These Lesser-Known Stocks Are Poised to Outperform
It’s easy for investors to get caught up in the most high-profile companies in the market. After all, these big names have delivered massive gains over the long term and make up a massive portion of equity indexes. With that said, it can also pay off to explore adding some of the lesser-known names in the market to your investment plan. There’s always a bull market going on somewhere, and the ability to recognize a strong stock even when it’s not necessarily a household name can really help you generate impressive returns.
While markets have been on a volatile streak to start the year 2022, there are still some bright spots that investors should be paying attention to. Several underrated companies are quietly delivering plenty of alpha and posting impressive earnings, and it might pay off to consider adding them to your portfolio. After all, diversification is a key concept that all investors should keep in mind in a market chalked full of uncertainty.
Here are 3 underrated stocks to add to your portfolio:
McKesson Corp (NYSE:MCK)
While McKesson is the largest distributor of pharmaceuticals in the United States, the company still flies under the radar for a lot of investors. It’s an underrated company in the health care sector to consider adding at this time for a few different reasons. First, the company is one of three market leaders in the pharmaceutical wholesale and distribution industry, which means there are high barriers to entry for competitors and that the company has a dominant negotiating position with drug manufacturers. It’s also a great option to consider given that the company has stable demand for its products in all different economic environments.
McKesson just delivered impressive Q3 earnings results including total revenues of $68.6 billion, up 10% year-over-year, and adjusted earnings per diluted share of $6.15, up 34% year-over-year. The company also increased its 2022 outlook thanks to continued benefits from COVID-19 vaccine distributions, tests, and medical equipment. McKesson is also in the process of selling its European business assets, which should lead to more investment and growth in other areas of the company. It’s one of the few stocks that are trading at all-time highs in a mixed market, which means that investors are not willing to part with shares even during volatility.
UBS Group (NYSE: UBS)
The financial sector has been a mixed bag over the last few months, which means a lot of investors are probably overlooking UBS Group. It’s the world’s largest wealth manager and also operates a universal bank in Switzerland. High-net-worth investors are attracted to the safety of the Swiss private banking accounts that the company offers, especially if they are located in emerging markets. The company’s reputation is also a big asset, as wealth management is all about relationships. High-net-worth clients have complicated needs, particularly when you consider things like tax planning, wealth planning, and large portfolios of different asset classes, which means once they are with UBS Group it can be costly to switch to another firm.
This is a stock trading at a very attractive valuation with a forward P/E ratio of 9.96, and it is certainly an underrated name in the financial sector. The company did recently report a decline in Q4 profits but was able to exceed consensus expectations. The latest earnings release sent shares soaring to new 52-week highs, likely due to UBS Group’s new profitability targets, a big bump to its share buyback program, and an annual dividend increase of 35%. If you’re interested in owning a prestigious international bank with a very strong business model, UBS Group should certainly be on your radar.
CF Industries Holdings Inc (NYSE: CF)
This major manufacturer and distributor of nitrogen fertilizer products play a critical role in crop production around the world and is trading around its all-time highs in a weak market, which is a good reason to consider it for your portfolio. CF Industries has a strong market position in fertilizers thanks to its transportation cost advantage. Since the company’s plants have access to low-cost natural gas in North America and are connected to its principal customers via pipelines, the company can offer its products at lower prices than international competitors, which is certainly a plus to consider.
With crop prices continuing to tick up, which benefits nitrogen fertilizer prices, investors can expect strong earnings from CF Industries this year. There’s also a lot to like about the company’s 1.61% dividend yield, share buyback program, and sustainability initiatives. The bottom line here is that CF Industries is an underrated fertilizer play that has been outperforming in 2022, which makes it a very appealing potential addition to any portfolio.
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