We are officially in the final quarter of the year and awaiting earnings announcements for the third quarter.
So before getting into the whys and wherefores of what companies did in the last quarter, as we will be doing in a few days from now, it’s important to bear in mind that things haven’t been as bad as feared. That’s not just in tech, which benefited from the whole disruption, but also in many other areas.
It was already indicated in the recently-released non-farm payroll numbers from the Bureau of Labor Statistics (BLS) that the biggest job gains in September occurred in leisure and hospitality (318K), retail trade (142K), health care and social assistance (108K), and in professional and business services (89K).
Yesterday’s ISM report for Services appeared to support those estimates. Accordingly, the ISM non-manufacturing activity index rose to 57.8 last month, up from 56.9 in August and just above the 57.3 level that it was at in February, indicating that the sector has already reached pre-pandemic levels.
Taking this as an indicator of continued improvement in economic activity, we can say that we are pulling out of the situation.
Does this mean that it will be all smooth-sailing? Or that there will be any dramatic improvement this year?
I think that the answer to both questions is “not likely.” Because obviously, the segments where activity resumes fastest are the ones that are relatively more essential to existence. And the ones that follow will come back slower. So we should expect job adds to slow down somewhat (while also benefiting from increased digitization and holiday demand).
Now let’s talk about some of the uncertainties, the virus being number one on the list. The availability of a vaccine feels like something of a mirage: the closer you appear to get, the further it seems. And infections go on increasing in the meantime with death rates falling consistently lower.
One added concern for the U.S. is President Trump testing positive, because it could push back the elections. But we don’t know.
If the elections are pushed back, the volatility is stocks could continue and gold prices could continue to escalate, brightening prospects in that area.
But whatever the scenario, this is but a blip in our entire investment careers, so we should treat it as such. Invest with caution, keep expectations realistic and wait for the bad times to pass over.
On that note, I thought it would be a good idea to present some great value stocks that also look attractive in terms of growth this year-
Frontline Ltd. FRO
Frontline Ltd., which transports crude oil by sea, belongs in the Transportation – Shipping Industry (top 35% of Zacks-classified industries). The company has a Zacks Rank #1 and Value Score A. The company is expected to grow 223.17% this year and is trading at 4.17% of its 52-week high. So its dividend yields 30.67%.
Valuation: Current price to forward 12 months’ earnings (P/E) of 3.45X is below the median value of 4.80X over the past year. So the shares are undervalued.
South32 Ltd. SOUHY
This producer of alumina, aluminium, coal, manganese, nickel, silver, lead and zinc belongs in the Mining – Miscelleneous industry (top 17% of Zacks-classified industries). With A Zacks Rank #2 and Value Score B, the company promises growth of 137.5% this year. However, the stock is trading 51.15% of its 52-week high. Its dividend yields 1.23%.
Valuation: Current P/E of 15.58X is below the median value of 16.04X over the past year. So the shares are undervalued.
SpartanNash Company SPTN
SpartanNash Co. is a food distributor through military commissaries and exchanges as well as independent retail stores across 44 states and the District of Columbia, Europe, Cuba, Puerto Rico, the Azores, Bahrain and Egypt. The company is a part of the Food - Natural Foods Products industry, which is in the bottom 49% of Zacks-classified industries. However, its expected growth rate of 129.4% qualifies it for a Zacks Rank #1. Its Value Score A is likely driven by a share price that’s currently 50.97% of its 52-week high. Its dividend yields 4.68%.
Valuation: Current P/E of 7.71X is below the median value of 10.07X over the past year. So the shares are undervalued.
The E.W. Scripps Company SSP
The E.W. Scripps Company is a Broadcast Radio and Television industry (top 38%) player, with a growing portfolio of television, print and digital media brands. It’s also the long-time steward of the popular educational program, Scripps National Spelling Bee. The Zacks Rank #2 company has a Value Score B and expected growth rate of 1,300% this year. Still, it’s trading 55.56% of its 52-week high. Its dividend yields 1.70%.
Valuation: Current price to forward 12 months’ sales (P/S) of 0.53X is just under the median value of 3.54X over the past year. So the shares are undervalued.
These are relatively small players in terms of market cap and turnover. So there are only one or two analysts providing estimates. Therefore, it’s best to tread with caution. So while you can bet on these stocks, it’s a good idea not to over-indulge.
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