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Vaccines to Fuel Santa Claus Rally: 5 Stock Picks

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With only eight trading days left this year, markets are bracing for the so-called Santa Claus rally. A Santa Claus rally refers to the increase in stock prices in the final week of the calendar year (i.e. between Christmas and New Year’s Day) that extends into the first two days of the New Year. According to the Stock Trader’s Almanac, the S&P 500 has gained an average 1.3% during the seven-trading day session since 1969.

Santa On The Way!

Although good tidings have already started flowing in thanks to the rollout of vaccines and further stimulus hopes, year-end seasonal factors such as holiday optimism, tax-related affairs, investment of Christmas bonuses, mutual fund manager window dressing, and the “January effect” will continue to push stocks higher.

Coronavirus immunizations have already started in America with Pfizer (PFE - Free Report) shots and more vaccines on the way. Moderna (MRNA - Free Report) , last week, received the FDA authorization for emergency use against COVID-19 in individuals 18 years of age or older. A vaccine will end the pandemic crisis and set the stage for a speedy recovery, thereby boosting demand for several types of products and services in the economy.

Increased optimism on further fiscal stimulus should also support the Santa Claus rally. Democratic and Republican leaders reached an agreement on the new coronavirus relief package of $900 billion, which includes a round of $600 direct payments, funding for the Paycheck Protection Program, and $300 per week unemployment compensation supplement. The bill will soon be put for a vote in the House and the Senate.

Further, the Fed has pledged to hold rates near zero and will continue the asset purchase program at the current rate until “substantial further progress” has been made toward reaching maximum employment and healthy inflation. The lower rates and super-easy policies will continue to drive the stock prices up.

Stocks to Jingle

While most of the stocks will see a nice boost in the final weeks of the year, we have highlighted those that are expected to outperform in the seven-day period and are intriguing choices for a short spell. Notably, high-beta and high-momentum stocks are expected to lead the market in the weeks ahead. High-beta stocks experience larger gains than the broader market counterparts in a bullish market. On the other hand, momentum investing looks to capture profits from buying hot stocks, which have shown an uptrend over a few weeks or months.

As a result, we have chosen the best stocks using the Zacks Screener that fit our criteria: a Zacks Rank #1 (Strong Buy) or 2 (Buy), Momentum Score of B or higher, market cap of more than $100 million, beta greater than 2, Zacks Industry Rank within the top 45% and a positive four-week price change. Here are the five chosen stocks.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Rayonier Advanced Materials Inc. (RYAM - Free Report)

With a market cap of $410.5 million, this company operates as a global supplier of cellulose specialties products, a natural polymer for the chemical industry. The stock has a beta of 3.92 and has surged about 13% in a month. Rayonier Advanced Materials carries a Zacks Rank #2 and has a Momentum Score of A. It belongs to a top industry Rank (in the top 24%).

Commercial Vehicle Group Inc. (CVGI - Free Report)

This company supplies interior systems, vision safety solutions and other cab-related products for the global commercial vehicle market, including the heavy-duty (Class 8) truck market, the construction market and other specialized transportation markets. With a market cap of $287.6 million and a beta of 3.42, the stock falls in the top 20% industry Rank. Commercial Vehicle has a Zacks Rank #2 and a Momentum Score of B. It has risen about 24% in a month.

Apergy Corporation (CHX - Free Report)

This company provides chemistry solutions and engineered equipment and technologies to companies drill for and produce oil and gas. It has a market cap of $2.8 billion and a beta of 2.81. The stock has gained about 19% over the past month and belongs to the top 45% of the industry Rank. It has a Zacks Rank #2 and a Momentum Score of A.

Adient PLC (ADNT - Free Report)

With a market cap of $3.3 billion and beta of 3.30, Adient is one of the world’s largest automotive seating suppliers. It has a solid Zacks Industry Rank in the top 20% and has gained nearly 28% in a month. The stock has a Zacks Rank #2 and a Momentum Score of B.

The Michaels Companies Inc.

This company is one of the leading arts and crafts specialty retailers in North America on the basis of store count. With a market cap of $1.47 billion and a beta of 3.12, the stock falls in the top 15% industry Rank. Michaels Companies has a Zacks Rank #1 and a Momentum Score of A. It has risen about 24% in a month.

Bottom Line

These stocks could be the winning picks for the next few days, as these would generate higher returns compared to other products when the market is booming.

Zacks Top 10 Stocks for 2021

In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2021?

These 10 are painstakingly hand-picked from over 4,000 companies covered by the Zacks Rank. They are our primary picks to buy and hold.

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