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Top 5 Momentum Picks for April After Markets Rebound in March
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U.S. stock markets completed a highly disappointing first-quarter 2022. However, last month was a solid one for Wall Street. Despite the ongoing war between Russia and Ukraine, soaring inflation and the possibility of a more than-expected hawkish Fed in 2022 failed to deter market participants in risky assets like equities.
Wall Street started April and the second quarter of 2022 on a positive note. Historically, April remained favorable to investors. This year too the trend is likely to prevail supported by the solid fundamentals of the U.S. economy.
At this stage, it will be prudent to invest in stocks that have momentum in April with a favorable Zacks Rank. Five such stocks are — Alcoa Corp. (AA - Free Report) , Chevron Corp. (CVX - Free Report) , D.R. Horton Inc. (DHI - Free Report) , Williams-Sonoma Inc. (WSM - Free Report) and The Mosaic Co. (MOS - Free Report) .
Wall Street Rebounds in March
In first-quarter 2022, the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — tumbled 4.6%, 4.9% and 9.1%, respectively. This marked the worst quarterly performance by these three indexes since the first quarter of 2022, at the onset of the coronavirus outbreak.
However, in March, the Dow, the S&P 500 and the Nasdaq Composite – gained 2.3%, 3.6% and 3.4%, respectively. A series of negotiations between Russia and Ukraine to resolve geopolitical disputes, the cooling down of commodity prices, especially, for crude oil and investors’ expectation of a 2% interest rate hike by the Fed, which seems already factored in market valuation, resulted in a stock market rally.
Historically, April is considered a strong month on Wall Street. This month is considered as the best month for the market’s benchmark the S&P 500 Index. CNBC reported citing CFRA that the S&P has been higher 70% of the time and has gained an average 1.7% in each April since World War II. For all these months, the S&P averaged a gain of 0.7%.
Strong Fundamentals of the U.S. Economy
U.S. labor has regained pace in 2022. Businesses are recruiting more despite mounting inflation and prolonged supply-chain disruptions. Strong demand helped businesses to absorb higher cost of production.
The U.S. economy added 431,000 jobs in March. Although the data fell below the consensus estimate of 474,000, in absolute term, the data was impressive. Moreover, February and January’s data were revised upward by 72,000 and 23,000 respectively.
The unemployment rate dropped to 3.6% in March from 3.8% in February. Moreover, the real unemployment rate, which includes discouraged workers and those holding part-time jobs for economic reasons, declined to 6.9% in March from 7.2% in February.
Personal spending increased by 0.2% in February after climbing 2.7% in January, defying a record-high inflation, which is currently a its 40-year high. Furthermore, the average hourly wage rate increased by 0.4% in March over February and 3.6% year over year. This would enable Americans to spend more in April.
The Fed hiked the benchmark interest rate on Mar 16, for the first time in more than three years. The central bank also warned of harsher stances in near future if it fails to contain inflation. However, Wall Street witnessed an impressive rally in the second half of March. It seems that market participants have already factored a 2% in interest rate in 2022.
Our Top Picks
We have narrowed our search to five large-cap (market capital > $10 billion) momentum stocks. These stocks have seen strong earnings estimate revisions within the last 30 days indicating that the market is expecting this companies to do good business in the near-term. Each of our picks carries a Zacks Rank #1 (Strong Buy) and has a Momentum Score of A or B. You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks year to date.
Image Source: Zacks Investment Research
Chevron is one of the best-placed global integrated oil firms to achieve a sustainable production ramp-up. CVX’s existing project pipeline is one of the best in the industry, thanks to its premier position in the lucrative Permian Basin. The WTI crude oil price is hovering well above $100 per barrel. The price is likely to remain elevated as the Russia-Ukraine conflict is yet to be resolved.
Chevron’s Noble Energy takeover has expanded its footprint in the region and the DJ Basin. CVX now has access to Noble Energy’s low-cost, proven reserves along with cash-generating offshore assets in Israel — particularly the flagship Leviathan natural gas project — thereby boosting its footing in the Mediterranean.
Chevron has an expected earnings growth rate of 60.4% for the current year. The Zacks Consensus Estimate for current-year earnings improved 1.9% over the last 7 days.
Alcoa produces and sells bauxite, alumina, and aluminum products in the United States, Spain, Australia, Brazil, Canada, and internationally. AA operates through three segments: Bauxite, Alumina, and Aluminum.
