April Pick: Coca-Cola HBC (LSE:CCH)
The Hellenic Bottling Company is best known for its connection with Coca-Cola, although it is more diversified in operations than some initially think. With own brands and other third party arrangements, the business is spread well both in product offering and in geographical reach.
The reason I like the stock at the moment is that I think the 40% fall so far this year is overdone. The halting of operations in Russia and the temporary closure of the plant in Ukraine will impact performance. However, these regions only contributed about 20% of volumes in the 2021 financial year. Therefore, I think the 40% sell off is more from fear than actual fundamentals.
Therefore, I think the share price could bounce back in Q2 as investors realize that the impact of disruption in Eastern Europe isn’t as bad as was being priced into the shares.
April Pick: Metacrine Inc (NASDAQ:MTCR)
This month I am going for a small cap US stock. Metacrine are a clinical-stage biopharmaceutical company pioneering differentiated therapies for patients with gastrointestinal (GI) and liver diseases. Their most advanced program targets the farnesoid X receptor (FXR), which is central to modulating GI and liver diseases.
MTCR has a very small market capitalisation of just $26M. The chart has a great setup. Resistance at $0.65 is the first test needed. If this can be cleared and the price hold above, $0.75 is a likely area for the price to target.
Small cap stocks have seen a more friendly environment over the last weeks. The market has seem some stabilisation and money is coming back into more high risk stocks. I think Metacrine will see a nice move up throughout April.
April Pick: Align Technology (NASDAQ:ALGN)
Align Technology designs and manufactures “Invisalign”, an innovative teeth straightening system that is replacing traditional orthodontic solutions and is rapidly changing the dentistry industry. With the help of computer-aided design (CAD), the company manufactures sets of clear plastic mouthpieces which over time reposition and straighten teeth in a more convenient and less visible way than fixed metallic braces.
ALGN has endured a tough 6 months, as the stock price has dropped significantly from a high of ~$730 down to a low of ~$380. The recent pick up in risk across markets has seen the price rise again towards the ~$450 mark. I believe the current levels are undervaluing the fundamentals of the business. Each quarter last year resulted in record revenues, albeit with a slowing rate of growth, and 2022 EBITDA margins are estimated to still be ~30%. ALGN is also set to benefit from its efforts in expanding their international reach, as over 50% of revenues are now from outside the US domestic market.
Analyst Recommendations – the institutional crowd is also extremely bullish on ALGN, as the latest Bloomberg survey of Equity Research Analysts showed that 93% have issued a “BUY” rating on the stock, with only 7% recommending “SELL”. In addition, the consensus 12 month target price implies a potential return of ~45% from the current levels.
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