Despite the April rally, all the major North American indexes are still deep in the red so far this year because of the COVID-19 shock. As of the Wednesday’s close, the S&P/TSX Composite Index was off about 16 per cent year to date, while the S&P 500 was down more than 13 per cent. But some stocks are bucking the trend. They have rebounded strongly from the March lows and have outperformed the indexes for most of 2020. Here are three to consider.
United Health Group Inc. (UNH-N)
Background: UnitedHealth Group Inc. is one of the largest health care companies in the world. It is divided into two segments, with UnitedHealth providing insurance coverage while Optum provides information and technology-enabled health services.
Performance: The shares dropped to US$187.72 in the March plunge but have surged back this month and closed Wednesday at US$277.02, a gain of 47.6 per cent from the low. Year-to-date, the shares are off less than 6 per cent.
Recent developments: The company released first-quarter results that beat expectations and says that, so far, it has been minimally affected by COVID-19. Revenue was up US$4.1-billion over the same period last year, to US$64.4-billion.
Net earnings were US$3.52 per share and adjusted net earnings were US$3.72. The company maintained its full year earnings per share outlook, forecasting net earnings of US$15.45 to US$15.75 a share and adjusted net earnings of US$16.25 to US$16.55.
Dividend: The shares pay a quarterly dividend of US$1.08 (US$4.32 a year) to yield 1.6 per cent at the current price. The dividend appears to be safe.
Outlook: The company’s decision to maintain its profit outlook indicates management and the board do not feel that COVID-19 will have a serious impact on its operations. RBC Dominion Securities has a target of US$341 on this stock.
J.B. Hunt Transport Services Inc. (JBHT-Q)
Background: This company is in the freight transportation business, providing truckload, intermodal and contract carriage facilities to customers across a diverse set of industries in the United States, Canada and Mexico.
Performance: The shares closed Wednesday at US$100.25, up 33 per cent from the March low. Year to date, the stock is down 14 per cent, a bit more than the S&P 500.
Recent developments: As with UnitedHealth Group, first-quarter results came in ahead of expectations, although they were down marginally from the first quarter of 2019.
The company reported net earnings of US$104.8-million (98 US cents a share, fully diluted) compared with last year’s US$119.6-million (US$1.09).
Operating income for the current quarter totalled US$154.7-million versus US$167.8-million for the same period a year ago. That included a US$12.3-million charge for a one-time bonus to employee drivers and certain personnel at field operations and customer facilities who have kept freight moving during the pandemic.
Dividend and buybacks: The company raised its quarterly dividend by 2 US cents a share in February, to 27 US cents (US$1.08 annually), to yield 1.1 per cent at the current price.
The company continues to buy back its stock, purchasing 798,000 shares for approximately US$75-million in the quarter. As of the end of March, the company had US$520-million remaining under its share repurchase authorization. I would be surprised if that allocation is used.
Outlook: Trucking is an essential service and one of the few businesses that is thriving in this environment.
Gilead Sciences Inc. (GILD-Q)
Background: Gilead is a U.S. biotech that researches, develops, and commercializes drugs.
Performance: The stock took a big jump to US$83.99 last week on a report of a successful clinical trial of an experimental drug. The shares, which closed Wednesday at US$81.31, are up more than 18 per cent since the March low and are ahead 25 per cent year-to-date.
Recent developments: A report in the medical journal STAT claimed that Gilead’s drug remdesivir was effective in treating severely ill COVID-19 patients at the University of Chicago hospital. The drug was originally developed to combat Ebola and has not been authorized by the U.S. Food and Drug Administration.
The report of the successful test was released without authorization, and Gilead was cautious about drawing any conclusions. It did not issue a press release on the trial and told Reuters in an e-mail that “the totality of the data needs to be analyzed in order to draw any conclusions.”
Outlook: What happens from here will depend on future results from remdesivir trials. Gilead has a portfolio of approved drugs, but investor attention is focused on this single project right now. If remdesivir treatment helps a significant number of COVID-19 patients and the drug is FDA-approved, the shares will likely move sharply higher. But if it turns out to be ineffective, they’ll test the March low.
Gordon Pape is editor and publisher of the Internet Wealth Builder and Income Investor newsletters.
Gordon Pape