Top 5 Value Picks to Counter Coronavirus-Led Market Volatility
After an impressive rally in the first two weeks of November, Wall Street is once again faced with volatility in the third week. This is primarily due to a massive surge in new cases of COVID-19 infection that overshadowed several positive developments on the vaccine front. The magnitude of new daily coronavirus cases is much higher in November than in March and April.
The coronavirus resurgence has forced several state administrations in the United States to cut back on regular economic activities. Market participants remained concerned that even if a vaccine is approved in the near future, its widespread implementation will take much longer than originally expected.
Meanwhile, the U.S. economy continues to grow, albeit slowly, despite the surge in coronavirus infections. The first tranche of fiscal incentives - known as CARES ACT - ended in July. Nevertheless, the economy has grown over the past three months and is showing its fundamental stability. At this point, it makes sense to buy the stocks that could prove valuable once the rally resumes.
Recurrence of coronavirus infections
Both new cases and hospital stays set records, topping 182,000 and more than 79,000, respectively, on Nov. 19, according to the U.S. COVID tracking project. Both new cases and hospital stays set records, according to a New York Times tracker in the US. The total number of U.S. cases has exceeded 11.8 million and the death toll is over 252,000. There are new cases in 50 states and territories.
New restrictions on economic activity
On November 19, the Centers for Disease Control and Prevention (CDC) issued a new policy for Americans urging them not to travel to Thanksgiving celebrations and to avoid gatherings with anyone outside their home.
New York City, which operates the largest public school system in the United States, has decided to end personal schooling on November 19 as the number of new coronavirus cases has soared in the city. New York Governor Andrew Cuomo ordered bars, restaurants and gyms to close at 10 p.m. from November 13th.
The New Hampshire government issued a mandate to wear masks, and Rhode Island issued a two-week "hiatus" later that month. The Mayor of Chicago advised people to stay home or work from home for 30 days from November 16, except for important travel and business trips. California Governor Gavin Newsom said his administration is considering a nationwide curfew due to a surge in COVID-19 cases.
Positive news on COVID-19 vaccine development
On November 19, AstraZeneca plc (AZN) announced that the experimental COVID-19 vaccine co-developed by Oxford University had demonstrated a robust immune response in the Phase 2 clinical trial in older adults.
In the meantime, Pfizer Inc. (PFE) and BioNTech SE (BNTX) announced on November 18 that their jointly developed potential vaccine BNT162b2 was more than 95% effective in preventing COVID-19 in subjects without prior evidence of SARS-CoV-. 2 infection. These two companies plan to file an emergency clearance with the FDA in the next few days.
On Nov. 16, Moderna Inc. (MRNA) reported that preliminary data from the Phase III clinical trial showed the potential coronavirus vaccine to be more than 94% effective in preventing COVID-19. The study was carried out in collaboration with the National Institute for Allergies and Infectious Diseases. On November 10, the FDA approved an emergency COVID-19 antibody treatment from Eli Lilly & Co. (LLY).
Our top picks
At this point in time, investors should be ready to minimize fluctuations in their portfolio and consequently balance it out with suitable financial assets to maintain stability. Hence, it would be wise to include value stocks with a cheap Zacks rank.
We narrowed our search to five stocks. Each of them have a Zacks Rank 1 (strong buy) and a value of A. The full list of Zacks Rank 1 stocks today can be found here.
The following graphic shows the price development of our five picks over the last month.
Office Depot Inc. ODP provides business services and supplies, products, and technology solutions. The company operates in three business areas: Business Solutions, Retail and CompuCom.
The forward price-to-earnings ratio (P / E) for the current fiscal year is 6.3, below the industry average of 12.5X. The PEG ratio of 0.5 is below the industry average of 2.6. The Zacks consensus estimate for the current year has improved 31.1% in the past 7 days.
WESCO International Inc. The WCC distributes products and building materials for the maintenance, repair and operation of electrical, industrial and communications equipment and for original equipment manufacturers in North America and internationally.
The forward P / E for the current fiscal year is 11.9X, below the industry average of 12.1X. The PEG ratio of 1.2 is below the industry average of 1.22. The Zacks consensus estimate for the current year’s earnings has improved 12.3% in the past 30 days.
General Motors Co.'s strong GM demand for profitable trucks and SUVs adds to the company's sales. The best-selling brands in the US like Chevrolet Silverado, Equinox and GMC Sierra are also leaders.
The forward P / E for the current fiscal year is 9.5X, below the industry average of 26.9X. It has a PEG rate of 1.1, which is below the industry average of 4.3. The Zacks consensus estimate for the current year has improved 71.9% in the past 30 days.
Laboratory Corp. of America Holdings. LH operates worldwide as an independent clinical laboratory company. The company operates in two segments: LabCorp Diagnostics and Covance Drug Development.
The forward P / E ratio for the current fiscal year is 9.7X, below the industry average of 26.1X. It has a PEG rate of 1.1, which is below the industry average of 2.6. The Zacks consensus estimate for the current year has improved 37.1% in the past 30 days.
Knight-Swift Transportation Holdings Inc. KNX provides truck cargo transportation services in the United States and Mexico. The company operates in three segments: trucking, logistics and intermodal.
The forward P / E ratio for the current fiscal year is 15.5X, below the industry average of 22.4X. It has a PEG ratio of 1, which is below the industry average of 1.9. The Zacks consensus estimate for the current year has improved 16.8% in the past 30 days.
5 shares bet on double
Each copy was selected as the # 1 favorite stock by a Zacks expert to hit + 100% or more in 2020. Each comes from a different sector and has unique properties and catalysts that could fuel exceptional growth.
Most of the stocks in this report fly under the Wall Street radar, which is a great opportunity to get into the ground floor.
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WESCO International, Inc. (WCC): Free Stock Analysis Report
General Motors Company (GM): Free Stock Research Report
Laboratory Corporation of America Holdings (LH): Free Stock Analysis Report
The ODP Corporation (ODP): Report on Free Stock Analysis
KnightSwift Transportation Holdings Inc. (KNX): Free Stock Analysis Report
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