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Analyzing Coronavirus-Hit US Economy on World Health Day: 6 Picks
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The ongoing COVID-19 crisis has disrupted economic growth and business activities across nations with lockdowns, social distancing and stay-at-home mandates in place to contain the spread. Let us examine the health of the U.S. economy this World Health Day and bring to investors notice some solid picks for a robust investment portfolio.
Similar to the six vital nutrients required for good health, there are six pillars that support the economy. Here, we have picked six essential market nutrients in the form of sectors and then zeroed in on stocks that have a Zacks Rank #1 (Strong Buy) or 2 (Buy) stocks with higher market caps in their respective sectors using the Zacks Stock Screener. Other parameters considered include VGM Score of B or better, positive current-year earnings estimate revisions over the past 30 or 60 days, positive current-year EPS growth, and place in a top-ranked Zacks industry (in the top 45%).
Growth in America has stalled as depicted by the latest round of data. The decade-long job growth trend came to a halt with an unprecedented spike in March jobless claims. Americans lost 701,000 jobs in March, making it the worst month for jobs since the depths of the Great Recession in March 2009. Unemployment jumped to the highest since August 2017 to 4.4% from a near 50-year low of 3.5%. Meanwhile, the manufacturing sector contracted in March with activity hitting its lowest level since 2009. Consumer confidence dropped to a near three-year low last month.
Further, President Donald Trump has warned “very, very painful two weeks” in face of the rapidly spreading disease. United Nations stated that the outbreak is the “most challenging crisis we have faced” since World War II. With the economic fundamentals worsening, one Bank of America analyst predicts the deepest recession on record, nearly five times more severe than the post-war average. Another analyst at JP Morgan recently slashed first-half GDP growth estimates with first-quarter growth down to -10% from -4% and second quarter estimates to -25% from -14%.
However, the large fiscal and monetary stimulus is expected to provide a boost to the economy and the resultant stock market. The slew of measures will keep borrowing cost down, thereby resulting in higher consumer spending and rise in economic activities. As such, the beaten-down prices have made the stocks in the consumer sector attractive going into the spring selling season and that will provide the economy its regular dose of vitamins. Within this sector, Campbell Soup Company (CPB - Free Report) , a worldwide manufacturer and marketer of high-quality, branded convenience food products, is a great pick for investors.
This Zacks Rank #2 company saw positive earnings estimate revision of 10 cents over the past 30 days for fiscal year (ending July 2020). It has an expected earnings growth rate of 17.4%. Campbell Soup belongs to a top-ranked Zacks industry (top 39%) and has a VGM Score of B, suggesting its potential for solid growth in the months ahead. The stock has shed 3.7% so far this year.
Proteins: Financial Sector
Like protein, the financial sector, helps in carrying out a huge array of functions through its banks and financial institutions. The sector facilitates growth in every part of the country. The stocks in this sector have been battered by the dual attack of decline in yields and fears of default triggered by coronavirus-led economic slowdown. Additionally, the Fed has slashed interest rates to near zero in order to combat the slowdown, thereby leading to more pain in the sector.
Ally Financial Inc. (ALLY - Free Report) has plunged nearly 55% in the year-to-date timeframe but could represent a good buying opportunity. It is a diversified financial services company, providing a broad array of financial products and services, primarily to automotive dealers and their customers. The Zacks Consensus Estimate for 2020 has been revised by a penny over the past 60 days and indicates substantial year-over-year growth of 14.2%. This Zacks Rank #1 company falls within a top-ranked Zacks industry (top 17%) and has a VGM Score of B.
Minerals: Medical Sector
Just like minerals are important for bone structure, healthcare is crucial to the economy. In fact, it is the backbone of an economy. Healthcare is one of the largest and fastest-growing sectors thanks to an aging population, growing middle class, and insatiable demand for new treatments and drugs for many illnesses. About 10% of economic growth comes from this sector.
The industry is currently benefiting from increased demand for COVID-19 tests. Many health-care companies are developing treatments, vaccines and tests for the coronavirus pandemic. The FDA has allowed certain certified laboratories to begin developing validated coronavirus diagnostics on a priority basis. However, the tests will have to be submitted for review within 15 days to the federal agency. One of the beneficiaries of this trend is Zacks Ranked #2 player AbbVie Inc. (ABBV - Free Report) from a top-ranked Zacks industry (top 14%).
This research-based biopharmaceutical company develops and markets pharmaceutical products in the United States, Japan, Germany, Canada, France, Spain, Italy, the Netherlands, the United Kingdom, Brazil, and internationally. It saw solid earnings estimates of 20 cents for this year over the past 60 days to $10.53, indicating year-over year growth of 17.8%. The stock has a VGM Score of A and is down 14.5% so far this year.
