Who better to know when a stock will be moving significantly in the near future than insiders working at the company in question? Following insider transactions can be a good starting point to dissect where a stock's future may be headed, given that you finish doing the due diligence necessary to justify the evidence you find.
Now that the FED has pivoted into a proposed interest rate cut policy for 2024, markets are ready to shift their preferences soon. Some out there have rolled out their outlooks for the year, such as BlackRock (NYSE: BLK) and The Goldman Sachs Group (NYSE: GS), but the specific advice for you today comes from Barron's.
By proposing their top stock picks for 2024, the team at Barron's is onto something in today's shaky market. One thing is sure though, they are chasing value and growth, which is one of the reasons that U-Haul (NASDAQ: UHAL) stock made it into the list along with other value plays like Alibaba Group (NYSE: BABA), but more on U-Haul later.
Get with the program
Being Jerome Powell, the chairman of the FED, must be the most challenging job out there today. He has to deal with conflicting data from two active economies today, broken down into services and manufacturing spaces in the United States.
Following the ISM PMI indexes, both services and manufacturing, you will notice a significant gap forming. While manufacturing has been contracting for roughly a year, services have pushed expansion activity during the same period. Now, everyone is looking for the answer: how will rate cuts change this?
Well, Goldman Sachs is making a lot of sense in its 2024 macro outlook report, where they expect these rate cuts to spark a turnaround - and a breakout - in the manufacturing sector, which would also imply a continuation of the bullish trend seen in the services sector.
Here is how this is good for U-Haul: Because construction is an industry likely to be exposed to this manufacturing boom. The housing market stalemate is in desperate need of new residential inventory; there will be many people moving once these new homes hit the market.
Even Warren Buffett has gotten behind this idea, judging by his purchases in homebuilding stocks like Pulte Group (NYSE: PHM) and D.R. Horton (NYSE: DHI). A secondary gauge for you to judge the market's sentiment on real estate can be the Vanguard Real Estate ETF (NYSEARCA: VNQ), which closed the last quarter in a bull run.
Follow the money
So why U-Haul and not competitors like Ryder System (NYSE: R) or similar business models like Hertz Global (NASDAQ: HTZ)? Well, remember what Goldman and Barron's look for in 2024? They want growth, notably above-average growth prospects.
Knowing what you know now, a comparison of U-Haul against the rest of the transportation services industry is called for. On average, analysts today project earnings per share growth of roughly 10.5% for the next twelve months. This is now your benchmark against which to compare U-Haul.
Analysts expect EPS expansion of 14.9% for the next year in U-Haul, roughly 42.0% above the industry average, bingo. Where the growth will come from is still debatable. Still, your educated guess is that the stock will ride the tailwind of housing activity coming in the next few quarters.
Could this be the reason behind insiders buying the stock in the past quarter? Mark V. Shoen, a major shareholder in U-Haul, could affirm that this was part of his reasoning when he added up to 132.5 thousand shares in November 2023; that's $6.9 million in value, by the way!
When analysts sat down to figure out the growth prospects for Hertz, they came up with a net decline of 38.9% for earnings in the next year, which pales in comparison to U-Haul's. Regarding Ryder Systems, analysts were not scared to show their bearish bias, as this stock is set to contract EPS by 10.3% in the next twelve months.
Asking the ultimate judge, the marketplace, price action seals the deal to express bullish sentiment toward this name. Because Hertz stock trades at 47.0% of its 52-week high prices, it is evident that today's price reflects the poor outlooks analysts expect from the stock.
With U-Haul, markets keep bidding up the stock's price as it is now trading at 92.0% of its 52-week high prices, and the way the economy is looking for 2024, this momentum is far from dying off.
