As fears of high inflation and the threat of recession become talk, investors are turning to the titans of Wall Street for guidance, namely Ken Griffin. Founded the hedge fund Citadel in 1990, the firm now has more than $50 billion in 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 Citadel CEO, whose net worth is $27 billion, is known as one of Wall Street’s bigwigs. Looking at the fund’s performance in 2022, it’s even clearer why Griffin has legendary status.
In contrast to the average hedge fund, which returned a negative 4.54% in the first seven months of 2022, Citadel’s flagship Wellington fund saw its returns rise 21% over the same period.
With that in mind, we wanted to take a closer look at three recently acquired Citadel stocks. Using the TipRanks database, we found that each ticker has earned a consensus ‘Strong Buy’ rating from the analyst community. Not to mention all three of them have plenty of upside potential.
Ranger Oil (ROCC)
We’ll start with an independent hydrocarbon producer based in Houston, Texas, Ranger Oil. Ranger operates in the Eagle Ford shale formation in South Texas, where its holdings produced 38,500 barrels of oil equivalent per day last quarter, 2Q22. Of this 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 they generated a top line of $314.5 million for Ranger in the second quarter. The company saw net income, based on that revenue, of $71.18 million, a sharp rebound from the first quarter’s loss of $9.98 million and well above the $3.04 million profit generated in the second quarter. quarter of 21.
This pattern also applies to EPS. Last quarter, the company posted earnings of 20 cents per share, which narrowed to an EPS loss of 47 cents in 1Q22. In the second quarter of this year, diluted EPS came in at $3.33.
Ranger is benefiting from higher prices in the oil and gas markets. The company produces and sells crude oil, natural gas liquids and natural gas – and prices for all three have risen over the past 12 months, even with a recent drawdown.
This company maintains an active policy of returning capital to shareholders, through a small dividend and a larger share buyback program. The company’s board has approved up to $140 million in buybacks through June next year, and since the program began last May it has returned about $46 million to shareholders.
Ken Griffin saw fit to buy ROCC by purchasing 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 the few small-cap E&Ps that we believe may be inclined to repurchase shares when the market presents opportunities while at the same time growing double-digit production…. We believe the solid operations/financials mix offers a unique investment, especially at today’s highly discounted relative valuation. We anticipate solid production/profit/FCF growth in the latter part of the year, which should follow in 2023 for a strong setup.”
Dingmann doesn’t just paint a bullish path for the company, he backs it with a Buy rating and a $71 price target. Going by this target, shares are expected to climb ~76% higher in the one-year time frame. (To watch Dingmann’s record, Click here)
In total, there are 3 recent analyst reviews for this stock, and all are positive – making it a unanimous Strong Buy analyst consensus. Shares are trading at $40.66 and the average target price of $58.33 suggests ~44% upside potential over the next 12 months. (See ROCC Stock Prediction on TipRanks)
Skechers USA (SKX)
Now we’re going to turn to footwear and look at Skechers. This company was founded in 1992 and over the past 30 years has become one of the largest athletic shoe brands in the US. Branded as “the comfort technology company,” Skechers offers a wide range of shoes, sandals, slippers and other footwear for every purpose under the sun.
Skechers ended the second quarter with some mixed numbers. The company reported a 12% year-over-year revenue increase to a quarterly record of $1.87 billion. That 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, up from 88 cents in the previous quarter.
Skechers reported it had $946.4 million in cash and liquid assets available at the end of the second quarter, 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 in its authorized share repurchase program.
Reflecting a new position in Griffin’s Citadel, the fund opened the trigger for 455,696 shares in the second quarter. As for the value of this holding, it stands at $17.77 million.
Morgan Stanley analyst Alexandra Stratton is unequivocally bullish on SKX, saying, “Run, don’t walk, to take another look at this stock.” Straton goes on to say, “In our view, SKX is one of the few companies in our coverage with 1) room for positive EPS revisions, 2) a clear revaluation opportunity, and 3) that it could benefit from a macro slowdown due to of 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 over a one-year horizon. (To follow Straton’s history, Click here)
Skechers has clearly piqued the Street’s interest – there are 9 recent analyst reviews here, all positive, supporting a consensus Strong Buy rating. Shares trade at $38.99 and the average price target of $50.33 suggests a 12-month upside of 29%. (See Skechers stock forecast on TipRanks)
Cycling 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 to treat currently refractory solid cancers. 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, which 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 the expansion cohort of its clinical trial candidate BT5528, a second-generation Bicycle Toxin (BTC) conjugate that targets EphA2. This is a Phase I/II study, planned to enroll up to 56 patients in the clinical trial to begin in the third trimester.
Bike also has early-stage clinical trials underway for BT7480 and BT8009. Again, both are precision treatments designed to target solid tumors. The 7480 is currently undergoing a Phase I/II clinical trial, as is the 8009. Earlier this year, Bicycle announced positive Phase I data for the 8009, which warranted continued studies. The company currently has 37 patients dosed in its Phase I/II trial of BT8009.
Bicycle is lucky and receives partnership fees and payments from development partners in its activities. In the second quarter, those payments totaled $4.37 million, up from $1.78 million in the previous quarter.
This biologic has a unique development platform and an early stage clinical program – all of which caught Ken Griffin’s eye. His firm bought 243,334 shares of the company’s stock in the second quarter, which are now valued at $6.5 million.
JMP analyst Reni Benjamin would agree that this stock deserves a closer look. He writes for Bicycle: “With three products in the clinic progressing through dose studies or already in Phase 2, data points moving to market over the next 12 months, and a strong cash position of $392.6 million (pro forma), we believe the shares bikes represent a unique buying opportunity given the recent weakness in the biotech industry.”
Benjamin uses his comments to support his Outperform (i.e. Buy) rating, and his $70 price target shows the extent of his confidence: a 172% upside over the next year. (To follow Maughan’s history, Click here)
Again, we’re looking at a stock with a consensus strong market analyst consensus here – this is based on 7 recent positive reviews. Shares have a trading price of $26.71 and an average target of $57.14, for a one-year upside potential of 114%. (See Bike Stock Prediction at TipRanks)
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Denial of responsibility: The views 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.