Just because something hasn’t happened yet doesn’t mean it isn’t about to happen. This is the view of the legendary investor Stanley Druckenmiller Regarding the possibility of an impending recession. And unlike other financial forecasters, Druckenmiller did not vacillate on the issue and remained adamant that a recession was on the way.
Druckenmiller said, “For me, the odds haven’t changed, they’re delayed compared to expectations, but the fact that it hasn’t started yet doesn’t in any way change the likelihood of whether it’s going to be hard or soft.” In fact, Druckemiller doesn’t think a recession is inevitable. Not only that, but he thinks a dreaded plummet is a more likely possibility.
This is not to say that Druckenmiller, who has a net worth of $6.4 billion and is famous for being an asset manager who has never had a down year, is turning his back on the markets. He still believes that in the event of a recession, “market pockets” will work out well, and he is still investing heavily in certain names.
We have run two of his large properties through TipRanks database Also, see what the Street stock experts make of these picks. It turns out that they are betting on their continued success as well. Both are rated Strong Buys by the analyst consensus. Let’s see why both Druckenmiller and the analysts support the chances of these names.
Lamb Weston Holdings (LW)
Druckenmiller is apparently convinced that during a recession, people will continue to eat a lot of potatoes. The first stock in which Druckenmiller owns a significant stake is Lamb Weston, a company with a “passion for potatoes” and one of the world’s largest players in the frozen potato industry. Druckenmiller currently owns 2,066,610 shares of Lamb Weston, which has a market value of over $199.1 million.
The Lamb Weston Company has a strong presence in several markets and specializes in producing a wide range of frozen potato offerings, including french fries, potato chips, hash browns, and other potato-based appetizers.
The past two years have seen a significant jump in revenue and net income, and more evidence of the business launching into full steam is found in the recently reported Q4 FY2023 report. Revenue was up 47% year-over-year to $1.7 billion, beating Street expectations by $40 million. On the other end of the scale, adjusted net income jumped 90% to $178 million. The result was an adjective. Earnings per share of $1.22, also beating expectations – by $0.17.
Looking to fiscal 2024, the company guided net sales of $6.7 billion to $6.9 billion (consensus of $6.77 billion) and diluted earnings per share in a range of $4.95 to $5.40. Street was expecting $5.01.
Despite all this goodness, and perhaps due to the high expectations amid the previous high valuation, the shares fell in the aftermath of the report’s release and have been on a downtrend ever since. However, Jefferies analyst Rob Dickerson poses a rhetorical question to investors with a simple answer.
Will you be a buyer of the stock? The short answer: Yes, the analyst says. “We see the potential for earnings to rise as the year progresses, volume growth could accelerate significantly by FY25E, and we have no concerns about pricing power eroding as industry capacity emerges. The rating also looks attractive to us. In terms of forward price/earnings and EV/EBITDA, LW shares trade at nearly record low multiples.
These comments support Dickerson’s buy rating while the $135 price target suggests the shares will rise 40% in the coming months. (To view Dickerson’s track record, click here)
Most analysts agree with Jefferies’ view. The stock has a Strong Buy consensus rating, based on 5 Buys for 1 Contract. At $126.67, the average target indicates that shares will rise by 31% over the one-year time frame. (be seen LW stock forecast)
Option Care Health (Ouch)
For our next Druckenmiller-backed name, we’ll move into the healthcare space and take a look at Option Care Health. This company provides comprehensive and personalized infusion therapy services to patients across the United States. In fact, it is the largest home infusion company in the country.
With a strong focus on patient well-being, Option Care Health offers a range of advanced treatments covering various medical conditions, including immunodeficiency disorders, chronic diseases, and other complex conditions that require intravenous or parenteral treatments. Option Care has licenses in all 50 states, and in 45 of them it has infusion home operations. It is complemented by 157 mobile infusion suites.
On the financial side, over the past few years, the company has seen steady revenue growth and that was the case again in the most recent quarterly reading of Q2 ’23. Revenue was $1.07 billion, which is up 9.1% year-over-year. Adjective. EBITDA of $110.1 million increased by 29.2% from $85.2 million achieved during the same period last year. Both numbers came in above Street expectations. For the full year 2023, Option Care expects net revenue of $4.2 billion to $4.3 billion and adj. EBITDA is in the $415 million to $425 million range.
And while Druckenmiller already had some OPCH shares among his holdings, he significantly increased his fund stake in the second quarter by buying 3,587,359 shares. Total holdings now total 4,391,174 shares, which currently have a market value of approximately $153.7 million.
The company also has a fan of JPMorgan analyst Lisa Gill, who is impressed with the recent performance and sees more good things on the way.
“The first half of 2023 should have been a difficult period for OPCH in terms of comparative margins; however, the company has cleared itself quite well, and we believe the year-over-year cost savings will flow into the back half, making the updated adjustment “EBITDA margin is doable in our view,” said the 5-star analyst. However, we see OPCH as a beneficiary of new areas of treatment, and we see this as a key driver in the chronic infusion growth algorithm.
To this end, Gilles rates OPCH shares as overweight (i.e. buy), supported by a price target of $46. Implications for investors? An increase of 31% from current levels. (To view Jill’s track record, click here)
Bottom line, all four other analysts who have recently reviewed this stock are on the same page – giving it a consensus rating of “Buy”, resulting in a consensus rating of “Strong Buy”. Forecasts are for 12-month returns of 18%, bearing in mind an average price target of $41.40. (be seen OPCH Stock Forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
