The headwinds from the aggressive interest rate hikes by the Federal Reserve to tame the multi-decade high inflation, supply disruptions arising out of the continuing Ukraine-Russia war, rising energy and commodity prices, and the possibility of a recession ignited fears among investors, leading to the stock market ending the last year in a downbeat tone.

The benchmark indices witnessed their steepest annual losses last year since 2008, following the Fed’s fastest pace of rate hikes since the 1980s. The Dow Jones Industrial Average declined 8.8%, while the S&P 500 and the Nasdaq Composite fell 19.4% and 33.1%, respectively.

Moreover, the IMF had already warned in October 2022 that more than a third of the global economy will contract and that there is a 25% chance of global GDP growing by less than 2% in 2023. Recently IMF Managing Director Kristalina Georgiev warned that the global economy faces “a tough year, tougher than the year we leave behind.”

While there is elevated anxiety in investors, strong momentum stocks TotalEnergies SE (TTE), North American Construction Group Ltd. (NOA), and Overseas Shipholding Group, Inc. (OSG), which might be able to sustain their gains considering their solid fundamentals, might be ideal buys for the new year.

TotalEnergies SE (TTE)

TTE operates globally as an integrated oil and gas company. It operates through four segments: Integrated Gas, Renewables & Power; Exploration & Production; Refining & Chemicals; and Marketing & Services.

On December 21, TTE announced that the company and Eni (operator) had made a new gas discovery at the Zeus-1 well in Block 6, offshore Cyprus. This discovery follows the Calypso-1 and the Cronos-1 discoveries made on the same block, respectively, in 2018 and August 2022. This success at Zeus-1 further enhances the potential of Block 6 for the future ahead.

On December 19, TTE announced that it had won the Agua Marinha block today in the Open Acreage under Production Sharing Regime. Agua Marinha is a large block of 1,300 km2, about 140 km from onshore, located in the pre-salt Campos Basin.

This development aligns with the company’s strategy to focus exploration on selected high-potential basins that can deliver material at low cost, low carbon intensity resources.

Moreover, on November 28, the company declared a quarterly dividend of $0.72, payable on January 25, 2022. It pays an annual dividend of $2.87 that yields 4.63% on the prevailing prices. The company has a four-year average dividend of 6.54%.

TTE’s revenue increased 32.3% year-over-year to $64.92 billion in the third quarter ended September 30, 2022. Its adjusted EBITDA increased 73.7% year-over-year to $19.42 billion. The company’s adjusted net income increased 106.8% year-over-year to $9.86 billion, while its adjusted quarterly EPS increased 117.6% year-over-year to $3.83.

Analysts expect TTE’s revenue for the fiscal year that ended December 2022 to increase 39.4% year-over-year to $257.33 billion. Its EPS is likely to rise 111.9% year-over-year in the current year to $14.15. It has surpassed the EPS estimates in three of the trailing four quarters, which is impressive.

The stock has gained 20.5% over the past year and 24.8% over the past three months to close its last trading session at $61.44. It is trading higher than its 50-day and 200-day moving averages of $58.78 and $53.40, respectively, indicating an uptrend.

TTE’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It has an A grade for Momentum and a B for Quality. The stock is ranked #18 among the 93 stocks in the B-rated Energy – Oil & Gas industry.

To access additional POWR Ratings for TTE’s Growth, Stability, Value, and Sentiment, click here.

North American Construction Group Ltd. (NOA)

Headquartered in Acheson, Canada, NOA provides equipment maintenance, mining, and heavy construction services in Canada. It operates through the broad divisions of Heavy Construction & Mining; and Equipment Maintenance.

On October 4, 2022, NOA entered into a total return swap agreement for up to 1,000,000 of its common shares with a notional value of $15.0 million for a twelve-month period. This agreement provides an opportunity to capitalize on its share price, which the company believes is undervalued.

On October 1, 2022, NOA acquired a privately-owned company specializing in mobile fuel, lube, and steaming services for an estimated purchase price of $15.0 million. The acquisition was premised on its continued drive to lower operating costs by maximizing the company’s internal maintenance capabilities.

On September 20, 2022, NOA announced an amendment and extension of its senior secured credit facility to October 8, 2025. In addition to the extension of existing favorable terms, overall capacity has been allocated to provide greater flexibility in operating the company’s joint ventures.

NOA’s total combined revenue increased 38.2% year-over-year to CAD234.90 million ($172.44 million) in its fiscal fourth quarter ended December 31. Its adjusted net earnings improved 62% from the prior-year period to CAD16.78 million ($12.32 million), while its adjusted EPS rose 63.9% from the same period the prior year CAD0.59.

Street’s EPS estimate of $0.53 for the fiscal fourth quarter that ended December 2022 indicates a 13% rise year-over-year, while the Street’s $146.07 million revenue estimate for the same quarter reflects a 2.4% improvement from the prior year.

The stock has gained 26.1% over the past three months and 16.1% over the past six months to close the last trading session at $12.90. NOA is currently trading above its 50-day and 200-day moving averages of $12.83 and $12.30, respectively.

It is no surprise that NOA has an overall A rating, which translates to Strong Buy in our POWR Ratings system. The stock has an A grade for Momentum and a B grade for Value, Stability, Sentiment, and Quality. It is ranked at the top of the 42 stocks in the B-rated Energy – Services industry.

In addition to the POWR Rating grades stated above, one can view NOA’s rating for Growth here.

Overseas Shipholding Group, Inc. (OSG)

OSG is the owner and operator of a fleet of oceangoing vessels engaged in transporting crude oil and petroleum products in the U.S. flag trade. The company serves independent oil traders, refinery operators, and government entities.

On December 8, OSG announced that it had exercised options to extend its six bareboat charter agreements with American Shipping Company ASA for an additional three-year term commencing in December 2023. With these extensions, seven vessels will continue to lease from AMSC, six with maturity dates aligned to end in December 2026 and one with a maturity of 2025.

On November 15, the company’s Board of Directors announced the purchase of $5 million shares of the company’s common stock from Cyrus Capital at $2.86 per share for a total of $14,300,000. The price paid in this share purchase equates to an enterprise value of roughly 4.5 times the expected adjusted EBITDA for 2022, an implied valuation considered quite attractive for OSG.

OSG’s shipping revenues increased 30.9% year-over-year for the third quarter that ended September 30, 2022, to $123.06 million. The company’s net income came in at $13.25 million, compared to a net loss of $16.01 million in the year-ago period. Also, its EPS came in at $0.15, compared to a loss per share of $0.18 in the prior-year period.

Shares of OSG have gained 54.1% over the past year and 47% over the past six months, closing the last trading session at $2.94. The stock is trading above its 50-day and 200-day moving averages of $2.88 and $2.56

OSG’s POWR Ratings reflect its bright prospects. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. It has an A grade for Momentum and Quality and a B for Growth and Value. In the 45-stock A-rated Shipping industry, OSG is ranked first.

Click here to see OSG’s rating for Stability and Sentiment.

TTE shares were trading at $61.63 per share on Wednesday morning, up $0.19 (+0.31%). Year-to-date, TTE has declined -0.72%, versus a 0.33% rise in the benchmark S&P 500 index during the same period.

About the Author: Kritika Sarmah

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities. More...

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