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5 Value Stocks to Make the Most of Economic Reopening

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Value stocks were mostly unloved last year since they are dependent on the proper functioning of the economy and the COVID-19 pandemic had put a brake on activities. Instead, investors favored high-flying technology growth stocks that were making the most of the pandemic-induced stay-at-home orders. Nonetheless, the situation is changing and value stocks are winning back favor, thanks to the gradual reopening of the U.S. economy.

One of the main driving forces behind the economic reopening is surely the rapid progress in vaccination across the country. Toward that end, on May 4, President Joe Biden announced a goal to vaccinate 70% of the U.S. adult population by Jul 4 with at least one dose and to fully vaccinate 160 million Americans. Adding to that, COVID-19 restrictions are being slowly lifted across the country. Notably, New York governor Andrew Cuomo said on May 3 that most COVID-related restrictions on businesses will be lifted from May 19, in New York and the neighboring states of New Jersey and Connecticut, as mentioned in a Financial Times article.

Meanwhile, the federal government has remained proactive in lending its support to the people and toward that end, it recently sent out an additional $1,400 stimulus check to American households. Reflective of this additional income, consumer spending witnessed an uptick in March. Notably, the Commerce Department reported that consumer spending rose 4.2% in March compared to a fall of 1% in February, as quoted in a Reuters article.

Moreover, manufacturing activity in the United States has been expanding at a steady pace as it rose for the eleventh consecutive month in April, albeit at a slower pace. Per the latest report by the Institute for Supply Management, the manufacturing purchasing managers’ index for April was reported at 60.7% compared to 64.7% in March.

Reflective of these positive developments, the U.S. economy continued on its expansion path in the first quarter of 2021. Notably, per the “advance” estimate released by the Bureau of Economic Analysis, GDP expanded at an annual rate of 6.4% in the first quarter of 2021 compared to an increase of 4.3% in the fourth quarter of 2020. Markedly, another Financial Times article cited that this was the quickest pace of first-quarter growth since 1984. In fact, the fast pace of growth is expected to continue in the second quarter as well. Per the latest GDPNow model estimate released on May 4 by the Federal Reserve Bank of Atlanta, the second-quarter GDP is expected to increase 13.6%. Such positive indicators will surely fuel economic recovery and in turn allow value stocks to gain ground.

Meanwhile, the Conference Board also stated that consumer confidence in the United States rose to more than a one-year high in April, as quoted in a Wall Street Journal article. The article stated that the consumer confidence index was reported at 121.7 in April compared to a revised 109 in March.

5 Top Value Picks

The U.S. economy is gradually reopening, thanks to the ramp-up in vaccination along with other factors like continued expansion in manufacturing and rebounding consumer spending. This, in turn, should bode well for the economically-sensitive value stocks, making it a good time to invest in them. Our research shows that stocks with a Value Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer the best investing opportunities in the value space. Notably, we have handpicked five such stocks. You can see the complete list of today’s Zacks #1 Rank stocks here.

G-III Apparel Group, Ltd. (GIII - Free Report) designs, sources and markets women's and men's apparel in the United States and internationally. The company currently has a Zacks Rank #1 and Value Score of A. The Zacks Consensus Estimate for its current-year earnings increased 4.5% over the past 60 days. The company’s expected earnings growth rate for the current year is more than 100%.

OneWater Marine Inc. (ONEW - Free Report) operates as a recreational boat retailer in the United States. The company currently has a Zacks Rank #1 and Value Score of A. The Zacks Consensus Estimate for its current-year earnings increased nearly 21% over the past 60 days. The company’s expected earnings growth rate for the current year is 42.9%.

Funko, Inc. (FNKO - Free Report) , a pop culture consumer products company, designs, sources and distributes licensed pop culture products. The company currently has a Zacks Rank #2 and Value Score of B. The Zacks Consensus Estimate for its current-year earnings increased 60.3% over the past 60 days. The company’s expected earnings growth rate for the current year is more than 100%.

AZZ Inc. (AZZ - Free Report) provides galvanizing and metal coating solutions, welding solutions, specialty electrical equipment, and engineered services to the power generation, transmission, distribution, refining, and industrial markets. The company currently has a Zacks Rank #2 and Value Score of A. The Zacks Consensus Estimate for its current-year earnings increased 1.5% over the past 60 days. The company’s expected earnings growth rate for the current year is 27.5%.

Sleep Number Corporation (SNBR - Free Report) , together with its subsidiaries, provides sleep solutions and services in the United States. The company currently has a Zacks Rank #2 and Value Score of A. The Zacks Consensus Estimate for its current-year earnings increased nearly 11% over the past 60 days. The company’s expected earnings growth rate for the current year is 38.2%.

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