Let’s bring it down to basics; investors want to see returns. After all, the comings and goings of the markets and daily price fluctuations are interesting to observe, but they would have significantly less appeal if the possibility of profit was taken out of the equation.
Like in any field, though, there are multiple routes to achieving the desired end-goal. You could go it alone and develop the skills of spotting a compelling investment opportunity, or maybe follow the lead of a fellow investor. Or you could go the tried and tested way of listening to the experts’ advice.
Here’s where we turn to the Street, where according to some, the massive disruption caused by the coronavirus has created particular openings for investors. We will take a look at two stocks which were recently reassessed by those in the know. What’s more, in addition to receiving a higher rating, the analysts see each surging by at least 40% in the year ahead. Let’s take a closer look.
SilverCrest Metals (SILV)
SilverCrest has been Wall Street’s biggest standout of 2019, with shares skyrocketing over 120%. The biggest question for investors, then, is whether those gains are likely to continue. B.Riley FBR analyst Adam Graf came out with an answer. The analyst upgraded SILV shares from Neutral to Buy, along with a $9.60 price target. The implication? Further upside of a handsome 40%. (To watch Graf’s track record, click here)
SilverCrest’s focus is on the exploration and drilling of gold and silver in Mexico, where it has two flagship projects, the Las Chispas property and the Cruz de Mayo property. Of the two, the latter is currently attracting the bulk of attention. Exploration of the facility is currently in high gear and accelerated drilling has been taking place amid rumors of a potential takeover of the high-flying small cap. Last month SilverCrest announced it had made the highest-grade discovery so far on the property in the Babicanora Norte Vein (called Area 200) of the Las Chispas Project. The discovery drill hole BAN19-200 intercepted 2.0 metres grading 6,418 grams per tonne silver equivalent. Area 200 joins Area 118 and Area 51 zones as the third “treasure chest” of high-grade gold-silver ore.
The discovery has not gone unnoticed by Graf: “We maintain our favorable view of the company’s flagship project, Las Chispas, which is approaching final feasibility and a construction decision. […] Exploration continues to yield new high grade gold-silver zones (e.g. Area 200 zone)—effectively increasing resource grade and project IRR […] As the discovery of Area 200 zone demonstrates, SILV is not passing up opportunities to define new high grade zones to upgrade the overall project and quicken capital payback.”
Overall, 3 additional Buy ratings add up to a Strong Buy consensus rating. The average price target of $8.50 could provide gains in the shape of 24%, should the figure be met over the next year. (See SILV price targets and analyst ratings on TipRanks)
Warrior Met Coal (HCC)
Like many other sectors, the coal industry has been hit hard by the coronavirus, disrupting supply and demand dynamics. US metallurgical coal producer Warrior Met Coal has been feeling the pinch, too. HCC stock is down by 11% year-to-date. The current lower share price provides an attractive entry point, at least according to B.Riley FBR analyst Lucas Pipes.
Pipes upped his rating on HCC from Neutral to Buy, as he believes the coal mine company is worth about 77% more than it’s currently selling for, and should hit $33 within the next 12 months. (To watch Pipes’ track record, click here)
The Alabama based company’s latest quarterly results noted a number of positives. EPS of $0.23 beat the Street’s call by $0.05; Revenue of $204.9 million beat the estimate by $7.76 million. For the full year, Warrior pulled off record annual sales volume of 8.0 million short tons, whilst also posting best-ever annual production volume of 8.5 million short tons.
In other recent news, Warrior announced it is to begin development of its Blue Creek reserves into a new mine located in Alabama. When finished, the company believes the investment will establish its standing as the leading U.S. pure-play producer of premium metallurgical coal products. Warrior exports 100% of this type of coal, which is necessary for the manufacture of steel in blast furnaces.
Pipes notes that while finding the perfect met coal stock is difficult, macro volatility and the uncertain outlook for China have caused the rising prices in the Pacific Basin to have gone unnoticed for too long. The analyst believes “on an apples-to-apples comparison, the stock looks too cheap to justify anything but a Buy rating.”
Pipes added, “We believe Warrior Met Coal occupies the most favorable market position based on current market trends. HCC’s high-quality coal reserves and ability to price its coal at a percentage of Australian LV HCC put the company in a relatively stronger position than many met coal domestic peers… Given the much more robust prices for Australian low-vol today, names tied to Pacific Basin prices such as Warrior Met Coal could benefit first.”
All in all, Warrior’s Moderate Buy consensus rating breaks down into 3 Buys and 2 Holds. With an average price target of $31.25, the analysts foresee an additional 68% to the share price over the next 12 months. (See HCC stock analysis on TipRanks)