Carbohydrates: Technology Sector
Similar to carbs that provide energy to the muscles and brain, the technology sector powers the economy with its wide range of products and services including electronics, software, computers and social media. The social distancing and stay-at-home policies have raised demand for cloud computing, gaming and e-sports, as well as streaming services as people are looking for entertainment indoors and are doing office work from home.
Within the sector, Akamai Technologies Inc. (AKAM - Free Report) with a Zacks Rank #2 and a VGM Score of B seems a solid choice. It is a global provider of content delivery network and cloud infrastructure services. The stock, which belongs to a top-ranked Zacks industry (top 17%), saw positive earnings estimate of 12 cents over the past 60 days for this year and has an expected earnings growth rate of 8.9%. It has gained nearly 13% so far this year.
Fats: Construction Sector
Construction sector — accounting for 5.5% of GDP — provides energy backup to the economy. This is because construction activity picks up when the economy strengthens. Though the economy is seeing slowdown, the construction sector has been doing well on lower mortgage rates, which is encouraging people to buy more homes and has made refinancing cheaper.
To tap this bullish trend, Gibraltar Industries Inc. (ROCK - Free Report) , which manufactures and distributes products to the industrial and buildings market, could be an exciting pick. The company’s earnings estimates have gone up by 17 cents over the past month for this year. The current Zacks Consensus Estimate is pegged at $3.01, up 16.7% year over year. Gibraltar Industries has a Zacks Rank #1 and a VGM Score of A, It belongs to a top-ranked Zacks industry (top 36%). Shares of ROCK are down nearly 17.7% in the year-to-date timeframe.
Water: Transport Sector
Transport enables smooth movement of freight and passengers through different modes such as rail, trucks, ships and air. It occupies an important place in the world market and is often considered a barometer of broad economic health. Though the lockdown has taken a toll on the sector at large, the stimulus package is expected to provide some boost.
Frontline Ltd. (FRO - Free Report) is a shipping company engaged in the seaborne transportation of crude oil and oil products worldwide. The stock has seen positive earnings estimate revision of 17 cents for this year over the past month and has estimated earnings growth of 142.7%. Frontline has a Zacks Rank #2 and a VGM Score of A. It belongs to a top-ranked Zacks industry (top 36%). The stock has tumbled more than 34% this year.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%. This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
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Analyzing Coronavirus-Hit US Economy on World Health Day: 6 Picks
The ongoing COVID-19 crisis has disrupted economic growth and business activities across nations with lockdowns, social distancing and stay-at-home mandates in place to contain the spread. Let us examine the health of the U.S. economy this World Health Day and bring to investors notice some solid picks for a robust investment portfolio.
Similar to the six vital nutrients required for good health, there are six pillars that support the economy. Here, we have picked six essential market nutrients in the form of sectors and then zeroed in on stocks that have a Zacks Rank #1 (Strong Buy) or 2 (Buy) stocks with higher market caps in their respective sectors using the Zacks Stock Screener. Other parameters considered include VGM Score of B or better, positive current-year earnings estimate revisions over the past 30 or 60 days, positive current-year EPS growth, and place in a top-ranked Zacks industry (in the top 45%).
You can see the complete list of today’s Zacks #1 Rank stocks here.
Vitamins: Consumer Sector
Growth in America has stalled as depicted by the latest round of data. The decade-long job growth trend came to a halt with an unprecedented spike in March jobless claims. Americans lost 701,000 jobs in March, making it the worst month for jobs since the depths of the Great Recession in March 2009. Unemployment jumped to the highest since August 2017 to 4.4% from a near 50-year low of 3.5%. Meanwhile, the manufacturing sector contracted in March with activity hitting its lowest level since 2009. Consumer confidence dropped to a near three-year low last month.
Further, President Donald Trump has warned “very, very painful two weeks” in face of the rapidly spreading disease. United Nations stated that the outbreak is the “most challenging crisis we have faced” since World War II. With the economic fundamentals worsening, one Bank of America analyst predicts the deepest recession on record, nearly five times more severe than the post-war average. Another analyst at JP Morgan recently slashed first-half GDP growth estimates with first-quarter growth down to -10% from -4% and second quarter estimates to -25% from -14%.
However, the large fiscal and monetary stimulus is expected to provide a boost to the economy and the resultant stock market. The slew of measures will keep borrowing cost down, thereby resulting in higher consumer spending and rise in economic activities. As such, the beaten-down prices have made the stocks in the consumer sector attractive going into the spring selling season and that will provide the economy its regular dose of vitamins. Within this sector, Campbell Soup Company (CPB - Free Report) , a worldwide manufacturer and marketer of high-quality, branded convenience food products, is a great pick for investors.
