Ronald Baron: Why the Market Weakness Presents Great Opportunities

Last month’s inflation annualized rate of 8.6% was reached. It was the highest annualized rate for inflation for over 40 years. Economists have become glum about the prospect of another late 1970s/early 80s with similar inflation and high rates that led to market weakness and deep recessions.

Long-term investors might be more optimistic. Ron Baron (billionaire investing icon, founder of Baron Capital) considers today’s investment climate a ‘huge and once-in-a-generation buying opportunity.

“Overall our optimism is high.

Investors need to identify stocks that can grow in the future. Let’s examine the details.

Wallbox (WBX).

Wallbox, a Spanish-based company that specializes in an electric car (EV), charging, will be our first partner. This allows fully charged EVs to send power directly from the charger to either the home or the grid. The EV can also be used to store energy when it’s not being utilized.

Wallbox started trading on the public markets in October last year after it had completed a business merger with a SPAC firm. They are currently trading at close to $17 as 2022 begins. However, they are down 47% since last year.

Wallbox has had strong financial results but Wallbox shares are falling sharply. Wallbox expects 2022 revenue of between 175 and 205 million euros. This would translate into a 145% – 190% increase in revenue year over year.

Cowen analyst Gabriel Daoud has stated that Wallbox could invest $293 bn worldwide in hardware due to its rapid expansion. Sirius and new products in the software will bring additional benefits.

Generac Holdings GNRC

Generac is a Wisconsin manufacturer and exporter of power generators. This will be our second stock.

Generac has been expanding its product lines, seeking new niches to benefit from backup power generators. The second model has the dual-fuel capability and can be used with regular gasoline or LP gas.

Generac’s strong selling position stems from new products and quality ranges. Generac earned $1.14 billion in top-line revenue for the latest 1Q22. This figure is 41% higher than the previous year. The increase was due to a 43% rise in residential product sales, and a 38% jump in commercial &industrial sales.

Although revenues were rising, earnings declined. The adjusted income for Q1 was $135 million. It means that the per-share decrease of $2.38 to 2.09 has been achieved in the past year.

Generac shares were volatile in 2018. There were sharp swings either way. The stock is down 33% for 2018.

Donovan Schafer from Northland is still bullish on this stock despite the recent drop in price. His optimism is based on three factors: (1) GNRC controls U.S. Home Standby. This market has enduring competitive and 75% market shares; (2) GNRC is ideally positioned to understand and navigate the evolving energy transition terrain. (3) Generac’s global footprint, from 2010-2018, flies below the radar. It could potentially be a force multiplier.

These comments were made to Schafer in support of his Outperform rating. This means that there is a possibility of a 57% upside over the next 12 months.

Generac received 16 analyst evaluations in the last month when we consider the larger picture. Generac’s 15:1 split of Buys/Holds gives Generac Strong Buy consensus. Generac’s average target stock price is $399.33, while its trading price trades at $233.50. This shows that Generac stock could have a robust 70% upside in 2017.

Daoud gives his outlook on WBX shares based on an Outperform (i.e. buy) rating and a $14/share price target. This indicates a 63% increase over the next 12 months.

Daoud has been surprised by Wallbox. The stock’s market price is $8.58. Their average market price target is $16.50, indicating strong upside potential in this year’s 92 %.

Silvergate Capital (SI)

Silvergate, a California bank specializing in digital currency investment is the last. This company has been profitable for 24 years straight and offers services to institutional and retail investors.

Silvergate shares have dropped 58% so far this year. This is in addition to the sharp drops we have seen in crypto markets.

Silvergate’s business in digital currencies is growing despite recent difficulties. Its transfer volume decreased from $219.2 Billion in 4Q21 to $142.3 Billion in 1Q22.

Silvergate enjoyed income gains despite currency exchange transactions being down. The net income for Q1 was $27.4million. This represents a 28% rise over 4Q21, as well as an important 115% increase from 1Q21.

Jared Shaw is an analyst who covers Silvergate for Wells Fargo. He believes that SI shares should be considered by investors. Zero-cost deposits can lead to higher spread income. Zero-cost deposits can lead to higher spread income.

Shaw has given the stock an Overweight rating, which means that he recommends it as a Buy. The target price is $120. This shows his confidence that the stock will have a 93% year-end upside.

The stock was rated a Buy by eight of the nine Wall Street analysts who recently reviewed it. Another Hold (i.e. a Strong Buy consensus rating) is the other. The default rating is neutral. The shares trade at $62.32 per share and have an average target of $175.89. This suggests that there will be a 182% increase in the stock over the next 12 months.