Are you looking for a COVID-19 play?
You aren’t the first person to think of that angle.
Consider this narrative from the Zacks Leisure and Recreation industry first.
It is late summer. This discretionary spending-driven industry group contains 15 companies. Currently, it holds a Zacks Industry Rank of #5 out of 253 stock market groups we assemble each week. Since early June, this industry ranking has been no lower than #52. Stable and improving earnings strength is what you ideally want to see.
Did these earnings upgrades make a meaningful difference to share performance?
Consult a returns performance chart (below) to see.
At every time interval, this industry niche of the Consumer Discretionary sector widely beats the S&P 500 index.
In fact, this industry’s share returns are up over 6X the S&P 500 the last three months.
If those outperforming returns don’t scream “COVID-19 play,” what does?
However, inspect specific share stories – closely – to see what is going on.
Three Top Zacks #1 Rank (STRONG BUY) Stocks
I am only going to discuss top names — with big market capitalizations.
(1) Pool Corp. (POOL - Free Report)
This is a $12.5B market cap stock with a whopping $307 share price now.
Based on the Zacks Price and Consensus chart, I wouldn’t get in now. Wait for a pullback. The recent share price run-up is worrisome.
The Zacks Value score is D (with a nosebleed forward P/E ratio of 48.2), the Zacks Growth score is A, and the Zacks Momentum score is C. That’s an overall VGM score of B.
Current year EPS is $6.52 a share.
Based in Covington, LA, Pool Corp. is the world's largest wholesale distributor of swimming pool supplies, equipment and related products.
In addition, the company is a leading regional wholesale distributor of irrigation and landscape products.
The company was incorporated in the State of Delaware in 1993 and grew from a regional distributor to a multi-national, multi-network distribution company.
(2) Yeti Holdings (YETI - Free Report)
This is a $4.1B market cap stock with a $47 share price now.
Based on the Zacks Price and Consensus chart, I wouldn’t get in now. Wait for a pullback. Once again, the recent share price run-up is worrisome. The COVID-19 momentum traders were all over this stock.
The Zacks Value score is F (another nosebleed forward P/E ratio of 45.0), the Zacks Growth score is D, and the Zacks Momentum score is C. That’s an overall VGM score of F.
Current year EPS is $1.04 a share.
Yeti Holdings, Inc. designs, markets and distributes products for the outdoor and recreation market under YETI brand primarily in the United States.
The company's products are designed for use in outdoor activities, including recreational and professional pursuits targeting various categories, including hunting, fishing, camping, barbecue, farm and ranch activities and others.
Yeti Holdings, Inc. is headquartered in Austin, Texas.
(3) Brunswick (BC - Free Report)
This is a $5.7B market cap stock with a $72 share price now.
Based on the Zacks Price and Consensus chart, this stock is the more fairly priced of the three. The share price was destroyed during the mid-March shutdowns, but it has since recovered to its prior levels.
The Zacks Value score is D (but the forward P/E ratio is much lower at 24.6), the Zacks Growth score is D (which may vastly improve after the July 30th EPS report), and the Zacks Momentum score is F. That’s an overall VGM score of F.
Current year EPS is $2.94 a share.
Brunswick Corporation endeavors to instill Genuine Ingenuity in all its leading consumer brands, including:
- Mercury and Mariner outboard engines
- Mercury MerCruiser sterndrives and inboard engines
- MotorGuide trolling motors
- Attwood and Whale marine parts and accessories
- Land 'N' Sea, Kellogg Marine, Diversified Marine, BLA and Bell RPG parts and accessories distributors
- Bayliner, Boston Whaler, Brunswick Commercial and Government Products, Crestliner, Cypress Cay, Harris, Lowe, Lund, Meridian, Princecraft, Quicksilver, Rayglass, Sea Ray and Uttern boats
- Life Fitness, Hammer Strength and SCIFIT fitness equipment
- Brunswick billiards tables, accessories and game room furniture and InMovement products and services for productive well-being
This Leisure & Recreation industry narrative shows you. Stock market traders have already been betting the summer outdoor crowd would be bigger than normal this year.
Shutdown-crazed folks were expected to pick up their spending on outdoor goods.
My closing stock picking advice?
This is one industry to pick your way through, very carefully. Trend chasing COVID19 profiteers lurk behind big momentum share price runs. Any time now, they can start mass-selling the POOL and YETI names in this giddy stock market.
So, play it safe when trading in the COVID-19 environment.
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