The stock market and the economy have held up well so far this year in the face of several macroeconomic headwinds. Therefore, it could be wise to invest in quality stocks Assurant, Inc. (AIZ), ACADIA Pharmaceuticals Inc. (ACAD), and Accel Entertainment, Inc. (ACEL), which have gained substantial momentum recently.
Despite various macroeconomic challenges, including higher interest rates, the banking crisis, geopolitical instability, and growing warnings of a potential recession, the economy has proven resilient as consumer spending and income rose significantly in April, despite inflationary pressures.
Consumer spending, which drives most of the economy, increased 0.8% last month, while nonfarm payrolls increased by 253,000, exceeding estimates. The unemployment rate ticked at 3.4%, tying the lowest level since 1969. Moreover, average hourly earnings grew 0.5% for the month and 4.4% year-over-year, exceeding economists’ expectations.
As a result, the S&P 500 has gained more than 9% year-to-date, while the tech-heavy Nasdaq 100 has climbed more than 25%. According to Citigroup (C), investors poured $21 billion into new long positions on the S&P 500 last week.
Additionally, Goldman Sachs’s (GS) prime brokerage unit bought shares for two consecutive weeks at the fastest pace since October, following a period of persistent selling.
Furthermore, the stock market is gearing up for a robust surge in the near future. The S&P 500 might trade above 4,900 by early next year, according to Bank of America's (BAC) technical research strategist Stephen Suttmeier. The bullish trend revolves around breadth, or the rate of participation in upside rises, among the stock market's underlying security issues.
Amid a positive market outlook, it could be wise to invest in fundamentally strong stocks AIZ, ACAD, and ACEL, which are already building up significant momentum.
Let’s discuss in detail what makes these stocks worthwhile investments.
Assurant, Inc. (AIZ)
AIZ is a global lifestyle and housing solution provider that supports, safeguards, and connects consumer purchases. Its Global Lifestyle division offers mobile device solutions and extended service products, while the Global Housing division provides lender-placed insurance, voluntary manufactured housing insurance, and other specialized products.
On April 26, AIZ announced it had secured a multi-year partnership with Updater, the industry leader in relocation technology. This collaboration enables AIZ to capitalize on Updater's innovative product, which brings value to property management companies and renters while driving technological advancements in the multifamily industry.
On April 20, the company announced that it had joined forces with CNH Industrial Capital America LLC and CNH Industrial Capital Canada Ltd., subsidiaries of CNH Industrial N.V. (CNHI). CNHI is a prominent worldwide provider of agricultural and construction equipment and services.
This enables AIZ to expand its reach through CNHI dealers in the United States, allowing them to offer a wide range of equipment protection and insurance products, resulting in increased business opportunities and expansion.
For the first quarter that ended March 31, 2023, AIZ’s revenue from net investment income increased 21.9% year-over-year to $105.20 million, while its total revenues grew 6.4% year-over-year to $2.64 billion. The company’s cash inflows from operating activities came in at $259.60 million, compared to cash outflows of $501.10 million in the prior year’s period.
The consensus revenue estimate of $10.67 billion for the fiscal year (ending December 2023) reflects a 4.7% year-over-year improvement. Likewise, the consensus EPS estimate of $11.37 for the current year indicates a 2.2% rise year-over-year. Moreover, the company surpassed the consensus EPS estimates in three of the trailing four quarters.
Shares of AIZ have marginally gained over the past month to close the last trading session at $123.79. It is trading above its 50-day moving average of $121.94.
AIZ’s solid fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
AIZ has a B grade for Growth, Momentum, and Sentiment. It has ranked #2 in the B-rated 8-stock Insurance - Accident & Supplemental industry.
In addition to the POWR Ratings I’ve just highlighted, you can see AIZ’s ratings for Value, Stability, and Quality here.
ACADIA Pharmaceuticals Inc. (ACAD)
ACAD is a biopharmaceutical company that develops and commercializes innovative medicines for unmet medical needs in Central Nervous System (CNS) disorders and rare diseases. It provides treatments for hallucinations and delusions, Rett Syndrome, Alzheimer's disease psychosis, and more.
The company has been making significant strides in its pipeline, including completing the Phase 1 development program for ACP-204. In the latest release of quarterly results, ACAD’s CEO, Steve Davis, said, "We are nearing enrollment completion of the Phase 3 program for pimavanserin as a potential treatment for the negative symptoms of schizophrenia with top-line results expected in early 2024.”
On March 10, ACAD announced it had received FDA approval for DAYBUE™ (trofinetide), making it the first and only treatment for Rett syndrome. This breakthrough benefits patients and positions ACAD as a leader in addressing unmet medical needs, enhancing its competitive advantage in the market.
For the fiscal first quarter that ended March 31, 2023, ACAD’s revenues increased 2.6% year-over-year to $118.46 million. As of March 31, 2023, the company’s cash and cash equivalents stood at $290.90 million, compared to $114.85 million as of December 31, 2022. Also, its total assets amounted to $655.31 million, compared to $587.81 million as of December 31, 2022.
Analysts expect ACAD’s revenue to increase 7.6% year-over-year to $556.46 million for the fiscal year ending December 2023. Similarly, the company’s revenue for the next year (ending December 2024) is expected to grow 22.1% from the prior year to $679.47 million.
The stock has gained 52.7% over the past six months to close the last trading session at $23.79. It is trading above the 50-day and 200-day moving averages of $20.65 and $18.02, respectively.
ACAD’s robust outlook is apparent in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
ACAD has a B grade for Value, Quality, and Momentum. It has ranked #23 out of 167 stocks within the Medical - Pharmaceuticals industry.
Click here to access additional ACAD ratings for Growth, Stability, and Sentiment.
Accel Entertainment, Inc. (ACEL)
ACEL functions as a distributed gaming operator. It is involved in the setup, maintenance, and operation of gaming terminals and redemption devices with ATM functionality. Additionally, ACEL manages other amusement devices in authorized non-casino establishments.
During the first quarter of fiscal 2023, ACEL repurchased approximately $4 million worth of its Class A-1 common stock. By reducing the number of outstanding shares, this strategic move could boost the company’s share prices, benefiting both ACEL and its shareholders.
ACEL’s net revenues increased 48.9% year-over-year to $293.21 million for the first quarter that ended March 31, 2023. Its operating income increased 30.5% from the year-ago value to $27.67 million. The company’s adjusted EBITDA grew 30.9% from the prior-year period to $46.12 million, and its adjusted net income came in at $21.06 million, up 19.6% year-over-year.
The consensus revenue estimate of $1.15 billion for the fiscal year ending December 2024 indicates a 2.2% year-over-year improvement. The consensus EPS estimate of $0.88 for the same period reflects an 11.7% rise year-over-year. Furthermore, the company topped the consensus revenue and EPS estimates in three of four trailing quarters, which is impressive.
The stock has gained 15.5% year-to-date to close the last trading session at $9.16. It is trading above its 50-day and 200-day moving averages of $9.03 and $8.93, respectively.
ACEL’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our proprietary rating system.
ACEL has a B grade for Value, Quality, Sentiment, and Momentum. It is ranked #5 within the B-rated 28-stock Entertainment - Casinos/Gambling industry.
Click here to access additional ACEL ratings (Growth and Stability).
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AIZ shares were trading at $118.58 per share on Wednesday afternoon, down $5.21 (-4.21%). Year-to-date, AIZ has declined -4.13%, versus a 9.45% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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