After brutal trading, the S&P 500 has recovered about half of its losses made in late March on heightening coronavirus fears. Notably, the index is up about 25% from its lows. Most of the gains were recorded last week on signs of a slowdown in the number of hospitalizations and intensive-care admissions in New York and Europe.
This has led to optimism over the reopening of the economy soon and improving activity in the near future. Additionally, the large fiscal and monetary stimulus has added to the strength. In its latest move, the Fed rolled out a massive $2.3-trillion program last week to aid local governments and businesses impacted by the coronavirus pandemic (read: Fed Goes the Extra Mile: 6 ETF Areas to Win).
This is in addition to the historic $2.2-trillion stimulus package approved by the government last month to rescue the economy ravaged by the coronavirus. The Fed also took aggressive action last month. After slashing interest rates to near zero and offering to buy more government bonds and mortgage-backed securities as needed to support smooth market functioning, the central bank will lend against student loans and credit card loans, as well as back the purchase of corporate bonds and direct loans to companies. This represents the most extreme intervention in the economy by the central bank in its history of more than 100 years.
Amid the recovering backdrop, the proxy version of the S&P 500 Index, SPDR S&P 500 ETF Trust SPY has gained 15.6% in a month. Let’s take a closer look at the fundamentals of SPY and its best stocks (read: S&P 500 ETFs Face Off: SPY vs. IVV):
Inside the SPY
The ETF holds 505 stocks in its basket with each accounting for not more than 5.45%. This suggests a nice balance across each security and prevents heavy concentration. The fund is widely spread across sectors with information technology, healthcare, financials and communication services being the top four, with double-digit allocation each. It has AUM of $259.4 billion and charges 9 bps in fees per year from investors. The product trades in heavy volume of around 110.1 million shares a day on average, ensuring higher liquidity with a tight bid/ask spread, leading to lower trading costs for investors (see: all the large Cap Blend ETFs here).
SPY has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook. Though most stocks in the fund’s portfolio are in green from the one-month look, we have highlighted 10 stocks that are leading the way in the ETF and have a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold):
Best-Performing Stocks of SPY
Newmont Corporation NEM: It is one of the world's largest producers of gold with several active mines in Nevada, Peru, Australia and Ghana. The stock has gained more than 51% in a month and saw positive earnings estimate revision of 15 cents for this year in the past month. The company has an estimated earnings growth rate of 83.3% and has a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Amcor PLC AMCR: This company is a major supplier of flexible and rigid plastic packaging used by leading food, consumer products, healthcare, and other companies worldwide. Having a Zacks Rank #3, the stock has risen 30.5% in a month. Its earnings are expected to grow 1.6% in the fiscal year (ending June 2020).
Fortinet Inc. FTNT: It is a provider of network security appliances and Unified Threat Management (UTM) network security solutions to enterprises, service providers and government entities worldwide. The stock climbed 26.6% in the same time frame and has an estimated earnings growth rate of 6.1% for this year. Fortinet has a Zacks Rank #3 (read: Cyber Security ETFs to Thrive in the Virus-Hit Economy).
WestRock Company WRK: It is a multinational provider of paper and packaging solutions for consumer and corrugated packaging markets. The stock climbed 25.4% in the same time frame and delivered average positive earnings surprise of 10.01% over the past four quarters. Its earnings are expected to decline 22.1% for fiscal year (ending September 2020). WestRock has a Zacks Rank #3.
Illumina Inc. ILMN: The life sciences company provides tools and integrated systems for analysis of genetic variation and function. It has gained 24% in a month and has an estimated earnings decline rate of 1.5% for this year. The stock has a Zacks Rank #3.
Citrix Systems Inc. CTXS: It is a leading provider of virtualization, networking and cloud computing solutions to more than 400,000 organizations worldwide. Its earnings are expected to decline 5.3% for this year. Citrix Systems is up more than 23% in a month and has a Zacks Rank #2.
Amazon.com Inc. AMZN: It is one of the largest e-commerce providers with extensive operations in North America and rapidly increasing reach across the globe. The stock has risen 21.5% in a month and has an estimated earnings growth rate of 22% for this year. It has a Zacks Rank #3.
Alexion Pharmaceuticals Inc. ALXN: This Zacks #3 Ranked biopharmaceutical company is focused on the development and commercialization of life-transforming drugs for the treatment of patients with ultra-rare disorders. It has gained 20% in a month and has an estimated earnings growth rate of 4.9% (read: Healthcare Stocks & ETFs to Gain on Coronavirus Test Progress).
Incyte Corporation INCY: This biopharmaceutical company is focused on the discovery, development and commercialization of proprietary therapeutics. It has gained 19.2% in the same time frame and its earnings are expected to decline 11.3% for this year. Incyte has a Zacks Rank #3.
Sempra Energy SRE: This Zacks #3 Ranked energy services holding company is involved in the sale, distribution, storage and transportation of electricity and natural gas. It has gained 18.8% in a month and has an estimated earnings growth rate of 4.7%. The stock has a Zacks Rank #3 (read: OPEC Output Deal Cut: Will It Help Oil & Energy ETFs?).
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