The new bull market of Wall Street, which commenced in April 2020 after exiting the coronavirus-induced shortest bear market, is continuing in January. Early trends in 2021 indicate that the rally will continue in the near term.
At this stage, it will be prudent to invest in those stocks with a favorable Zacks Rank that are currently trading at attractive valuations. Discounted stock price and a favorable Zacks Rank will be the right combination to strengthen one's portfolio in the near future.
Momentum Likely to Continue
Approval of COVID-19 vaccines and their nationwide implementation will result in reopening of the U.S. economy that is operating in sub-optimal level since the outbreak of the virus in March 2020. Moreover, the injection of the fresh trench of coronavirus-aid package will help realizing the pent-up demand of American consumers thereby boosting the GDP.
Consequently, investors have shifted the allotment of funds from safe-haven government bonds to risky equities. On Jan 6, the yield on 10-Year US Treasury Note was closed at 1.049%, The benchmark treasury yield closed above 1% for the first time since March 2020. On Jan 12, this benchmark yield touched 1.18% before closing at 1.14%.
Moreover, the Fed has decided to keep the benchmark interest rate as low as 0-0.25% and to pursue quantitative easing policy buying of at least $120 billion of bonds ($80 billion of Treasury bonds and $40 billion of agency mortgage-backed securities) per month. This would ensure sufficient liquidity until substantial progress is made toward maximum employment and price stability goals.
Finally, expectations of better corporate earrings are growing since July 2020. At present, total earnings of the S&P 500 companies are expected to decline 16.6% on 3.8% lower revenues in the pandemic-affected 2020. However, total earnings of the same set of companies are estimated to jump 22.7% on 7.6% higher revenues in 2021.
Our Top Picks
We have narrowed down our search to five stocks based on four criteria. First, we have selected large-cap stocks (market capital > $10 billion) as these companies have a well-established business model and strong brand value. Second, these stocks are currently trading at deep discount from their 52-week highs.
Third, all these stocks have strong growth potential for 2021 and witnessed robust earnings estimation revisions within last 30 days. Fourth, each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). 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 year.
Exxon Mobil Corp. XOM explores and produces crude oil and natural gas in the United States, Canada/Other Americas, Europe, Africa, Asia, and Australia/Oceania. It operates through the Upstream, Downstream and Chemical segments.
The Zacks Rank #1 company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for the current-year earnings has improved 4.8% over the last 7 days. The stock price is currently trading at a discount of 31.2% from its 52-week high price of $69.59.
ONEOK Inc. OKE is engaged in the gathering, processing, storage and transportation of natural gas in the United States. It operates through the Natural Gas Gathering and Processing, Natural Gas Liquids, and Natural Gas Pipelines segments.
The Zacks Rank #2 company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for the current-year earnings has improved 1.8% over the last 30 days. The stock price is currently trading at a discount of 44.6% from its 52-week high price of $78.48.
FedEx Corp. FDX is the leader in global express delivery services. It provides a broad portfolio of transportation, e-commerce and business services through companies competing collectively, operating independently and managed collaboratively, under the FedEx brand.
The Zacks Rank #1 company has an expected earnings growth rate of 81.5% for the current year (ending May 2021). The Zacks Consensus Estimate for the current year has improved 10.5% over the last 30 days. The stock price is currently trading at a discount of 18.5% from its 52-week high price of $305.66.
Facebook Inc. FB is the world’s largest social media platform. Its portfolio offering evolved from a single Facebook app to multiple apps like photo and video sharing app Instagram and WhatsApp messaging app.
The Zacks Rank #2 company has an expected earnings growth rate of 12.1% for the current year. The Zacks Consensus Estimate for the current year has improved 0.2% over the last 7 days. The stock price is currently trading at a discount of 17.6% from its 52-week high price of $304.67.
PulteGroup Inc. PHM is engaged in homebuilding and financial services businesses, mainly in the United States. It conducts operations through two primary business segments –- Homebuilding and Financial Services.
The Zacks Rank #2 company has an expected earnings growth rate of 17.7% for the current year. The Zacks Consensus Estimate for the current year has improved 0.2% over the last 7 days. The stock price is currently trading at a discount of 14.2% from its 52-week high price of $49.7.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>
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Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
ONEOK, Inc. (OKE) : Free Stock Analysis Report
PulteGroup, Inc. (PHM) : Free Stock Analysis Report
FedEx Corporation (FDX) : Free Stock Analysis Report
Facebook, Inc. (FB) : Free Stock Analysis Report
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