Time to Ride These 3 Mid Cap Momentum Plays

May 17, 2022 at 6:05 AM
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    Time to Ride These 3 Mid Cap Momentum Plays

    From outperformance over a period of minutes to weeks, momentum can be defined in many ways. Day traders tend to care most about a stock’s short-term momentum while buy-and-hold investors typically focus on the long term.

    As far as longer-term momentum strategies go, stocks with sizable year-to-date gains have been hard to come by. This has made it more challenging for momentum investors to reliably hitch their wagons to winning stocks. On many occasions this year, a stock that looked like it had the wind at its back later got dragged down with the herd.

    Yet there have been several companies that have sustained an upward trajectory since 2022 began. Energy names are the obvious candidates, but big gainers can be found in other sectors too. 

    In the U.S. mid-cap space several stocks are up 20%, 30%, or more this year. Some will likely keep running while others will stumble. These three momentum plays seem to have plenty left in the tank. 

    Why is PBF Energy Stock Going Up? 

    PBF Energy Inc. (NYSE:PBF) has some serious momentum going. The crude oil refiner has followed up last year’s 83% recovery by soaring another 140% year-to-date. It may feel like chasing performance at this point. Maybe not.

    As a provider of heating oil, transportation fuels, lubricants, and other oil-based products, PBF Energy is experiencing rising demand during the economic recovery. The company has a significant competitive advantage over most of its peers in the form of greater capacity. It processes a combined one million barrels of oil daily from six refineries located in New Jersey (its hometown), Delaware, Ohio, Louisiana, and California. Having a presence along the East, West, and Gulf Coasts should continue to go a long way toward fulfilling world demand.

    With crude and feedstocks throughput volumes up sharply from last year and the price of oil climbing well above $100, PBF Energy’s margins are up dramatically. First-quarter EPS of $0.35 handily surpassed Street expectations.

    Global inventories of refined oil products remain tight and demand is increasing. This is the perfect backdrop for a refiner like PBF Energy. There’s more fuel to this uptrend.

    Will Murphy USA Stock Keep Going Higher?

    Moving further along the fuel food chain, Murphy USA Inc. (NYSE:MUSA) is also benefiting from the favorable energy price environment. The gas station operator (and Murphy Oil spinoff) is pumped up about its 2022 growth prospects—and for good reason.

    Murphy USA prides itself on being a low-cost, high-volume seller of consumer and commercial fuels. So with AAA reporting that the national average for a regular gallon of gas has reached a record high, people are even more likely to seek out Murphy USA stations to save a few bucks. And since the company’s retail centers are strategically located near Walmart (NYSE:WMT) supercenters, budget minded-shoppers have a convenient pit stop. As with real estate, it is ‘location, location, location’ that drives Murphy USA’s performance.

    Unique access to oil pipelines and distribution terminals helps Murphy USA keep costs below those of other gas retailers. This allowed it to triple its profits in the first quarter and set the stage for a stellar 2022. Merchandise sales are also trending higher with more people on the road and food and beverage margins expanding. An active buyback program and dividend should keep investors refilling on Murphy USA as the stock rises for the fourth straight year.

    Is World Wrestling Entertainment Stock a Buy?

    The energy of a different sort, World Wrestling Entertainment, Inc. (NYSE:WWE) is a surprise winner in 2022. Shares of the wrestling-centric media group are up nearly 20% year-to-date while media giants like Netflix (NASDAQ: NFLX), Disney (NYSE: DIS), and Comcast (NASDAQ: CMCSA) are down significantly. Why are investors tuning out the big dogs and tuning in to a niche content provider like WWE? 

    Much of the difference lies in the return of live entertainment after pandemic cancellations. With the main events like WWE Raw and Smackdown back in business, the company’s financials are on the upswing. 

    First-quarter revenue and profits jumped 27% and 33% respectively as wrestling fans attended and watched live events like never before. Both reached record Q1 levels and management is forecasting record full-year results. The highly successful release of the WWE 2K22 video game is also responsible for the newfound hype around the stock.

    Meanwhile, a new partnership with Fanatics to create a digital platform for e-commerce and non-fungible token (NFT) trading cards has investors buzzing about WWE’s rebound. An extension of its programming partnership with A&E and expansion into the Middle East & North Africa (MENA) region are also reasons why WWE should continue to pick itself up off the mat. 

    Analysts are projecting 30% earnings growth this year buoyed by pent-up demand for live entertainment. This means WWE’s 23x forward P/E ratio has room to run and that the stock’s return to the $90’s may be in the cards. There’s no need to wrestle with a decision to buy this momentum play.


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