This Intriguing, Under-Followed Stock Has Captured My Attention
The Fed Chair is not the only 'Powell' I'm following.
You've reached your free article limit
You've read 0 of 1 free Pro articles.
Following a strong earnings report from Meta META and a market-friendly Fed, investors are rotating back into the Magnificent Seven names. Apple AAPL and Amazon AMZN will report quarterly results on Thursday night, and there is hope that those reports will be more like Meta's than Microsoft's MSFT, which was mediocre.
The Nasdaq 100 QQQ is trading up 0.4% while overall breadth is running negative, and new 12-month highs have dropped to around 400. The Russell 2000 IWM is exhibiting relative weakness, especially in the financial and energy sectors.
I'm holding some Amazon AMZN, but I have reduced the position a bit in front of earnings. Amazon is less levered to AI than the other Magnificent Seven names and has a more attractive valuation than most, so I'm inclined to make additions after the earnings news.
Next week, there are at least a dozen small-cap companies I follow that will be reporting news. In addition, Humacyte HUMA is due for an FDA decision on its artificial vein product. I'm tinkering with my position sizes and developing some strategies for the inevitable volatility that the news will produce. I am not a big fan of holding positions into binary events, and I also want to have the flexibility to take advantage of overreactions to the news, so I tend to cut some exposure in front of big events.
One interesting name that I'm following after its earnings report is Powell Industries POWL. This is a higher-priced name that has little analyst coverage and trades a little thin. Powell manufactures power substation packages, generators, and similar equipment that are used primarily by electrical utilities. The power market is very robust due to data center and AI demand.
Powell had a big earnings beat, with revenue jumping 50% and EPS coming in at $3.79 versus expectations of $2.16. Powell's chief financial officer said:
"Looking forward, we remain encouraged with where Powell is positioned as we enter the last quarter of fiscal 2024. Commercial activity remains strong, providing a tailwind as we close out the year and prepare for fiscal 2025. Operationally, we continue to make improvements necessary to execute our backlog while also progressing our plans to thoughtfully expand our capabilities. Notwithstanding the typical challenges associated with a projects-based business, based upon the quality of our backlog and our liquidity position, we believe that we are well-positioned to sustain our year-to-date financial performance through the fourth quarter while providing a strong entry point as we look forward to fiscal 2025."
POWL's current forward P/E multiple for fiscal year 2024 (ending September) is 16x, and anticipated EPS growth in the following year is about 20%. However, the potential for upside surprises makes the name an interesting value, and the thin trading may offer some mispricing. I am holding a position and will be looking to add to it as things develop.
At the time of publication, Rev Shark was long AMZN, HUMA and POWL.
