5 Stocks to Buy at Deep Discount for a Stronger Portfolio
Wall Street has performed fairly well so far in 2020 after recovering impressively from the pandemic-led bear market. At present, all the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — are in positive territory year to date. The Dow recorded an all-time high last week while both the S&P 500 and the Nasdaq Composite have been registering fresh all-time highs almost on a regular basis in the past seven days.
Historically, December is a favorable month for market participants. This year, this trend is likely to continue. U.S. stock markets witnessed a broad-based recovery in November after declining in the previous two months. All large-cap, mid-cap and small-cap specific indexes rallied in November. Cyclical or reopening stocks have performed exceptionally well aside from the traditional growth stocks.
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.
Four Near-Term Drivers
First, although coronavirus-induced woes are persisting in the United States, causing occasional market fluctuations, the overall movement of Wall Street is likely to remain northbound. At least three potential vaccine candidates for COVID-19 have been backed by impressive late-stage clinical trial data and are lined up for emergency authorization from the FDA.
On Dec 2, the U.K. government has approved the first-ever coronavirus vaccine in the world. The vaccine was developed by Pfizer Inc. PFE and BioNTech SE BNTX. Nationwide deployment will start from next week.
Second, the availability of a vaccine in the near future will be a game changer in 2021 as it will reopen the U.S. economy or at least a large part of it. Since the lockdowns imposed in March, the U.S. economy is operating at a significant sub-optimal level.
The gradual reopening process, which was started in May-June, was jeopardized in late September as the resurgence of coronavirus forced several state administrations to impose fresh restrictions.
Third, strong pent-up demand is likely to drive the U.S. economy in 2021. Personal savings rate remains high in 2020 so far due to concerns over coronavirus-led economic uncertainties. Consumers were restrained or restricted by the government to spend on those items that were closed during lockdowns. Reopening of the economy with the easing of the pandemic will significantly boost personal spending.
On Nov 27, Adobe Analytics reported that online spending on Thanksgiving soared 21.5% year over year to reach a new record of $5.1 billion. Last year online sales were $4.2 billion. On Dec 1, Adobe Analytics reported that people spent $10.8 billion, up 15.1% year over year, shopping online on Cyber Monday, making it the single-largest shopping day ever.
Fourth, on Dec 1, a bipartisan group of lawmakers proposed a $908 billion fresh coronavirus-aid package. On Dec 2, House Majority Leader, Steny Hoyer, said Congress hoped to reach an agreement on a scaled-back coronavirus-aid package over the weekend and vote on it next week.
The major components of the proposed bipartisan relief bill include $160 billion for state, local and tribal governments, $180 billion for additional unemployment insurance, and $288 billion as support to small businesses including the Paycheck Protection Program.
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 recorded within the past four months. Third, all these stocks have strong growth potential. Finally, 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 year to date.
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 #1 company has an expected earnings growth rate of 41.3% for the current year. The stock price is currently trading at a discount of 19.6% from its 52-week high price of $49.7 recorded on Oct 9.
The Boston Beer Co. Inc. SAM produces and sells alcohol beverages primarily in the United States. Aside from its flagship Samuel Adams Boston Lager beer, it offers various beers, hard ciders and hard seltzers under the Samuel Adams, Twisted Tea, Angry Orchard Hard Cider and Truly Hard Seltzer brands.
The Zacks Rank #1 company has an expected earnings growth rate of 63% for the current year. The stock price is currently trading at a discount of 18.7% from its 52-week high price of $1,092.8 recorded on Oct 23.
Lennar Corp. LEN is engaged in homebuilding and financial services in the United States. Its reportable segments consist of Homebuilding, Lennar Financial Services, Rialto and Lennar Multifamily.
The Zacks Rank #1 company has an expected earnings growth rate of 9.8% for the current year (ending November 2021). The stock price is currently trading at a discount of 21.9% from its 52-week high price of $86.8 recorded on Oct 16.
Wayfair Inc. W is one of the world's leading online sellers of home goods products, consisting of furniture and home decor. The Zacks Rank #2 company has an expected earnings growth rate of more than 100% for the current year. The stock price is currently trading at a discount of 43.8% from its 52-week high price of $349.08 recorded on Aug 24.
Dynatrace Inc. DT is engaged in providing intelligent-software based application performance management, artificial intelligence for operations, cloud infrastructure monitoring and digital experience management.
The Zacks Rank #2 company has an expected earnings growth rate of 80.7% for the current year (ending March 2021). The stock price is currently trading at a discount of 28.4% from its 52-week high price of $48.85 recorded on Sep 2.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
See the 5 high-tech stocks now>>
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Pfizer Inc. (PFE) : Free Stock Analysis Report
PulteGroup, Inc. (PHM) : Free Stock Analysis Report
Lennar Corporation (LEN) : Free Stock Analysis Report
The Boston Beer Company, Inc. (SAM) : Free Stock Analysis Report
Wayfair Inc. (W) : Free Stock Analysis Report
Dynatrace, Inc. (DT) : Free Stock Analysis Report
BioNTech SE Sponsored ADR (BNTX) : Free Stock Analysis Report
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