Epicenter Stocks To Watch This Quarter
What are epicenter stocks? Originally coined by Fundstrat’s Tom Lee early in the pandemic, “epicenter stocks” are companies that were hit hardest by the virus blowback but could benefit the greatest from an economic reopening. The umbrella of epicenter stocks is broad and covers anything from energy to consumer cyclical stocks. But it is a relatively logical take on the stock market today.
All things considered, one of the only reasons many companies were crushed last year had to do with the coronavirus. While some industries still have yet to recover fully, others have begun flourishing. Given the circumstances in Europe, however, it’s important to keep in mind that we aren’t out of the woods by a long shot.
Vaccine distribution and a hopeful round of stimulus have boosted sentiment in the market despite finding new strains of the coronavirus in certain parts of the world. This trend also has the “Robinhood community” looking into beaten-down penny stocks. We discussed the general lack of low-priced stocks accessible on the app since it doesn’t allow OTC penny stocks. In light of this, Robinhood penny stocks will be those listed on major exchanges like the NYSE and Nasdaq.
So this begs the question, are there still epicenter stocks to watch on Robinhood, or have we surpassed the “oversold” stage in most names? Take one look at things like leisure, travel, energy, and even mortgage companies, and you’ll see that the “big recovery” has yet to return many of these companies to their pre-pandemic levels. With that in mind, there’s likely plenty of epicenter penny stocks to keep track of this year.
Epicenter Penny Stocks To Watch On Robinhood
- Drive Shack Inc. (NYSE: DS)
- Rave Restaurant Group (NASDAQ: RAVE)
- Muscle Maker Inc. (NASDAQ: GRIL)
- Kosmos Energy (NYSE: KOS)
- Ring Energy (NYSE: REI)
Restaurant & Entertainment Penny Stocks To Watch: Drive Shack Inc.
The standard hospitality and leisure industry was hit hard and has still yet to come close to recovering. However, as social distancing restrictions have begun to lift and certain states are reopening their economies, this industry has gained momentum. Drive Shack has been one of the top penny stocks to watch over the last few months. In fact, since the start of the 4th quarter last year, DS stock has managed to bounce back strongly from around $1 to highs this year of $3.65.
The biggest focus, aside from obviously reopening, is building out a new brand. In particular, the company is rolling out the launch of its Puttery locations this year. Part of this roll-out included a recent partnership with famed golf star Rory McIlroy. He will invest in the future growth of Puttery through his investment vehicle, Symphony Ventures. Furthermore, Drive Shack recently brought in fresh capital it has earmarked for this new initiative. A portion of this $50 million round will initially go toward the planned development of five of seven Puttery venues this year.
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Last week Drive Shack’s filings showed mounting institutional interest. T. Row Price reported an 8.3% stake in the company. Furthermore, American Assets Capital Advisers also reported a position in Drive Shack. In this case, it was a 6.3% interest.
Rave Restaurant Group + Muscle Maker Inc.
Both Rave. Restaurant Group and Muscle Maker Inc. have seemingly moved in tandem most of the year. While volume levels have varied, the overall trend is quite similar. Rave operates several pizza-focused restaurants via direct ownership, franchising, or licensing, including Pie Five Pizza Co., Pizza Inn restaurants, and Pizza Inn Express kiosks. The company just reported its second-quarter financial results for its 2021 fiscal year. As you might imagine, revenue results weren’t stellar in light of the pandemic. However, management appears optimistic about the rest of this year.
However, on a comparative quarterly basis, Rave actually showed more strength during the pandemic than it did in its prior-year period without any virus sell-off. Brandon Solano, Chief Executive Officer of RAVE Restaurant Group, Inc. explained, “We hold significant cash, have limited leverage, and were more profitable in Q2 during the pandemic than we were in Q2 a year ago before COVID-19 was declared a pandemic leading to dining room restrictions and closures.”
Muscle Maker’s “Healthier For You” Focus
Muscle Maker, on the other hand, has taken a different approach during the pandemic. The company has focused on building its Muscle Maker Grill, Healthy Joe’s, and MMG Burger Bar brands. This year, the company is expecting to launch additional brand offerings throughout the year. Muscle Maker announced that these additional brand offerings would expand its reach to new audiences showcasing a “healthier for you” option in a recent update.
“Households will no longer be divided on where to order – we have something for everybody! We can launch these brands from our already existing brick and mortar and ghost kitchen locations quickly with little cost associated making them a win for our non-traditional growth plans. Offering the new brands via 3rd party makes set-up, launch and execution very efficient,” explained Mike Roper, CEO of Muscle Maker Grill, in a January update.
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Its utilization of the “ghost kitchen” model has become a unique asset to the company. This entails Muscle Maker taking a lower-cost approach to gain fast market penetration and take advantage of a delivery-only model in new markets.
Energy Penny Stocks To Watch: Kosmos Energy
On another side of the “epicenter stock” conversation are energy stocks. Now, I know that green energy and alternative fuels are a big part of the Biden agenda. However, as you will come to find, infrastructure still needs to be created on a larger scale. To do that, traditional energy sources will need to be utilized in the near-term. This includes things like oil and natural gas, among other energy sources.
As you’ll see, since the 2020 Presidential election, energy penny stocks like Kosmos Energy have been on the rise. In fact, since November 6th, KOS stock price has risen more than 50% so far. This week the 2021 momentum continued fueling gains in KOS after the company’s latest update.
Kosmos announced its Q4 and 2020 full-year results. While revenue declined and its adjusted Q4 loss widened, management’s commentary seems to have given the market something positive to look to. In particular, Chairman and Chief Executive Officer Andrew G. Inglis said, “With the strategic actions we took in 2020, we enter 2021 with a lower cost base, a solid balance sheet, healthy liquidity, and the operational momentum to deliver value to our shareholders from a portfolio of assets that are low cost and lower carbon.”
Ring Energy
Another one of the energy penny stocks to watch is Ring Energy. The company also provided an update this week that has acted as a catalyst in the market. Ring gave its 4th quarter 2020 operation and financial results. The company also announced its initial plans and guidance for 2021. In particular, Ring produced 9,307 net barrels of oil equivalent per day last quarter. The company also plans on drilling 6-8 wells and complete 8-10 wells in 2021.
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“As we look to 2021, our preliminary guidance is underpinned by our new strategy. We have a disciplined capital program that is expected to be fully funded by operational cash flow and is designed to maintain production levels with the potential for some minimal growth. We have stabilized our production and improved the operational efficiencies of our Delaware Basin assets and are currently investigating commercializing a large portion of the salt-water disposal infrastructure there in preparation of launching a Delaware Basin Asset sales process during the second quarter 2021. The bottom line is we are focused on improving our balance sheet and are forecasting strong free cash flow well into the future…” explained CEO Paul McKinney.
Identifying Industry Trends With Penny Stocks
While broader market trends may not impact penny stocks, industry & sector trends are a bit different. As you can see, several industries wrapped into the epicenter niche have reacted favorably in the stock market today. With ore vaccine distribution in line and new vaccines coming to market, will the epicenter trade be one of the hot topics of discussion for you in 2021?