Alcoa is engaged in bauxite mining operations and processes bauxite into alumina and sells it to customers who process it into industrial chemical products. AA offers primary aluminum in the form of alloy ingot or value-add ingot to customers that produce products for the transportation, building and construction, packaging, wire, and other industrial markets and flat-rolled aluminum sheets to customers that produce beverage and food cans.
Alcoa has an expected earnings growth rate of 91.7% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3.1% over the last 7 days.
The Mosaic is likely to gain from higher demand for fertilizers. Demand for phosphate and potash in North America was strong in 2021, and the momentum is likely to continue this year. Strong grower economics and crop commodity prices are driving potash demand globally.
The Vale Fertilizantes buyout is also expected to deliver significant synergies. Mosaic is also expected to benefit from its cost-reduction actions, leading to an improvement in its operating cost structure. MOS’ efforts to lower debt, streamline processes, centralize mining operations and automation are encouraging.
Mosaic has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 10.8% over the last 30 days.
D.R. Horton is expected to continue strong performance supported by its industry-leading market share, solid acquisition strategy, well-stocked supply of land, lots and homes along with affordable product offerings across multiple brands.
Acquisitions have been an important part of DHI’s growth strategy. D.R. Horton is fast acquiring homebuilding companies in desirable markets. Higher building material costs, as well as land and labor shortages are prompting homebuilders to increase home prices. That said, DRI’s strategic shift toward more entry-level affordable homes has been paying off, with the segment experiencing strong demand and limited supply. First-time homebuyers represented 55% of its closings for first-quarter fiscal 2022.
D.R. Horton has an expected earnings growth rate of 39.2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.5% over the last 30 days.
Williams-Sonoma is a multi-channel specialty retailer of premium quality home products. WSM continues to enhance the e-commerce channel, optimize the supply chain and undertake cost-control measures to drive growth. Williams-Sonoma is focused on enhancing customer experience through technology innovation and operational improvement.
In order to drive brand awareness and increase customer engagement and cross-selling opportunities, WSM shifted its advertising spend toward social media campaigns and in cross-brand initiatives. Cross-brand initiatives such as The Key, Design Crew Room Planner and The One Registry are expected to be incremental growth drivers for all its brands going forward.
Williams-Sonoma has an expected earnings growth rate of 4.8% for the current year (ending January 2023). The Zacks Consensus Estimate for current-year earnings improved 8.7% over the last 30 days.
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Top 5 Momentum Picks for April After Markets Rebound in March
U.S. stock markets completed a highly disappointing first-quarter 2022. However, last month was a solid one for Wall Street. Despite the ongoing war between Russia and Ukraine, soaring inflation and the possibility of a more than-expected hawkish Fed in 2022 failed to deter market participants in risky assets like equities.
Wall Street started April and the second quarter of 2022 on a positive note. Historically, April remained favorable to investors. This year too the trend is likely to prevail supported by the solid fundamentals of the U.S. economy.
At this stage, it will be prudent to invest in stocks that have momentum in April with a favorable Zacks Rank. Five such stocks are — Alcoa Corp. (AA - Free Report) , Chevron Corp. (CVX - Free Report) , D.R. Horton Inc. (DHI - Free Report) , Williams-Sonoma Inc. (WSM - Free Report) and The Mosaic Co. (MOS - Free Report) .
Wall Street Rebounds in March
In first-quarter 2022, the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — tumbled 4.6%, 4.9% and 9.1%, respectively. This marked the worst quarterly performance by these three indexes since the first quarter of 2022, at the onset of the coronavirus outbreak.
However, in March, the Dow, the S&P 500 and the Nasdaq Composite – gained 2.3%, 3.6% and 3.4%, respectively. A series of negotiations between Russia and Ukraine to resolve geopolitical disputes, the cooling down of commodity prices, especially, for crude oil and investors’ expectation of a 2% interest rate hike by the Fed, which seems already factored in market valuation, resulted in a stock market rally.
Historically, April is considered a strong month on Wall Street. This month is considered as the best month for the market’s benchmark the S&P 500 Index. CNBC reported citing CFRA that the S&P has been higher 70% of the time and has gained an average 1.7% in each April since World War II. For all these months, the S&P averaged a gain of 0.7%.
Strong Fundamentals of the U.S. Economy
U.S. labor has regained pace in 2022. Businesses are recruiting more despite mounting inflation and prolonged supply-chain disruptions. Strong demand helped businesses to absorb higher cost of production.
The U.S. economy added 431,000 jobs in March. Although the data fell below the consensus estimate of 474,000, in absolute term, the data was impressive. Moreover, February and January’s data were revised upward by 72,000 and 23,000 respectively.
