5 ADRs That More Than Doubled S&P 500 Returns in 2021
We have narrowed our search to five ADR stocks that have rallied more than double the S&P 500 Index in 2021. These are: ASML, SSL, EQNR, WIT and ERJ.
We are approaching the end of 2021 with an impressive bull run on Wall Street. U.S. stock markets have performed exceptionally well in the two coronavirus-ridden years of 2020 and 2021. This year, aside from U.S. stocks, several ADRs (American Depository Receipt) have skyrocketed. An ADR is a negotiable certificate issued by a U.S. depositary bank representing a specified number of shares of a non-U.S. company's stock.
Out of all ADRs traded in U.S. bourses, a handful has provided more-than-double returns to that of the market’s benchmark S&P 500 Index year to date. Five among them are ASML Holding N.V. ASML, Equinor ASA EQNR, Sasol Ltd. SSL, Embraer S.A. ERJ and Wipro Ltd. WIT.
Global Economy in 2021 At a Glance
The year 2021 started with coronavirus infections and the lack of a COVID-19 vaccine. However, after the U.S. FDA approved the first COVID-19 vaccine, other countries, especially in Europe started authorizing vaccines. Several Asian countries also gave regulatory permissions to indigenously developed vaccines.
The global economy along with the U.S. economy opened up in 2021, travel restrictions were removed and international trade gathered pace systematically. However, the rapid spread of Delta, Delta+ and Omicron variant of coronavirus created intermittent problems to global economic recovery.
More importantly, the coronavirus-led supply-chain disruptions continued throughout the year across the world, resulting in a massive increase in input costs for producers. This along with strong pent-up demand lifted the general price levels and inflation skyrocketed globally.
Mounting inflation has forced major central banks like the U.S. Fed and the European Commission to reduce monetary stimulus, indicating a about possible interest rate hike in 2022. The Bank of England has already raised rate.
On Oct 12, the International Monetary Fund (IMF) projected that the global economy to grow at 5.9% in 2021 and 4.9% in 2022. Both projections were 0.1% lower than the previous projections given in July. The IMF reduced its forecast due to soaring inflation in developed economies and worsening pandemic conditions in low-income developing economies.
Stocks in Focus
We have narrowed our search to five ADR stocks that have popped more than double the S&P 500 Index in 2021. These stocks have strong potential in 2022 too and have seen positive earnings estimate revisions in the last 60 days. Each of our picks carries either a Zacks Rank #2 (Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The chart below shows the price performance of our five picks year to date.
Image Source: Zacks Investment Research
Embraer continues to witness good demand for E-jets across the globe. Order flow for the products remains robust. As of Sep 30, 2021, ERJ’s E-Jets E2 had 159 orders in backlog. Embraer holds a strong solvency position and favorable financial ratios, at least over the short run. ERJ’s main ongoing project in the Commercial Aviation business unit is the development of the E175-E2.
Zacks Rank #3 Embraer has an expected earnings growth rate of more than 100% for next year. The Zacks Consensus Estimate for next-year earnings improved 5.7% over the last 60 days. The stock price of ERJ has soared 154.8% year to date.
Equinor is one of the premier integrated energy companies, with operations spreading across 30 countries. In Europe, EQNR is the second-largest supplier of natural gas. Equinor made 16 commercial discoveries in 2019 and 2020 each. The discoveries are likely to help reach EQNR’s compound annual production growth rate of 3% through 2026.
Zacks Rank #3 Equinor has an expected earnings growth rate of 13.4% for next year. The Zacks Consensus Estimate for next-year earnings improved 5.2% over the last 30 days. The stock price of EQNR has rallied 67.1% year to date.
Sasol operates as an integrated chemical and energy company in South Africa. It is engaged in the mining and processing of coal. SSL operates through the Mining, Gas, Fuels, Chemicals Africa, Chemicals America, and Chemicals Eurasia segments.
Sasol also produces chemicals, explores for and refines crude oil, and manufactures fertilizers and explosives. In addition, SSL converts coal to petrochemicals products, such as diesel fuels and gasoline.
Zacks Rank #3 Sasol has an expected earnings growth rate of 25.4% for the current year (ending June 2022). The Zacks Consensus Estimate for current-year earnings improved 0.1% over the last 60 days. The stock price of SSL has jumped 84.9% year to date.
Wipro provides comprehensive information technology solutions and services, including systems integration, Information Systems outsourcing, package implementation, software application development and maintenance, and research and development services to corporations globally. WIT operates through three segments: IT Services, IT Products, and India State Run Enterprise Services.
Zacks Rank #2 Wipro has an expected earnings growth rate of 11.5% for the current year (ending March 2022). The Zacks Consensus Estimate for current-year earnings improved 0.1% over the last 60 days. The stock price of WIT has climbed 70.6% year to date.
ASML Holding is a world leader in manufacturing advanced technology systems for the semiconductor industry. ASML Holdings offers an integrated portfolio for manufacturing complex integrated circuits. ASML designs, develops, integrates, markets and services advanced systems used by the major global semiconductor manufacturers to create chips that power a wide array of electronic, communications and information technology products.
Zacks Rank #3 ASML Holding has an expected earnings growth rate of 23.9% for next year. The Zacks Consensus Estimate for next-year earnings improved 0.9% over the last 30 days. The stock price of ASML has advanced 66.4% year to date.
Zacks Top 10 Stocks for 2022
In addition to the investment ideas discussed above, would you like to know about our 10 top picks for the entirety of 2022?
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EmbraerEmpresa Brasileira de Aeronautica (ERJ): Free Stock Analysis Report
Wipro Limited (WIT): Free Stock Analysis Report
ASML Holding N.V. (ASML): Free Stock Analysis Report
Sasol Ltd. (SSL): Free Stock Analysis Report
Equinor ASA (EQNR): Free Stock Analysis Report
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