This Zacks Rank #2 company saw positive earnings estimate revision of 10 cents over the past 30 days for fiscal year (ending July 2020). It has an expected earnings growth rate of 17.4%. Campbell Soup belongs to a top-ranked Zacks industry (top 39%) and has a VGM Score of B, suggesting its potential for solid growth in the months ahead. The stock has shed 3.7% so far this year.
Proteins: Financial Sector
Like protein, the financial sector, helps in carrying out a huge array of functions through its banks and financial institutions. The sector facilitates growth in every part of the country. The stocks in this sector have been battered by the dual attack of decline in yields and fears of default triggered by coronavirus-led economic slowdown. Additionally, the Fed has slashed interest rates to near zero in order to combat the slowdown, thereby leading to more pain in the sector.
Ally Financial Inc. (ALLY - Free Report) has plunged nearly 55% in the year-to-date timeframe but could represent a good buying opportunity. It is a diversified financial services company, providing a broad array of financial products and services, primarily to automotive dealers and their customers. The Zacks Consensus Estimate for 2020 has been revised by a penny over the past 60 days and indicates substantial year-over-year growth of 14.2%. This Zacks Rank #1 company falls within a top-ranked Zacks industry (top 17%) and has a VGM Score of B.
Minerals: Medical Sector
Just like minerals are important for bone structure, healthcare is crucial to the economy. In fact, it is the backbone of an economy. Healthcare is one of the largest and fastest-growing sectors thanks to an aging population, growing middle class, and insatiable demand for new treatments and drugs for many illnesses. About 10% of economic growth comes from this sector.
The industry is currently benefiting from increased demand for COVID-19 tests. Many health-care companies are developing treatments, vaccines and tests for the coronavirus pandemic. The FDA has allowed certain certified laboratories to begin developing validated coronavirus diagnostics on a priority basis. However, the tests will have to be submitted for review within 15 days to the federal agency. One of the beneficiaries of this trend is Zacks Ranked #2 player AbbVie Inc. (ABBV - Free Report) from a top-ranked Zacks industry (top 14%).
This research-based biopharmaceutical company develops and markets pharmaceutical products in the United States, Japan, Germany, Canada, France, Spain, Italy, the Netherlands, the United Kingdom, Brazil, and internationally. It saw solid earnings estimates of 20 cents for this year over the past 60 days to $10.53, indicating year-over year growth of 17.8%. The stock has a VGM Score of A and is down 14.5% so far this year.
Carbohydrates: Technology Sector
Similar to carbs that provide energy to the muscles and brain, the technology sector powers the economy with its wide range of products and services including electronics, software, computers and social media. The social distancing and stay-at-home policies have raised demand for cloud computing, gaming and e-sports, as well as streaming services as people are looking for entertainment indoors and are doing office work from home.
Within the sector, Akamai Technologies Inc. (AKAM - Free Report) with a Zacks Rank #2 and a VGM Score of B seems a solid choice. It is a global provider of content delivery network and cloud infrastructure services. The stock, which belongs to a top-ranked Zacks industry (top 17%), saw positive earnings estimate of 12 cents over the past 60 days for this year and has an expected earnings growth rate of 8.9%. It has gained nearly 13% so far this year.
Fats: Construction Sector
Construction sector — accounting for 5.5% of GDP — provides energy backup to the economy. This is because construction activity picks up when the economy strengthens. Though the economy is seeing slowdown, the construction sector has been doing well on lower mortgage rates, which is encouraging people to buy more homes and has made refinancing cheaper.
To tap this bullish trend, Gibraltar Industries Inc. (ROCK - Free Report) , which manufactures and distributes products to the industrial and buildings market, could be an exciting pick. The company’s earnings estimates have gone up by 17 cents over the past month for this year. The current Zacks Consensus Estimate is pegged at $3.01, up 16.7% year over year. Gibraltar Industries has a Zacks Rank #1 and a VGM Score of A, It belongs to a top-ranked Zacks industry (top 36%). Shares of ROCK are down nearly 17.7% in the year-to-date timeframe.
Water: Transport Sector
Transport enables smooth movement of freight and passengers through different modes such as rail, trucks, ships and air. It occupies an important place in the world market and is often considered a barometer of broad economic health. Though the lockdown has taken a toll on the sector at large, the stimulus package is expected to provide some boost.
Frontline Ltd. (FRO - Free Report) is a shipping company engaged in the seaborne transportation of crude oil and oil products worldwide. The stock has seen positive earnings estimate revision of 17 cents for this year over the past month and has estimated earnings growth of 142.7%. Frontline has a Zacks Rank #2 and a VGM Score of A. It belongs to a top-ranked Zacks industry (top 36%). The stock has tumbled more than 34% this year.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%. This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
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