In good markets or bad, we stick to a consistent game plan, recommending high-potential stocks uncovered by our Quadrix rating system, notes Rich Moroney, editor of the small-cap focused advisory service, Upside.
We isolate the very best names and mostly let our sector exposures fall where they may. We never recommend second-tier stocks simply to gain exposure to a particular sector. Still, we understand that many investors want to cover the bases.
With that in mind, we are reviewing our top picks in a variety of broad sectors defined by Standard & Poor’s. Profiled below are four sector leaders capable of climbing 20% in the year ahead, reflecting robust operating momentum and strong Quadrix scores.
Sporting an Overall score of 99, AMN Healthcare Services (AMN) is the top-ranked stock among the 186 health-care companies in the S&P 1500 Index. A leading provider of temporary and permanent skilled labor solutions to health-care providers, AMN is benefiting from labor shortages expected to persist.
AMN has topped consensus sales and profit targets in 14 straight quarters, and current estimates leave room for upside surprises. The consensus expects current-year profits to surge 41% to $11.32 per share. Revenue is projected to top $5 billion, up 27%. AMN is being upgraded to Best Buy.
Esquire Financial (ESQ) stands tall among financials. The stock boasts an Overall score of 98, compared to an average of 69 for financials in the S&P 1500. A microcap bank overseeing roughly $1.3 billion in assets, Esquire serves commercial and retail customers in New York. Across the U.S., it offers a variety of services to law firms, including loans based on the future value of legal cases.
The bank delivered outstanding June-quarter results, with per-share earnings up 37% to $0.78. Revenue (net interest income plus non-interest income) increased 23%. The stock seems overlooked, with only one analyst providing estimates. Per-share earnings for 2022 are projected to surge 52%, up from the 39% growth expected when we initiated coverage of the stock in June. Esquire is rated Best Buy.
A standout among industrial stocks, Heritage-Crystal Clean (HCCI) earns an Overall Quadrix score of 99 — first among the 25 environmental facilities stocks, which earn an average of 61. With annual capacity of some 50 million gallons, Heritage collects and re-refines used oil.
For the 12 months ended June, per-share profits more than doubled, while sales grew 33%. The five-analyst consensus estimate calls for per-share profits to climb 23% in 2022. For the September quarter, Heritage is expected report 3% per-share profit growth, a beatable target in our view. The stock is being upgraded to Best Buy.
Sanmina (SANM) is a top pick among technology stocks, reflecting its strong operating momentum, reasonable valuation, and growth trajectory. In a crowded field of 20 electronic-manufacturing services stocks in Quadrix, Sanmina earns an Overall score of 92, outstripping the group average of 69.
Sanmina seems cheap given its growth outlook. At 10 times trailing earnings, the stock trades at a 32% discount to the median provider of electronics manufacturing in the S&P 1500 Index and 23% below its 10-year norm of 13. For fiscal 2022 ended September, the consensus projects per-share profits will jump 22% to $4.85. Next year, per-share earnings are expected to advance 12% to $5.42, with revenue up 5%. Sanmina is a Best Buy.