The consensus on whether a market is bearish or if we’ve entered the bull market is not always unanimous. That’s especially true at and around the time of a market crash. The timelines of different experts upon the bear and the bull market vary, and they make their investment decisions accordingly. And it’s not always tied to the market as a whole. Sometimes sectors, as well as individual stocks, can act bullish and bearish on their own.
But few stocks have the presence and investor attention needed to break free from the overall sentiment about the sector, which is both a good and a bad thing. It’s bad, because even great companies might suffer alongside the sector (through no fault of their own). And it can be beneficial for investors, because if they have trouble chasing down individual stocks, they might keep sectors under observation and, based on the sector’s movement, pick individual stocks.
An energy stock
The energy sector is enjoying a powerful recovery, and the effect has been especially pronounced for some relatively small stocks in the sector. One of them is Nuvista Energy (TSX:NVA). The stock has grown over 400% in the last 12 months, and it’s still trading at a highly discounted valuation — i.e., a price-to-earnings multiple of 1.4 and a price-to-book multiple of 0.7 times.
As an oil and natural gas exploration company, Nuvista’s prospects are tied quite closely to the oil demand. If the demand for oil increases or stays steady, so does the demand for Nuvista’s services. But if the demand starts to slump (as it’s expected to in the coming years), the company might see its revenues dropping, and the stock will most likely follow.
Right now, the company is riding the momentum of the energy sector’s recovery and stability, and it might keep surging in 2021, unless the sector hits an unexpected hindrance.
A tech stock
The tech sector slumped earlier this year, but it has gained some traction in the last three months. While it hasn’t yet, the sector’s positive influence might cause TECSYS (TSX:TCS) stock to surge. The supply chain management rode the after-crash wave of the tech sector’s growth to new heights and grew over 200% between Feb. 2020 and Feb. 2021.
The stock has come a long way down from its yearly spike (over 30%), and it’s still too expensive (from a valuation perspective) to be an attractive “bargain” buy. But the tech sector might be gaining momentum, and even if it’s not as powerful as it was after the crash, a surge in TECSYS stock can give your portfolio a little boost.
A green stock
GreenPower Motor (TSXV:GPV) is a small venture capital stock that also experienced an incredible spike after the pandemic-driven market crash of 2020. The share price grew by over 2,800% in less than a year. The ideal time to buy the company would have been during or right after the market crash. But there is a chance that the stock might see another surge in 2021, although not nearly as powerful.
The company designs zero-emission vehicles, predominately electric-powered buses, and cargo transportation. The product line consists of 10 different vehicles, each with an impressive set of specs. One way the company might see a major surge in its stock in 2021 is if the company receives a few major orders.
Many public and private entities are striving to raise their ESG profile, and if they start placing orders for zero-emission mass-transport vehicles like the ones GreenPower designs, the company might receive more investor attraction as well.
Not every stock surge has the same power and momentum behind it, and even in sector-wide surges, some stocks might see growth in triple digits, while others might top mid-double digits at best. It has a lot to do with the value and share price before the surge. Relatively affordable stocks tend to surge higher than more expensive stocks.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Tecsys Inc.