3 Sectors. 3 52-Week Highs. 1 Buy.

According to Stocktwits’ Trends with No Friends newsletter, there were 115 52-week highs in Tuesday's trading, more than six times greater than the 52-week lows. Of the 52-week highs, the three leading sectors in order were financials (29), consumer cyclical (16), and industrials (14).  

Rather than reviewing the pros and cons of all 59 stocks in these five sectors, I will make my life much easier by selecting the stock from each sector with the lowest number of Stocktwits followers.

Before I do a little blurb for each stock and then select the one Buy from the three candidates, it’s essential to understand the rationale behind the Trends with No Friends system.  

“Stocks that are outperforming tend to continue to outperform. Stocks with a low Stocktwits following are, by definition, undiscovered by the crowd. Stocks that have both Relative Strength and Low Stocktwits Following can really outperform as more investors discover them,” states the latest newsletter. 

“They are ripe to rip.”

It’s a strategy that is simple to understand and execute. That makes it all right in my books. 

I’ll start with the stock with the highest number of Stocktwits followers and move lower from there. In the end, I’ll make my pick.

Transportadora de Gas del Sur ADR

I have to admit that I’m not familiar with the Argentinian energy company. It primarily transports natural gas and produces LNG (liquid natural gas). As a big follower of Latin American companies, I’ll definitely add it to my watchlist. 

The company has four operating segments: Natural Gas Transportation Services (22% of revenue), Liquids Production and Commercialization (58%), midstream (19%), and Telecommunications (1%). 

The Natural Gas Transportation Services segment transports natural gas through its pipeline system to distribution companies, power plants, and industrial customers. The Liquids Production and Commercialization segment produces and commercializes natural gas liquids, such as ethane, liquid petroleum gas, natural gasoline, propane, and butane. It also provides LNG storage. The Midstream segment provides refining services and generates steam for electricity production. Lastly, the Telecommunications segment offers data transmission services to residential, commercial, industrial, and electric power generation customers. 

For some strange reason, I can’t access the company’s investor relations site to get a better understanding. I also can’t locate their SEC filings. Thankfully, I can access the 40-F through the back door using S&P Global Market Intelligence data. 

In Q2 2024, its revenue was 267.34 billion Argentine real ($267.2 million), 27% higher than a year earlier. Its operating income was 127.66 Argentine real ($129.2 million), 127% higher than Q2 2023. 

On the surface, those seem like very good numbers. 

It is the sixth-largest holding of the Global X MSCI Argentina ETF @GLOBAL X AR with a 4.49% weighting. Its shares are up 108% over the past year. Monday’s 52-week high was the 19th of the past 12 months. It is trading within 7% of its all-time high of $24.22.

Choice Hotels International

The last time I followed Choice Hotels International stock was in 2023 and early 2024, when it unsuccessfully tried to acquire Wyndham Hotels & Resorts (WH) for $8 billion. Since the bid was called off on March 11, its shares have gained about 10%. 

Despite the rebuff from Wyndham, Choice’s stock has not suffered from an unsuccessful outcome. It hit a 52-week high of $143.69 on Monday, its 25th of the past 12 months. It’s not too far off its all-time high of $157.46, hit in December 2021.

The company is the largest hotel franchisor in the world, with over 7,400 hotels in 46 countries offering nearly 630,000 rooms. Its asset-light business model has approximately 115,000 rooms in its pipeline, with unit growth of 20% year over year.

In 2024, it expects adjusted earnings per share of $6.53 at the midpoint of its guidance, 7% higher than a year earlier. Based on its current share price of $140.42, it trades at a reasonable 21.5x that estimate. 

The only downside to buying Choice stock is that it’s underperformed over the past five years, gaining just 58%, considerably less than higher-end management companies like Marriott International (MAR), up 107% over the same period.

XCHG

XCHG, which operates as XCharge, has only been a public company for a couple of months. The Chinese EV charging company went public on Sept. 9, selling 3.3 million shares at $6.20, which was at the low end of the pre-IPO pricing range. 

However, that doesn’t seem to have dampened the investor enthusiasm. Its shares are up 319% since the IPO, although they are down over 20% as I write this mid-afternoon on Wednesday. On Monday, it hit $30.47, its highest share price since its IPO. That’s the second time it’s done that in a week.

The company’s revenues remain small. In 2023, its annual revenue was $38.5 million, 31% higher than a year earlier, with a $6.5 million operating loss. In the three months ended March 31, 2024, its revenues were $11.2 million, 51% higher than a year ago, with an operating profit of $919,000. 

If you annualize its latest quarter, its revenues would be $45 million, 16% higher than in 2023, with a $3.6 million operating profit. 

While those are decent numbers, the current share price values its equity at $1.55 billion, or 34x the $45 million 2024 sales estimate from above. 

Owners of Chargepoint Holdings (CHPT) stock understand what happens when you get ahead of the story.    

This is only for aggressive investors.

And the Winner Is…

All three of these businesses have their pros and cons. If you’re a dividend investor, none will be attractive to you. If you’re risk averse, X-Charge definitely won’t be. 

When it comes down to it, if you’re a buy-and-hold investor, Transportadora de Gas del Sur’s ADRs are your best bet. Natural gas demand will continue to grow in the years ahead, even as the world transitions away from fossil fuels. 

I’ll continue to study its business in the weeks ahead. I suggest you do the same. 

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