The unemployment rate dropped to 3.6% in March from 3.8% in February. Moreover, the real unemployment rate, which includes discouraged workers and those holding part-time jobs for economic reasons, declined to 6.9% in March from 7.2% in February.
Personal spending increased by 0.2% in February after climbing 2.7% in January, defying a record-high inflation, which is currently a its 40-year high. Furthermore, the average hourly wage rate increased by 0.4% in March over February and 3.6% year over year. This would enable Americans to spend more in April.
The Fed hiked the benchmark interest rate on Mar 16, for the first time in more than three years. The central bank also warned of harsher stances in near future if it fails to contain inflation. However, Wall Street witnessed an impressive rally in the second half of March. It seems that market participants have already factored a 2% in interest rate in 2022.
Our Top Picks
We have narrowed our search to five large-cap (market capital > $10 billion) momentum stocks. These stocks have seen strong earnings estimate revisions within the last 30 days indicating that the market is expecting this companies to do good business in the near-term. Each of our picks carries a Zacks Rank #1 (Strong Buy) and has a Momentum Score of A or B. You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks year to date.
Image Source: Zacks Investment Research
Chevron is one of the best-placed global integrated oil firms to achieve a sustainable production ramp-up. CVX’s existing project pipeline is one of the best in the industry, thanks to its premier position in the lucrative Permian Basin. The WTI crude oil price is hovering well above $100 per barrel. The price is likely to remain elevated as the Russia-Ukraine conflict is yet to be resolved.
Chevron’s Noble Energy takeover has expanded its footprint in the region and the DJ Basin. CVX now has access to Noble Energy’s low-cost, proven reserves along with cash-generating offshore assets in Israel — particularly the flagship Leviathan natural gas project — thereby boosting its footing in the Mediterranean.
Chevron has an expected earnings growth rate of 60.4% for the current year. The Zacks Consensus Estimate for current-year earnings improved 1.9% over the last 7 days.
Alcoa produces and sells bauxite, alumina, and aluminum products in the United States, Spain, Australia, Brazil, Canada, and internationally. AA operates through three segments: Bauxite, Alumina, and Aluminum.
Alcoa is engaged in bauxite mining operations and processes bauxite into alumina and sells it to customers who process it into industrial chemical products. AA offers primary aluminum in the form of alloy ingot or value-add ingot to customers that produce products for the transportation, building and construction, packaging, wire, and other industrial markets and flat-rolled aluminum sheets to customers that produce beverage and food cans.
Alcoa has an expected earnings growth rate of 91.7% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3.1% over the last 7 days.
The Mosaic is likely to gain from higher demand for fertilizers. Demand for phosphate and potash in North America was strong in 2021, and the momentum is likely to continue this year. Strong grower economics and crop commodity prices are driving potash demand globally.
The Vale Fertilizantes buyout is also expected to deliver significant synergies. Mosaic is also expected to benefit from its cost-reduction actions, leading to an improvement in its operating cost structure. MOS’ efforts to lower debt, streamline processes, centralize mining operations and automation are encouraging.
Mosaic has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 10.8% over the last 30 days.
D.R. Horton is expected to continue strong performance supported by its industry-leading market share, solid acquisition strategy, well-stocked supply of land, lots and homes along with affordable product offerings across multiple brands.
Acquisitions have been an important part of DHI’s growth strategy. D.R. Horton is fast acquiring homebuilding companies in desirable markets. Higher building material costs, as well as land and labor shortages are prompting homebuilders to increase home prices. That said, DRI’s strategic shift toward more entry-level affordable homes has been paying off, with the segment experiencing strong demand and limited supply. First-time homebuyers represented 55% of its closings for first-quarter fiscal 2022.
D.R. Horton has an expected earnings growth rate of 39.2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.5% over the last 30 days.
Williams-Sonoma is a multi-channel specialty retailer of premium quality home products. WSM continues to enhance the e-commerce channel, optimize the supply chain and undertake cost-control measures to drive growth. Williams-Sonoma is focused on enhancing customer experience through technology innovation and operational improvement.
In order to drive brand awareness and increase customer engagement and cross-selling opportunities, WSM shifted its advertising spend toward social media campaigns and in cross-brand initiatives. Cross-brand initiatives such as The Key, Design Crew Room Planner and The One Registry are expected to be incremental growth drivers for all its brands going forward.
Williams-Sonoma has an expected earnings growth rate of 4.8% for the current year (ending January 2023). The Zacks Consensus Estimate for current-year earnings improved 8.7% over the last 30 days.