 3.4% higher than Q2 2021 at $27.4 million.
The company’s drug pipeline includes Relacorilant (Phase 3 clinical trials), Relacorilant plus Abraxane (Phase 3), and several other Phase 2 and 1b trials.
It’s got steady growth with the potential for more.
Parsons Corporation (PSN)
Parsons Corporation (NYSE:PSN) provides digital technology solutions for the defense, intelligence and critical infrastructure markets. It’s been in business since 1944.
Parsons announced at the end of September that it had secured a $104 million three-year contract with the US Department of Defense’s Missile Defense Agency (MDA). The company will provide advisory and assistance support to the MDA as it works to build and update its infrastructure at facilities in Virginia, Alaska, Alabama and California.
The company’s second-quarter results were very healthy. On the top line, revenue increased 15% YOY to $1 billion, while On the bottom line, its adjusted EBITDA increased 18% to $77 million.
In the second quarter, its two operating segments obtained total awards valued at $992 million, down from a year earlier. However, its backlog at the end of June was $8.23 billion, providing plenty of revenue in the years ahead.
For all of 2022, Parsons expects total revenue of at least $3.95 billion. That’s up from its previous estimate of $3.7 billion. Its cash flow from operations will be $260 million at the midpoint of its guidance, 26% higher than a year earlier.
The 10 analysts that cover PSN stock rate it Overweight.
Aspen Technology (AZPN)
Aspen Technology (NASDAQ:AZPN). Is having an excellent year in the markets, up more than 61% YTD.
In September, I suggested that the company was an unknown tech stock that could double in 2023. This article merely doubles down on my sentiment. It’s already gained more than 10% since my September piece.
Infrastructure remains in the news these days. That’s not going to change in the years to come as U.S. infrastructure assets continue to age. Aspen provides industrial software for operating and maintaining infrastructure assets.
As I mentioned in my article, Aspen became much bigger earlier this year when it merged with Emerson Electric’s OSI Inc. and Geological Simulation Software businesses.
In fiscal 2023 (June year-end), the company expects total revenue of at least $1.14 billion, non-GAAP net income of at least $423 million, and a minimum free cash flow of $347 million.
Post-merger, investors will witness continued growth of Aspen’s business and its stock.
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.