A KKR logo is displayed on the floor of the New York Stock Exchange (NYSE), August 23, 2018.
Brendan McDermid | Reuters
Trading stocks in the capital markets in 2021 has not been an endeavor for the faint of heart.
The year could be characterized by exciting events like a powerful influx of retail traders, or by various cryptocurrency-linked stocks rising with bitcoin prices, or by an anticipated economic reopening driving optimism.
On the flip side, traders involved with 2021’s stock market may recall other less fortunate macro trends. They include uncertainty over Federal Reserve policy, semiconductor and component shortages, lack of available labor, and of course, the ongoing shipping logjams affecting the supply chain.
While 2021 began as an economic reopening story, as new variants emerge and continue to spread across borders, it appears that the theme at end of this year is quite different.
TipRanks, a financial data aggregation website, provides a multitude of tools for everyday investors to get a grip on both the bigger picture and the daily details. One of TipRanks’ notable features is its analyst pages, which this year have organized over 174,000 stock ratings into a digestible format.
The top analysts have amassed a collective success rate of 82.7%, as well as an aggregated average return of 13.95% on their stock picks.
These figures are far beyond all the other analysts, who delivered an average success rate of 48.02%, and an average return per rating of 0.16% in 2021.
To this end, TipRanks compiled a comprehensive list of the five best-performing analysts of 2021. The analysts’ performance was measured by looking at rolling three-month periods, and ordered based on a weighted scale of the analysts’ success and average return rates.
Topping our list this year is John Gerdes of MKM Partners, who is the acting managing director of the firm. Through his highly accurate stock ratings, Gerdes has achieved the best rank, weighted by his ratings success and average return percentages.
Before joining MKM, Gerdes spent time in up-close contact with the energy sector as a petroleum engineer at Shell (NYSE: RDS.A), before moving into a more finance-related field as an associate and vice president at Jefferies Group. After that, he worked as a managing director for about 19 years at several investment firms, including Canaccord and KLR.
Gerdes’ strong financial background has no doubt aided in his success rate, which currently sits at 93%. Having said that, being correct on nearly all of one’s stock ratings is only half the battle. The second part is securing a productive average return rate, and Gerdes’ lands at 24.9%.
When examining the most profitable of his many ratings, we identify his impressive end-of-Q3 stance on Devon Energy (NYSE: DVN). From Aug. 9 to Nov. 9, Gerdes stood by his bullish sentiment, and for good reason. The exploratory hydrocarbon company climbed in valuation by 68% during that three-month period, only to peak a bit more soon thereafter. Its momentary run-up fit well into Gerdes’ projections, and the stock has actually declined about 10% to-date since then.
Despite his impressive quarter, the analyst has remained bullish on DVN. In his most recent report, he cited Devon’s $1 billion share repurchase program, as well as its nearly 5% increase in production of natural gas liquids and other hydrocarbons.
Moreover, Gerdes explained that “from 2021 through 2026, Devon should generate ~$18.7 billion of free cash flow (FCF), which is two-thirds of the company’s market capitalization.” This kind of high free cash flow can raise operating leverage and provide for a competitive edge over DVN’s peers.
Gerdes stood by his hypothesis, rating the stock to a buy, and raising his price target to $50 from $49.
After 20 years in the energy sector, KeyBanc Capital Market’s managing director and equity research analyst, Leo Mariani, has made it to second place on our 2021 list.
Before retaining his current title, Mariani worked at several high-profile investment firms. These include Jefferies Group, RBC Capital Markets, and NatAlliance Securities. After graduating from Brown University, he started his professional career as an investment banker at UBS and PaineWebber.
Leo’s multi-decade experience as a CFA charter holder has allowed him to outperform much of his competition this year. Of his 2021 stock picks, 81% were correct in their projections. When averaged together, they returned 16.2% each.
Of course, this is an average return, so how did the analyst’s most successful rating turn out? On Jan. 7, 2021, Mariani opened a bullish rating on SM Energy (NYSE: SM). Over the next three months, SM climbed an impressive 110.1%.
As an exploratory hydrocarbon firm, SM had a rough 2020. Global economic activity ground to a halt due to lockdowns to fight the Covid-19 contagion, and as a result oil and natural gas prices fell off a cliff. From mid-February to mid-March of that year, the stock lost about 85% of its value, only to recover its losses by the time Mariani made his call. Astoundingly, the stock has come back from its early pandemic lows of $1.19, and is now trading around $26.50.
Throughout SM’s massive bull run, Mariani has maintained a staunch position of optimism. He has yet to downgrade his rating, noting that he still believes in further upside.
In his most recent published report, the analyst detailed that while the stock’s returns are significantly exposed to the volatility of oil commodity prices, “SM has solid hedge protection in 2021 and 2022, which helps to mitigate commodity price risk.” Moreover, he mentioned that the firm itself has strong and improving liquidity, and he expects it to generate free cash flow in 2022.
