Your five stocks to watch this week hail from a variety of sectors, amid signs of broadening market leadership: Lithium giant Sociedad Quimica Y Minra (SQM), semiconductor designer Monolithic Power Systems (MPWR), Commercial Metals (CMC), Vertex Pharmaceuticals (VRTX) and China electric-vehicle maker BYD (BYDDF).
The stock market is in a confirmed uptrend, with the major indexes showing resilience Friday despite a hot jobs report that suggests a more-aggressive Federal Reserve.
Chile-based chemicals maker Sociedad Quimica Y Minra is involved in the production and distribution of fertilizers, potassium nitrate, iodine and lithium. Lithium is SQM’s main business now, with production increasing.
SQM’s exposure to lithium makes it a key player in the EV boom, amid an insatiable demand for lithium-ion batteries. The price for lithium has spiked this year, making it a major contributor to SQM’s revenue. S&P Global Commodity Insights forecast the lithium carbonate CIF Asia price to average $41,708 per ton in 2022, more than triple that of 2021.
SQM’s fertilizers are also in high demand, though prices are off their highs. Its specialty plant nutrition products accounted for 31% of sales in 2021. Analysts estimate SQM is the world’s largest producer of potassium nitrate. Potassium nitrate is considered an ideal fertilizer for fruits and vegetables amid rapidly changing climate conditions.
SQM stock is in a consolidation with an official buy point of 115.86, according to MarketSmith. It’s formed a handle around its 50-day line but it’s a little too low in the base to be proper. Still, investors can use 99.84 as early entry.
SQM stock fell 5.6% to 92.79 last week, closing just below its 50-day line.
SQM stock’s relative strength line is trending downward, but still near multiyear highs. Its RS Rating is 98 out of a best-possible 99. Its EPS Rating is 84. The company has posted five straight quarters of profit and revenue growth.
SQM reports earnings on Aug. 17. FactSet analysts expect EPS of $3.12 vs. 31 cents in the year-ago quarter. Revenue is seen surging 288.6% year over year to $2.285 billion.
Peers Albemarle (ALB) and Livent (LTHM) posted strong earnings last week, with the former sharply raising guidance yet again. But their stocks failed to reflect the positive news. ALB stock, which has a cup-with-handle buy point of 273.78, fell 2.6% for the week. LTHM stock dipped 0.9%, trading around its 50-day and 200-day lines.
Monolithic Power Stock
Kirkland, Wash.-based Monolithic Power makes semiconductor-based electronics power control systems.
MPWR shares gapped up 9.4% on Aug. 2 after the company crushed analyst estimates for Q2 and raised its outlook for the current period.
Monolithic Power earned adjusted EPS of $3.25, an 80% jump from the same period last year. Sales rose 57% year over year to $461 million in the June quarter.
It marked the third straight quarter of accelerating sales and earnings growth for the company.
For the current quarter, Monolithic forecast revenue of $480 million to $500 million. The midpoint of $490 million is well above consensus for $458 million.
MPWR stock has been in a long consolidation with an official buy point of 580.10.
Shares shot up nearly 15% to 532.33 for the week. But after running up for five straight weeks, straight from the bottom, MPWR stock could use a breather. Ideally, shares would form a decent handle, forging a lower buy point and letting the moving averages catch up somewhat.
MPWR stock’s RS line is at a high. Its RS rating is 94, while its EPS is a best-possible 99.
Commercial Metals Stock
Irving, Texas-based Commercial Metals makes, recycles and markets steel and metal products in North America and Europe. Its North American segment accounted for 84% of its total revenue in the most recent quarter.
Major infrastructure spending plans in the U.S. fueled steel stocks’ rise earlier this year, as the price of steel surged. However, CMC stock and others in the group pulled back in May. More recently, CMC stock and some of its peers have rebounded.
One more day and Commercial Metals will have a handle on a daily chart, giving it a new 41.35 buy point. But no handle will show up on a weekly chart for now.
The company has reported six quarters in a row of earnings growth and seven straight quarters of revenue increases. It has an RS Rating of 92 and a top-notch 99 EPS Rating.
VRTX stock bounced off its 50-day line on Friday, breaking a trend line following strong earnings and raised guidance. Shares rose 4.8% to 288.03 on Friday, moving in heavy volume
It reported EPS of $3.60, topping views for $3.47. Sales rose 22% to $2.2 billion, also above estimates for $2.13 billion.
The company boosted its full-year sales outlook by $200 million. It now expects $8.6 billion to $8.8 billion in sales of its cystic fibrosis medicines.
Cystic fibrosis drug Trikafta, Vertex’s biggest moneymaker, took in $1.89 billion in sales. Analysts were expecting $1.81 billion to $1.86 billion.
VRTX stock is actionable from Friday’s move. Its relative strength line spiked up along with its stock price last week. It has an RS Rating of 95 and an EPS Rating of 99.
China-based BYD more than tripled EV sales in July after more than tripling Q2 sales year over year. The Warren Buffett-backed EV maker sold a record 162,530 new energy vehicles in July, up 222% vs. a year earlier and up 21% from June.
In the first seven months of 2022, BYD sold 803,880 NEVs, 292% more than it did in the year-ago period.
The Tesla (TSLA) rival will begin deliveries of the BYD Seal, a Model 3 challenger, later this month. The automaker also is kicking off a major overseas expansion. It’ll begin deliveries in Australia and New Zealand in the next few weeks and plans to sell passenger EVs in Germany and Sweden before year’s end, among with many other countries in Asia and Europe. It recently set plans to enter the Japanese market early next year.
BYD stock is working on a new consolidation. Shares rose slightly for a second straight week, but closed back below the 50-day line after peeking above it on Aug. 4. A strong move above the 50-day moving average, and above the July 29 high of 38.35, would offer an early entry.
Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.
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