The post-election stock market rally buoyed by positive news on a potemtial coronavirus vaccine has faded in less than a week. A significant spike in new coronavirus cases in the United States, the U.K., and the Eurozone has dented investors' confidence.
Major central bankers have cautioned about a tough road ahead for economic recovery. Uncertainty over a fresh fiscal stimulus lingers as the final result of the recently concluded U.S. presidential election is yet to be declared.
Meanwhile, Wall Street keep rotating from growth/momentum to reopening stocks and then again from cyclical reopening stocks to growth/ momentum stocks. In view of the three above-mentioned negative factors, market participants are likely to focus on growth/momentum stocks in the near term.
Significant Spike in COVID-19 Infections
Per the COVID Tracking Project in the United States, both new cases and hospitalizations set records, respectively, topping 150,000 and 67,000 on Nov 12. Total U.S. cases have crossed 10 million and the death toll stands at more than 242,000. New cases are rising in 49 states and territories.
The Governor of New York Andrew Cuomo ordered bars, restaurants and gyms to close at 10 P.M. starting Nov 13. The mayor of Chicago advised people to stay at home or work from home, apart from essential travel and business, from Nov 16 for 30 days.
Gloomy Outlook by Major Central Bankers
On Nov 12, at a European Central Bank (ECB) conference, Fed Chairman Jerome Powell said that despite the recent positive developments on the coronavirus vaccine front, the U.S. economic outlook remained uncertain and far from the pre-pandemic level.
The ECB President Christine Lagarde said that even if a vaccine gets approval, questions will be raised on the en masse production of such a vaccine and the ability to efficiently administer it. The Bank of England Governor Andrew Bailey raised concerns that the immediate global implementation of the vaccine is a remote possibility.
Uncertainty on Fresh Fiscal Stimulus
More than a week after the U.S. presidential election, the final result is yet to be announced. In the meantime, the Trump administration has decided not to negotiate further with Democrat House Speaker Nancy Pelosi regarding a new stimulus. Instead, Senate Majority Mitch McConnell will be the Republican negotiator, who is well known for his tough stand on a new tranche of coronavirus-aid package.
Better-Than-Expected Economic and Earnings Data
Several economic data of September and October indicated that the U.S. economy is growing despite the lack of a fresh stimulus. Consumer spending — the largest driver of the U.S. GDP — rose 1.4% in September after gaining 1% in August. In October, manufacturing PMI, services PMI, vehicles sales, non-farm payrolls and unemployment rate came in better than expected. The labor market is improving as indicated by improving initial claims data.
The third-quarter earnings season has started on a positive note although overall earnings are likely to remain negative. As of Nov 11, total S&P 500 earnings are expected to decline 8.9% on 1.3% lower revenues. This would mean an improvement over an earnings decline of 22% year over year on 2.9% lower revenues, as projected before the reporting cycle.
Our Top Picks
At this stage, it will be prudent to invest in growth stocks for November. We have narrowed down our search to seven growth stocks that have gained more than 12% in the past month. These stocks have strong growth potential and witnessed robust earnings estimate revisions in last 7 to 30 days. Each of our picks carries a Zacks Rank #1 (Strong Buy) and has a
Growth Score A. You can see . the complete list of today’s Zacks #1 Rank stocks here
The chart below shows the price performance of our seven picks in the past month.
Tapestry Inc. ( TPR Quick Quote TPR - Free Report) provides luxury accessories and branded lifestyle products in the United States, Japan, China, Hong Kong, Macau, Taiwan, Europe, Canada, South Korea, Malaysia, Singapore, Australia, and New Zealand. It operates through three segments: Coach, Kate Spade, and Stuart Weitzman.
The company has an expected earnings growth rate of more than 100% for the current year (ending June 2021). The Zacks Consensus Estimate for the current year has improved 2% over the last 30 days. The stock price has soared 33.7% in the past month.
The Providence Service Corp. offers human services and non-emergency transportation management services to children, adolescents, young adults, and families. It operates through Non-Emergency Medical Transportation Services, and Matrix Investment segments.
The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved 41.2% over the last 7 days. The stock price has rallied 31.2% in the past month.
Calix Inc. ( CALX Quick Quote CALX - Free Report) provides cloud and software platforms, and systems and services required to deliver unified access network in the United States, the Middle East, Canada, Europe, the Caribbean and internationally.
The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 71.2% over the last 30 days. The stock price has jumped 23.5% in the past month.
Crocs Inc. ( CROX Quick Quote CROX - Free Report) designs, develops, manufactures, markets and distributes casual lifestyle footwear and accessories for men, women and children worldwide. It offers various footwear products, including clogs, sandals, flips and slides, shoes, and boots under the Crocs brand name.
The company has an expected earnings growth rate of 63.4% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 27.1% over the last 30 days. The stock price has surged 14% in the past month.
MACOM Technology Solutions Holdings Inc. ( MTSI Quick Quote MTSI - Free Report) designs and manufactures analog radio frequency, microwave, millimeterwave, and lightwave spectrum products in the United States, China, the Asia Pacific, and internationally.
The company has an expected earnings growth rate of 65.3% for the current year (ends September 2021). The Zacks Consensus Estimate for the current year has improved 9.5% over the last 30 days. The stock price has appreciated 13.1% in the past month.
Primoris Services Corp. ( PRIM Quick Quote PRIM - Free Report) a specialty contractor and infrastructure company, provides a range of construction, fabrication, maintenance, replacement, and engineering services in the United States and Canada. It operates through five segments: Power, Industrial, and Engineering, Pipeline and Underground, Utilities and Distribution, Transmission and Distribution, and Civil.
The company has an expected earnings growth rate of 13% for the current year. The Zacks Consensus Estimate for the current year has improved 7.1% over the last 60 days. The stock price has advanced 12.2% in the past month.
Matson Inc. ( MATX Quick Quote MATX - Free Report) operates as an ocean transportation and logistics company. It offers shipping services in Hawaii, Guam, and Micronesia islands and expedited service from China to southern California.
The company has an expected earnings growth rate of 57.1% for the current year. The Zacks Consensus Estimate for the current year has improved 11.5% over the last 30 days. The stock price has gained 12.2% in the past month.
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