Mariani’s latest rating on the stock was again a buy, and included a price target of $42 per share.
Placing third on our list is the managing director of energy research at investment bank RBC Capital Markets.
Scott Hanold has been involved in the world of finance for over 26 years, starting off as an analyst at U.S. Bank, a stint as an auditor at Allianz, then spending a couple years as a financial analyst at Minnesota-based Musicland Group retailer, and finally settling into a career at RBC in 1999.
After analyzing his stock ratings, we have determined his success rate to be a remarkable 79%, and his average return per rating to clock in at 18.3%.
When taking a deeper look, one can see the extent of his stock-selecting successes.
Hanold’s top-performing rating was Callon Petroleum (NYSE: CPE), to which he assigned a bullish buy rating on Jan. 18, 2021. By April 18, Callon had risen a considerable 121.6%. The second highest of the top picks on our list, this return is something any investor would dream about.
It appears Hanold has taken notice of the run-up in energy prices over the past quarter, and adjusted his trajectory for CPE accordingly. At the time of the opened initial rating, the analyst assigned a price target of $20. This is now well below the current price per share of Callon, which closed trading Thursday at $47.84.
Hanold recently reported on the stock, summarizing that, “A healthy cost structure and efficient maintenance capital program set up robust FCF generation above peers over the next few years. However, with leverage still above the peer average, we anticipate shareholder returns remain a ways off until debt levels become more manageable.”
Moreover, the stock can become less favorable if poor-performing commodity prices persist, the potential for which is high, given the emergence of new Covid-19 variants.
As the year wore on, Hanold has stepped back from his bullishness and now maintains a more neutral stance on Callon. He has more recently maintained a hold rating on the stock, and provided a price target of $72.
Coming in at No. 4 on our list of the top performing analysts for 2021, is Oppenheimer’s managing director and senior analyst of large-cap banks and wealth management firms. Chris Kotowski is no stranger to outperforming the market, as he has been rather successful at his various roles at Oppenheimer and formerly Leerink Swann & Co., now known as SVB Leerink.
After an initial 11 years at Oppenheimer, the analyst moved to SVB Leerink for five years, eventually returning to the investment bank where he began his career. Since then, Kotowski has been hard at work, and now the fruits of his labor have paid off.
His stock ratings this past year have been successful 85% of the time, and have returned him an average of 10.4% on each one.
With so many ratings to examine, we delved into his most profitable ones.
Over the three-month period of Jan. 12 to April 12, Kotowski returned more on a rating than the S&P 500 has year-to-date.
To start the year, he assigned a well-advised buy rating to investment firm KKR & Co. (NYSE: KKR), and he did not disappoint. During those 90 days, KKR rose 29%, driving up Kotowski’s average return metric.
Since his rating, KKR has continued its rise in a steady fashion. The stock closed trading Thursday at $74.77. This price action has thus far been in-line with Kotowski’s current buy rating and price target of $73.
KKR is considered by Oppenheimer to be an alternative asset manager operating in three key sectors: private equity, real assets, and credit.
This past quarter, Kotowski delivered an updated hypothesis on the asset manager, asserting that, “there is significant upside to distributable earnings over time as there is ample room for the real asset and public market platforms to grow, balance sheet investment to be monetized and positive outlook regarding base management fee growth on funds associated with the next-generation flagships and other associated strategies.”
Landing the fifth and final spot on our list is Randy Giveans, also known as Jefferies’ senior vice president of equity research in the field of energy maritime companies. Giveans’ research has led him to high returns on his stock ratings, not the easiest task considering the difficulties experienced by the shipping industry throughout this past year.
Before he joined the investment bank, Giveans was employed for three years at Continental Airlines as a financial analyst, eventually being promoted to senior financial analyst for corporate finance.
Despite this year’s maritime challenges, such as massive shipping logjams at ports, an undersupply of containers, and rising fuel costs, Giveans has been able to carve out a strong success rate of 76% with his maritime stock picks. Additionally, they have resulted in an average return of 22.7%.
Of all his marine-based choices this year, the most profitable was on Navios Maritime Partners (NYSE: NMM). Initiated back on Jan. 8 and altered three months later on April 8, Giveans netted a whopping 135.50% return on the shipping and seafaring logistics stock. What is particularly impressive is his timing, as its valuation peaked soon thereafter.
Since then, Giveans has turned to his buy rating on NMM. He most recently reiterated a price target of $52 per share for the tanker vessel owner and operator stock.
More recently, the stock has seen significant pullback, and thus Giveans has reiterated his buy rating.
In a Dec. 8 report, he wrote that fuel prices should balance out with rising supply, which would help the tanker industry. He elaborated on this hypothesis, adding that, “Management believes 3Q21 likely marked the bottom for the tanker market as there were significant crude and products draws in the US, Asia, and Europe, putting downward pressure on seaborne transport demand and rates.”
If European gas firms are currently operating with low supply, they will require companies like Navios to replenish their inventories.