Investors searching for value should buy these underappreciated stocks not getting enough attention, analysts said this week. These companies have defensive characteristics, analysts say, and the shares offer an attractive entry point. CNBC Pro combed through top Wall Street research to find stocks that are under-the-radar. They include: Moog, O’Reilly , i3 Verticals , MRC Global and Safe Bulkers. O’Reilly MKM Partners said recently that it sees a “rare” opportunity to own shares of the auto parts retailers. The investment firm recently initiated coverage of the stock with a buy rating. O’Reilly has made several underappreciated and “under the radar” moves over the last several years that’s not getting enough investor attention, analyst David Bellinger said. The analyst noted key catalysts like new pricing initiatives, aggressive share buybacks, buy online pickup in store and the overall stability of the auto parts sector. “We view O’Reilly and its peers as unique hybrid plays benefiting both from stay-at-home trends/intermittent driving and also gaining traction as miles driven steadily recovers,” he said. Low unemployment and more aging vehicles on the road should keep demand growth high for the foreseeable future, the firm added. Bellinger also has the company as a top pick and said O’Reilly should be a core holding in any portfolio. “We view this as a hard-to-come-by opportunity for longer-term oriented investors,” he wrote. The stock is up 12% over the last month. Moog Shares of the systems and component controls company for the aerospace industry are up 8.4% this year. According to investment firm Cowen, the shares have plenty more room to run. “Under-the-radar Mood is a play on likely extended U.S./NATO defense spending lift and new defense program ramp,” analyst Cai von Rumohr said. Moog reported earnings earlier this month beating on both the top and bottom line. In addition, the company’s defense operations which is 55% of sales, have “above-average margins and include flight controls on tactical aircraft and missiles,” the analyst said. Von Rumohr called the stock an “attractive defense smidcap with firming outlook.” Execution and liquidity has given investors some agita, he wrote, but that’s largely overblown. Moog has also expertly managed supply chain issues and the analyst expects that to continue. “Despite restrained near- term cash flow and investor pushbacks the stock looks oversold,” von Ruhmohr said. i3 Verticals The software and service management solutions provider is firing on all cylinders, BTIG analyst Mark Palmer said recently. Shares are up 11.8% this year and i3 Verticals reported a strong top and bottom line beat and raised guidance in its third-quarter earnings earlier this week. The company also sits on BTIG’s top picks list for the second half of the year. “We view i3 Verticals as a relative safe haven within the FinTech space that is particularly compelling for not only its defensive characteristics but also for its under-the-radar, attractive growth profile,” analyst Mark Palmer said. The company is also a beneficiary of last year’s stimulus package passed by Congress. “We note that IIIV’s Public Sector business is poised to benefit from the disbursement of funds authorized by the American Rescue Plan Act to municipalities…” he wrote. Palmer said the company has undergone an impressive transformation to a software firm from a payments firm that sells software. “We view the company’s shares as deserving of a valuation that reflects the defensive and recurring nature of its top-line and the accelerating growth it has been demonstrating during the past several quarters,” Palmer said. Safe Bulkers- Jefferies, Buy rating “We are initiating coverage of Safe Bulkers with a Buy rating and $5 target. Safe is an under-the-radar dry bulk company with a long track record and sizable fleet. The shares are heavily discounted relative to its other US-listed dry bulk peers and the company recently announced a $5 million share buyback program which could help boost the valuation. ” MRC Global- Benchmark, Buy rating “MRC is the largest distributor of pipes, valves, fittings (PVF) and related products and services to the energy, industrial and gas utility end markets. With MRC demonstrating its ability to generate FCF in an upcycle, we believe its full-cycle FCF generation is underappreciated. … .Structural improvements in profitability and FCF have flown under the radar.” Moog- Cowen, Outperform rating “Attractive defense smidcap with firming outlook. Under-the-radar Mood is a play on likely extended U.S./NATO defense spending lift and new defense program ramp … .Despite restrained near- term cash flow and investor pushbacks (execution, liquidity), the stock looks oversold at an 8.8x FY23E TEV/EBITDA. MOGa’s defense ops (~55% of sales) have above-average margins and include flight controls on tactical aircraft and missiles.” O’Reilly- MKM, Buy rating “We view this as a hard-to-come-by opportunity for longer-term oriented investors. … .We view O’Reilly & its peers as unique hybrid plays benefiting both from stay-at-home trends/intermittent driving & also gaining traction as miles driven steadily recovers. … .Approximately 66%-75% of online orders for DIY are typically picked up in-store depending on the season, leveraging O’Reilly’s nearly 6,000-store footprint. … .This allows for more efficient, timely order fulfillment post some of the under-the-radar investments put in place…” i3 Verticals- BTIG, Buy rating “We view i3 Verticals as a relative safe haven within the FinTech space that is particularly compelling for not only its defensive characteristics but also for its under-the-radar, attractive growth profile. … .We note that IIIV’s Public Sector business is poised to benefit from the disbursement of funds authorized by the American Rescue Plan Act to municipalities. … .We view the company’s shares as deserving of a valuation that reflects the defensive & ecurring nature of its top-line & the accelerating growth it has been demonstrating during the past several quarters.”
© heardonwallstreet.com