As fears of high inflation and the threat of recession become the talk of the town, investors are turning to Wall Street titans for guidance, namely Ken Griffin. Founding hedge fund Citadel in 1990, the firm now boasts over $50 billion worth of assets under management.
As a 19-year-old sophomore at Harvard University, Griffin began trading from his dorm room with a fax machine, computer and phone. Now, the CEO of Citadel, whose net worth stands at $27 billion, is known as one of the Wall Street greats. Looking at the fund’s performance in 2022, it’s even more clear why Griffin has legendary status.
Unlike the average hedge fund, which had a negative return of 4.54% in the first seven months of 2022, Citadel’s flagship Wellington fund saw its returns grow 21% for the same period.
Bearing this in mind, we wanted to take a closer look at three stocks Citadel snapped up recently. Using TipRanks’ database, we found out that each ticker has earned a “Strong Buy” consensus rating from the analyst community. Not to mention all three of them boast plenty of upside potential.
Ranger Oil (ROCC)
We’ll start with a Houston, Texas-based, independent hydrocarbon producer, Ranger Oil. Ranger operates in the Eagle Ford shale formation of South Texas, where it’s holdings produced 38,500 barrels of oil equivalent daily in the last quarter, 2Q22. From that total production, Ranger saw crude oil sales totaling 27,500 barrels per day.
Those are solid production numbers for a small, independent oil company, and generated a top line of $314.5 million for Ranger in Q2. The company saw net earnings, based on this revenue, of $71.18 million, a sharp turnaround from the Q1 loss of $9.98 million, and far higher than the $3.04 million in profits generated in 2Q21.
This pattern holds for the EPS, as well. In the year-ago quarter, the company saw earnings of 20 cents per share, which fell to a 47-cent EPS loss in 1Q22. In the second quarter of this year, the diluted EPS came to $3.33.
Ranger has been benefiting from increased prices in the oil and natural gas markets. The company produces and sells crude oil, natural gas liquids, and natural gas – and prices for all three are up over the past 12 months, even accounting for a recent pullback.
This company maintains an active policy of returning capital to shareholders, through a small dividend and a larger share repurchase program. The company board has authorized up to $140 million in repurchases through June of next year, and since starting the program this past May has returned some $46 million to shareholders.
Ken Griffin saw fit to buy in on ROCC with a purchase of 100,845 shares. This opening position in the company is currently worth $4.1 million.
Griffin is far from the only bull here. 5-star analyst Neal Dingmann, of Truist, covers this stock and writes: “ROCC is one of few small cap E&Ps that we believe is able to lean into share repurchases when the market presents opportunities while simultaneously growing production double digits…. We believe the solid operations/financial combination offers a unique investment especially at today’s highly discounted relative valuation. We forecast solid production/earnings/FCF growth in the latter part of the year that should nicely ducktail into 2023 for a strong setup.”
Dingmann doesn’t just lay out an upbeat path for the company, he backs it with a Buy rating and $71 price target. Going by this target, shares are expected to climb ~76% higher over the one-year timeframe. (To watch Dingmann’s track record, click here)
Overall, there are 3 recent analyst reviews for this stock, and they are all positive – making the Strong Buy analyst consensus unanimous. The shares are trading for $40.66, and their $58.33 average price target implies ~44% upside potential for the next 12 months. (See ROCC stock forecast on TipRanks)
Skechers USA (SKX)
Now we’ll turn to footwear, and look at Skechers. This company was founded in 1992, and in the past 30 years has become one of the largest athletic footwear brands in the US. Branding itself as ‘the comfort technology company,’ Skechers offers a wide range of shoes, sandals, slippers, and other footwear, for any purpose under the sun.
Skechers finished up the second quarter with some mixed numbers. The company reported a 12% year-over-year gain in revenue, to a quarterly record of $1.87 billion. This total included an 18% gain in wholesale sales, and a more modest 4% gain in direct-to-consumer sales. The company’s earnings, however, came in at 58 cents per diluted share, down from 88 cents in the year-ago quarter.
Skechers reported having $946.4 million in cash and liquid assets on hand at the end of Q2, and year-to-date has completed share repurchases totaling $49.2 million, or 1.3 million shares. At the end of the quarter, the company still had $450.8 million remaining in its authorized share repurchase program.
Reflecting a new position for Griffin’s Citadel, the fund pulled the trigger on 455,696 shares in Q2. As for the value of this holding, it comes in at $17.77 million.
Morgan Stanley analyst Alexandra Straton is unabashedly bullish on SKX, saying, ‘Run, don’t walk, to take another look at this stock.’ Getting to the nitty-gritty, Straton goes on to say: “In our view, SKX is one of few companies in our coverage with 1) room for positive EPS revisions, 2) a clear valuation re-rating opportunity, & 3) that could benefit on a macroeconomic slowdown due to its value focus.”
Straton’s view naturally leads her to an Overweight (i.e. Buy) rating on SKX shares, and a $59 price target that implies a 51% upside potential on the one-year time horizon. (To watch Straton’s track record, click here)
Skechers has clearly piqued the interest of the Street – there are 9 recent analyst reviews here, all positive, backing up a unanimous Strong Buy consensus rating. Shares are trading for $38.99 and their $50.33 average price target suggests a 12-month upside of 29%. (See Skechers stock forecast on TipRanks)
Bicycle Therapeutics (BCYC)
The last stock we’ll look at lives in the biopharma sector. Bicycle Therapeutics is using a novel platform to develop a new class of synthetic, precision-guided therapeutic agents for the treatment of solid tumor cancers that are currently intractable. The therapeutic agents are based on Bicycles, a fully synthetic short peptide molecule that, structurally, forms two loops to maintain stability. They represent a new – and unique – therapeutic class, that combines the pharmacokinetic advantages of small molecules with the pharmacological advantages of biologics.
Most of Bicycle’s drug candidates are in early stages, and the company announced in June of this year that it had dosed the first patients in its expansion cohort of the clinical trial for candidate BT5528, a second-generation Bicycle Toxin Conjugate (BTC) targeting EphA2. This is a Phase I/II study, set to enroll up to 56 patients with the clinical trial to get started during Q3.
Bicycle also has early-stage clinical trials underway for BT7480 and BT8009. Again, these are both precision therapeutics designed to target solid tumors. 7480 is currently undergoing a Phase I/II clinical trial, as is 8009. Earlier this year, Bicycle announced positive Phase I data on 8009, which justified continuing the studies. The company currently has 37 patients dosed in the Phase I/II trial of BT8009.
Bicycle is fortunate, and receives collaboration fees and payments from development partners in its operations. In Q2, these payments totaled $4.37 million, up from $1.78 million in the year-ago quarter.
This biopharma features a unique development platform and a clinical program in the early stages of takeoff – all of this caught the eye of Ken Griffin. His firm bought 243,334 shares of the company in Q2, which are now valued at $6.5 million.
JMP analyst Reni Benjamin would agree that this stock is worth closer scrutiny. He writes of Bicycle: “With three products in the clinic advancing through dose-ranging studies or already in Phase 2, market-moving data points over the next 12 months, and a strong cash position of $392.6MM (pro forma), we believe Bicycle shares represent a unique buying opportunity given the recent weakness across the biotech sector.”
Benjamin uses his comments to back up his Outperform (i.e. Buy) rating, and his $70 price target shows the extent of his confidence: a 172% upside in the next year. (To watch Maughan’s track record, click here)
Again, we’re looking here at a stock with a unanimous Strong Buy analyst consensus – this one based on 7 recent positive reviews. The shares have a trading price of $26.71 and an average target of $57.14, for a 114% one-year upside potential. (See Bicycle stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
