Wall Street has staged a solid comeback from the coronavirus-led market sell-off. A booming technology sector and an unprecedented stimulus from the central bank and the government have been the primary reasons for the outperformance.
Additionally, hopes surrounding a potential coronavirus vaccine and reopening of the economy instilled confidence. All the 50 states have lifted restrictions put in place to combat the coronavirus outbreak and resulted in an uptick in economic activities. The latest bouts of data indicate that economic damage from the coronavirus pandemic was less severe than anticipated. U.S. manufacturing activity rose for the first time since January while Americans added 2.5 million jobs in May — the largest monthly gain since the Bureau of Labor Statistics started tracking the data series in 1939. Stronger-than-expected consumer confidence and homebuilder confidence also led to strong optimism.
The bullish trend will likely continue despite the recent escalation in U.S.-China trade tensions and the civil unrest in the country. The S&P 500 has turned slightly positive for this year while Nasdaq hit new highs in just 16 weeks after coronavirus fears smashed stocks.
Given improving fundamentals, one should invest in industries that are currently undervalued and have a solid Zacks Rank per our methodology. For them, we have highlighted four solid ETF & stock picks each from these industries that are have a Zacks Rank #1 (Strong Buy) or 2 (Buy), VGM Score of A or B, at least 100% estimated earnings growth for this fiscal year and a top-ranked Zacks Industry (top 40%).
You can see the complete list of today’s Zacks #1 Rank stocks here.
The finance sector is currently attractively valued, trading with a P/E ratio of 13.63 - the lowest of all the Zacks sectors. Within this, the life insurance industry with P/E ratio of 9.75 seems to be an excellent pick as it falls under a top-ranked Zacks Industry (placed at the top 34% of 250+ industries).
Brighthouse Financial Inc. (BHF - Free Report) : This North Carolina-based company provides annuity and life insurance products in the United States. The company has an expected earnings growth rate of 225.7% and market cap of $3.5 billion. It has a Zacks Rank #2 and VGM Score of B.
Oils & Energy
This sector has P/E ratio of 16.50. U.S. oil and gas exploration and production seems attractive with P/E ratio of 12.63. It belongs to a top-ranked Zacks Industry (top 15%).
Cheniere Energy Inc. (LNG - Free Report) : This Texas-based company is engaged in liquefied natural gas (LNG - Free Report) related businesses in the United States. The stock saw positive earnings estimate revision of 29 cents over the past month for this year and has an estimated earnings growth rate of 549.1%. With a market cap of $12.8 billion, it has a Zacks Rank #2 and VGM Score of A.
This sector has P/E ratio of 19.49 with electric power only being the industry, which is both cheap (P/E ratio of 18.75) and belonging to a top-ranked Zacks Industry (top 30%).
Atlantic Power Corporation (AT - Free Report) : This Massachusetts-based independent electric power producer owns interests in a diversified portfolio of independent, non-utility power generation projects and one transmission line situated in major U.S. markets. The stock has an estimated earnings growth rate of 309.1% and market cap of $198.1 million. It has a Zacks Rank #2 and VGM Score of A.
The transport sector is valued currently at P/E ratio of 20.77. While most of the industries are undervalued, air fright and cargo looks solid with P/E of 14.97 and its placement in the top 34% of 250+ industries.
Atlas Air Worldwide Holdings (AAWW - Free Report) : This New York-based company provides outsourced aircraft and aviation operating services. It saw positive earnings estimate revision of 79 cents for this year in a month and has an expected earnings growth rate of 61.3%. The stock has a Zacks Rank #1 and a VGM Score of A. It has a market cap of $1.1 billion.
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