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5 Momentum Picks for December Amid Virus and Fed Uncertainty

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·7 min read
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U.S. stock markets along with the global bourses, have been suffering from extreme volatility since Black Friday. As we are in the last month of 2021, market participants have started anticipating how Wall Street will behave this December. Historically December is the best-performing month for Wall Street, although it has a history of negative ending.

At this stage, it will be fruitful to invest in stocks with a favorable Zacks Rank that have showed strong momentum over the past month defying volatility. We have selected five such stocks. These are — Chevron Corp. CVX, Expeditors International of Washington Inc. EXPD, Westlake Chemical Corp. WLK, Devon Energy Corp. DVN and CBRE Group Inc. CBRE.

December – Historically Favorable to Wall Street

U.S. stock markets have provided impressive returns so far in 2021. Barring September’s market turmoil, major indexes have done extremely well. In November, the Dow and S&P 500 tumbled, but that was due to severe volatility in the last three trading sessions of last month. The resurgence of a new variant of coronavirus — Omicron — and the Fed’s likely shift to a relative hawkish monetary stance have unnerved investors.

However, the fundamentals of the U.S. economy remain robust. This is evident from the recently released economic data of November. CNBC reported citing a Bank of America finding that in December — the market’s benchmark the S&P 500 Index — has risen 2.3% on average since 1936 and ended on a positive note 79% of the time. Year to date, the Dow, the S&P 500 and the Nasdaq Composite — have rallied 13.2%, 21.9% and 19.3%, respectively.

Near-Term Positives

As of now, we have very little data available on the Omicron. Globally doctors and medical scientists are divided in opinion regarding the new variant of coronavirus. Upon analyzing the little data available, analyzing doctors think that Omicron is more transmissible but less severe than the earlier variants. Patients detected with Omicron have so far shown mild effect of coronavirus.

On Nov 30, in his testimony before a Senate committee, Fed Chairman Jerome Powell said that the central bank will discuss speeding up the tapering process of its monthly bond-buy program in the upcoming FOMS meeting scheduled from Dec 14-15. Current inflation is no longer transitory to Fed.

Powell said “At this point, the economy is very strong and inflationary pressures are higher, and it is therefore appropriate in my view to consider wrapping up the taper of our asset purchases, which we actually announced at the November meeting, perhaps a few months sooner.”

This means that the Fed strongly believes that the fundamentals of the U.S. economy are robust. Both consumer spending and business spending remain strong despite mounting inflation and supply-chain disruptions. Manufacturing and services PMIs have stayed elevated. The struggling labor market is showing a systematic recovery.

Moreover, in its latest projection on Dec 1, the Atlanta Fed reported that the U.S. economy would grow by 9.7% in fourth-quarter 2021. U.S. GDP grew 6.4%, 6.7% and 2.1%, in the first, second and third quarters of this year, respectively.

Total third-quarter earnings of the market's benchmark — the S&P 500 Index — jumped 40.3% from the same period last year on 17.3% higher revenues. Moreover, in fourth-quarter 2021, total earnings of the S&P 500 Index are expected to increase 19.1% year over year on 11.2% higher revenues.

Our Top Picks

We have narrowed our search to five large-cap (market capital > $10 billion) momentum stocks that have strong upside left for the rest of 2021. These stocks have seen positive earnings estimate revisions within the last 30 days. Each of our picks carries a Zacks Rank #1 (Strong Buy) and has a Momentum Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.

The chart below shows the price performance of our five picks in the past month.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

Chevron Corp. is one of the best-placed global integrated oil firms to achieve a sustainable production ramp-up. CVX’s existing project pipeline is one of the best in the industry, thanks to its premier position in the lucrative Permian Basin.

Chevron’s Noble Energy takeover has expanded its footprint in the region and the DJ Basin. CVX now has access to Noble Energy’s low-cost, proven reserves along with cash-generating offshore assets in Israel — particularly the flagship Leviathan natural gas project — thereby boosting its footing in the Mediterranean.

Chevron has an expected earnings growth rate of more than 100% for the current-year. The Zacks Consensus Estimate for current-year earnings improved 2.5% over the last 30 days.

Expeditors International of Washington Inc. is engaged in the business of global logistics management, including international freight forwarding and consolidation, for both air and ocean freight in the Americas, North Asia, South Asia, Europe, the Middle East, Africa, and India.

Expeditors is optimistic about the buyout of Fleet Logistics’ Digital Platform. The acquisition has boosted Expeditors’ online LTL shipping platform, Koho. The move is in line with EXPD's focus on Digital Solutions. Amid the coronavirus crisis, the acquisition is expected to expand business and get further investments that are expected to drive the top line in the upcoming quarters.

EXPD has an expected earnings growth rate of 80.8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 9.7% over the last 30 days.

Devon Energy Corp. aims for strong oil production from the Delaware Basin holdings. Devon Energy’s presence in Delaware has expanded due to its all-stock merger deal with WPX Energy. DVN is using new technology in production process to lower expenses.

Devon Energy’s divestiture of Canadian and Barnett Shale gas assets will allow it to focus on its five high-quality oil-rich U.S. basins assets. DVN’s stable free cash flow generation allows it to pay dividend and buy back shares. Devon Energy has ample liquidity to meet near-term debt obligations.

Devon Energy has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved 5.4% over the last 30 days.

CBRE Group Inc. operates as a commercial real estate services and investment company worldwide. CBRE’s performance in the recent quarters reflects the benefits from diversifying across asset type, business lines, client type and geography, plus the expansion of its resilient business in recent years.

CBRFE Group is well poised to continue on its growth path in the upcoming days on the back of its wide real estate products and services offerings, healthy outsourcing business, strategic buyouts, technology investments and solid balance-sheet strength.

CBRE has an expected earnings growth rate of 62.1% for the current year. The Zacks Consensus Estimate for its current-year earnings improved 1.9% over the last 30 days.

Westlake Chemical is benefiting from synergies from the Axiall acquisition. The buyout has diversified its product portfolio and geographical operations. The NAKAN acquisition has also allowed Westlake Chemical to boost its compounding business globally. Further, Westlake Chemical sees favorable demand trends for polyethylene and polyvinyl chloride resin.

Strong demand in the polyethylene business is likely to continue, especially in food packaging. Also, rising housing starts in the United States augur well for WLK’s downstream vinyl products business and domestic demand for PVC. Westlake Chemical should also benefit from its capacity expansion projects.

Westlake Chemical has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 11.6% over the last 30 days.


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Devon Energy Corporation (DVN) : Free Stock Analysis Report

Chevron Corporation (CVX) : Free Stock Analysis Report

Westlake Chemical Corporation (WLK) : Free Stock Analysis Report

Expeditors International of Washington, Inc. (EXPD) : Free Stock Analysis Report

CBRE Group, Inc. (CBRE) : Free Stock Analysis Report

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