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Top 5 Value Picks to Counter Coronavirus-Led Market Volatility

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After an impressive rally in the first two weeks of November, Wall Street is again facing volatility in the third week. This is primarily thanks to a massive spike in new cases of COVID-19 infections that overshadowed several positive developments on the vaccine front. The magnitude of new coronavirus cases on a daily basis is much higher in November than that of March and April.

The resurgence of coronavirus has forced several state administrations in the United States to reimpose restrictions on regular economic activities. Market participants remained concerned that even if a vaccine gets approval in the near future, its widespread implementation will take much longer time than initially expected.

Meanwhile, the U.S. economy continues to grow albeit at a slow pace despite the rise in coronavirus infections. The first tranche of fiscal stimulus — known as the CARES ACT — ended in July. Yet the economy has grown in the last three months, exhibiting its fundamental stability.  At this stage, it makes good sense to buy those stocks on the dip that could prove to be valuable once the rally resumes.

Resurgence of Coronavirus Infections

Per the COVID Tracking Project in the United States, both new cases and hospitalizations set records, respectively, topping 182,000 and more than 79,000 on Nov 19. Per a New York Times tracker, in the United States, both new cases and hospitalizations set records, respectively, topping 172,000 and more than 80,000 on Nov 19. Total U.S. cases have crossed 11.8 million and the death toll stands at more than 252,000. New cases are rising in 50 states and territories.

New Restrictions on Economic Activities

On Nov 19, the Centers for Disease Control and Prevention (CDC) issued a new guideline for Americans urging them not to travel for Thanksgiving celebrations and to avoid gatherings with those outside their households.

New York City, that operates the largest public school system in the United States, has decided to end in-person schooling starting Nov 19, owing to a major spike in new coronavirus cases in the city. The Governor of New York Andrew Cuomo ordered bars, restaurants and gyms to close at 10 P.M. starting Nov 13.

New Hampshire administration imposed a mask-wearing mandate and Rhode Island imposed a two-week “pause” effective at the end of the month. 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. California's Governor Gavin Newsom said that his administration is considering a statewide curfew owing to a surge in COVID-19 cases.

Positive News on COVID-19 Vaccine Development

On Nov 19, AstraZeneca plc (AZN) said that its experimental COVID-19 vaccine jointly developed by the Oxford University showed robust immune response in older adults in phase 2 clinical trial.

Meanwhile, on Nov 18, Pfizer Inc. (PFE) and BioNTech SE (BNTX) announced that their jointly developed potential vaccine BNT162b2 was more than 95% effective in preventing COVID-19 in trial participants with no previous evidence of the SARS-CoV-2 infection. These two companies are planning to submit for Emergency Use Authorization to the FDA in next few days.

On Nov 16, Moderna Inc. (MRNA) reported that the preliminary phase III clinical trial data revealed its potential coronavirus vaccine is more than 94% effective in preventing COVID-19. The study was conducted in collaboration with the National Institute of Allergy and Infectious Diseases. On Nov 10, the FDA had granted emergency authorization to a COVID-19 antibody treatment made by Eli Lilly & Co. (LLY).

Our Top Picks

At this stage, investors should be prepared to minimize fluctuations in their portfolio and consequently rebalance it with suitable financial assets to maintain stability. Thus, it would be prudent to pick up value stocks with a favorable Zacks Rank.

We have narrowed down our search to five stocks. Each of them carries a Zacks Rank #1 (Strong Buy) and a Value Score of A. 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 in the past month.

 

Office Depot Inc. (ODP - Free Report) provides business services and supplies, products, and technology solutions. It operates in three divisions: Business Solutions, Retail, and CompuCom.

The forward price-to-earnings ratio (P/E) for the current financial year is 6.3, lower than the industry average of 12.5X. It has a PEG ratio of 0.5, lower than the industry average of 2.6. The Zacks Consensus Estimate for the current-year earnings has improved 31.1% over the last 7 days.

WESCO International Inc. (WCC - Free Report) distributes electrical, industrial, and communications maintenance, repair and operating and original equipment manufacturers products and construction materials in North America and internationally.

The forward P/E for the current financial year is 11.9X, lower than the industry average of 12.1X. It has a PEG ratio of 1.2, lower than the industry average of 1.22. The Zacks Consensus Estimate for the current-year earnings has improved 12.3% over the last 30 days.

General Motors Co. 's (GM - Free Report) strong demand for profitable trucks and SUVs is aiding the company's revenues. Its hot-selling brands in the United States like Chevrolet Silverado, Equinox and GMC Sierra are also driving the top line.

The forward P/E for the current financial year is 9.5X, lower than the industry average of 26.9X. It has a PEG ratio of 1.1, lower than the industry average of 4.3. The Zacks Consensus Estimate for the current-year earnings has improved 71.9% over the last 30 days.

Laboratory Corp. of America Holdings. (LH - Free Report) operates as an independent clinical laboratory company worldwide. It operates in two segments, LabCorp Diagnostics and Covance Drug Development.

The forward P/E ratio for the current financial year is 9.7X, lower than the industry average of 26.1X. It has a PEG ratio of 1.1, lower than the industry average of 2.6. The Zacks Consensus Estimate for the current year has improved by 37.1% over the last 30 days.

Knight-Swift Transportation Holdings Inc. (KNX - Free Report) provides truckload transportation services in the United States and Mexico. It operates through three segments: Trucking, Logistics, and Intermodal.

The forward P/E ratio for the current financial year is 15.5X, lower than the industry average of 22.4X. It has a PEG ratio of 1, lower than the industry average of 1.9. The Zacks Consensus Estimate for the current year has improved by 16.8% over the last 30 days.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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