Hold Ratings, High Rewards? 3 Stocks That Could Defy Expectations
Risk-averse investors may prefer focusing on investment targets with broad approval from Wall Street analysts in the form of Buy ratings. However, sometimes attractive prospects may also be found in Hold-rated stocks.
These firms may have strong fundamentals and growth potential but, according to analysts, present a somewhat higher risk than more obvious Buy names.
Investors willing to take on a bit of risk could be handily rewarded by a position in one or more of the companies below, each of which combines a Hold rating with noteworthy potential to surprise to the upside. Particularly if you have the patience to outlast short-term volatility, it might be worth taking a closer look at these firms before they have the opportunity to realize that upside potential.
Embattled Tylenol Maker Kenvue Could Reward Patient Investors With Gains
Consumer health firm Kenvue (NYSE: KVUE) spun off from Johnson & Johnson (NYSE: JNJ) a couple of years ago, but it still retains an array of major brands in the space, including Band-Aid, Aveeno, Johnson's, and many others. The company has been in the news again recently as it has been embroiled in a controversy surrounding its massively popular Tylenol brand, which most recently led to the state of Texas filing suit against the firm and JNJ over allegations that the companies hid autism risks associated with the drug, although the connection remains unproven.
Unsurprisingly, this attention has been detrimental to KVUE's share price in the short term, sending it downward by more than 11% in the last month. This, combined with the company's second-quarter organic sales decline on a year-over-year basis due to seasonality, shipment timing, and other factors, may give investors and analysts pause. However, Kenvue's pipeline remains strong, and it is in the midst of a restructuring process that will see it narrow its focus toward its 10 best-selling brands and boost its supply-chain productivity.
Based on all of those factors, Kenvue shares could eventually rise to nearly $21 each, per analysts, for an upside potential of more than 44%. Investors entering a KVUE position should, though, brace themselves for more near-term turmoil.
Government Support Could Reverse Venture Global's Downward Trend
Venture Global (NYSE: VG) is a liquefied natural gas (LNG) export facilities firm, making it possible for domestic natural gas producers to ship their products to international markets. The company faces a fast-changing environment, including issues related to geopolitical conflict and trade wars, as well as overproduction concerns on one hand, but potentially beneficial regulatory changes and increasing global demand on the other.
In mid-October, the firm achieved final approval to export LNG from its Louisiana CP2 plant, currently under construction, to countries lacking a free trade agreement with the United States. This gives Venture a crucial advantage over other firms and reflects the federal government's support for fossil fuel endeavors.
Even though VG shares are down about 61% year-to-date (YTD)—and with short interest spiking by more than 21% in the last month—analysts remain divided over the company's likely trajectory going forward. Eight call VG shares a Buy, while another seven see it as a Hold or Sell. Regardless, though, the firm's consensus price target of $16.31 suggests nearly 74% in upside potential, which could become a reality if Venture continues to get a boost from the government.
Stablecoin USDC Firm Circle Has Tailwinds, But Uncertainty Lingers
Fintech firm Circle Internet Group (NYSE: CRCL) is involved in digital currency issuance, programmable payments, and the blockchain industry. It manages the stablecoin USDC. The company has experienced massive network growth in recent quarters, including several international launches, and has benefited from increasing adoption of stablecoins among banks, tech companies, and others.
Circle's revenue performance has been impressive. Second-quarter revenue rose 53% year-over-year to $658 million, driven largely by interest on U.S. dollar reserves to back USDC. At the same time, Circle struggles with losses, and the broader industry is highly volatile.
With the greenback weakening, it's also unclear what the near term will bring for stablecoins like USDC. Still, investors with an appetite for risk and some patience might see CRCL shares achieve more than 21% in upside, according to analyst forecasts.
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