Market Dynamics

After a rapid ascent off a crucial short-term moving average, Wall Street is currently experiencing a needed breather, with the Nasdaq slipping beneath its 21-day marker—an essential bastion of bullish support for the market throughout 2024. The larger retreat from this point should be embraced as a golden buying opportunity, as significant corrections seem inevitable against the backdrop of slightly altered inflation and rate projections on Wall Street.

Stock Picks

Investors with a vision toward the horizon are hunting for stocks that mesh upward earnings revisions with splendid value propositions. Today, we delve into the performance of three industry leaders that have not only turned heads over the last decade but also exemplify remarkable resilience in the face of market oscillations.

Stride, Inc. (LRN)

Stride stock has undergone a monumental 110% surge over the past three years, eclipsing the benchmark’s modest 30% gain and outstripping the Zacks Tech sector’s 47% growth during the last 12 months. The company’s success story is not just a transient Covid-related phenomenon; LRN has escalated by a staggering 180% in the past decade—a feat mirroring the S&P 500’s pace. Even though Stride shares have recently sidestepped to catch their breath in 2024, the current lull presents an opportune entry point for savvy investors.

Eyes on Valuation and Expansion

Stride finds a solid foothold at its 21-week moving average, though intermittent selling prospects could surface in the near term along with broader market trends. Notably, LRN’s stock trades 17% beneath its average Zacks price target and boasts compelling valuation metrics—an 80% markdown from its peaks and a substantial 45% below its ten-year median. On the earnings front, Stride cruised from $400 million in revenue back in 2010 to an impressive $1.84 billion last year, projecting a further 10% uptick in FY24 and a 6% increase in FY25.

Toll Brothers, Inc. (TOL)

Toll Brothers, a juggernaut in luxury home construction, witnessed a monumental 230% ascent in the last five years—surpassing the S&P 500’s trajectory and eclipsing the Zacks Construction sector’s 150% progress. TOL’s robust performance continued over the last 12 months, marking a staggering 100% surge and a 16% year-to-date appreciation.

Strategic Positioning

Toll Brothers’ architectural, engineering, mortgage, title, and land development subsidiaries underscore its status as a diversified luxury home builder with a pervasive national footprint spanning over 60 markets across the U.S. Despite the current elevation in its stock price, TOL trades at a 50% discount relative to the Construction sector and is positioned 17% below the Home Builders industry, highlighting a remarkable value proposition—55% under its ten-year peaks.

Toll Brothers confronts a cooling housing market, yet its prospects brightened following a recent surge in earnings revisions that catapulted it to a Zacks Rank #1 (Strong Buy). Furthermore, TOL’s net signed contract value in Q1 FY24 surged by a substantial 42%. As Millennials steer the housing market’s course and Baby Boomers embark on retirement relocations, Toll Brothers stands poised to capitalize on this generational shift. The company’s prudent restraint during the Covid surge—avoiding excessive construction—bodes well for a market where supply struggles to meet soaring demand.

Murphy USA’s Steady Surge in the Fuel Industry

A Meteoric Rise in the Gas Station Industry

Murphy USA, a gas station powerhouse, has seen its stock (MUSA) surge dramatically over the past decade. In a stunning display of growth, MUSA stock has soared by 930%, leaving traditional benchmarks in the dust. The Oil and Energy sector’s 17% downturn pales in comparison to Murphy USA’s outstanding performance. Over the last three years, Murphy USA shares have shown an impressive upward trajectory, outpacing its sector by a wide margin.

Resilience in Market Volatility

Murphy USA’s resilient nature was evident as the stock rebounded above its 21-day moving average, setting its sights on new records. Much like the broader market trends, MUSA is poised to challenge its 21-week moving average soon. A glance at the chart highlights Murphy USA’s consistent climb over the past decade, showcasing its ability to weather market ups and downs.

Value Metrics and Strategic Positioning

From a valuation perspective, Murphy USA is currently trading at its 10-year median, presenting an attractive investment opportunity. Trading 33% below its peak, MUSA’s forward 12-month earnings multiple stands at 16.2X, making it an appealing option for investors. Additionally, the company’s commitment to returning excess cash to shareholders through dividends and buybacks further bolsters its financial standing.

Robust Business Model and Growth Trajectory

Murphy USA has solidified its position in the market by marketing refined products through a network of retail stations, strategically located near Walmart outlets across the Southeast, Southwest, and Midwest regions. With a dedicated line space on the Colonial Pipeline, the largest refined products system in the U.S., Murphy USA serves approximately 1.6 million customers daily. This strategic positioning has contributed to the company’s impressive growth trajectory.

Positive Earnings Outlook

Over the last five years, Murphy USA’s earnings outlook has continued on an upward trajectory, culminating in a Zacks Rank #1 (Strong Buy) following a positive post-Q4 release. This positive momentum bodes well for the company’s future performance and investor confidence.