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Top 5 Momentum Stocks to Tap Solid Economic Recovery in June

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We are in the sixth month of 2021 and Wall Street has maintained its northbound journey after finishing an astonishing 2020 despite being ravaged by the pandemic. Year to date, U.S. stock markets have suffered intermittent volatility due to several reasons like speculative trading practice by individual investors, who bought a few key heavily shorted stocks, soaring yields on sovereign bonds and growing expectations of inflationary concerns.

Despite the presence of volatile factors, the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — have rallied 12.8%, 11.9% and 6.7%, respectively, year to date. Moreover, the small-cap-specific Russell 2000 and S&P 600 have jumped 14.9% and 22.6%, respectively. The mid-cap-centric S&P 400 has climbed 18.2% in the same period.

This clearly indicates that the overall movement of Wall Street is northward so far in 2021 and the movement is broad-based. This scenario is likely to prevail in the near term also despite the fact that historically June is one of the weakest months on Wall Street.

New Coronavirus Cases and Vaccinations

The United States has witnessed a sharp decline in new coronavirus cases. According to data from Johns Hopkins University, 11,976 new cases were reported on May 29, the lowest since Mar 23, 2020. The seven-day average of 21,007 was the lowest since Mar 31, 2020.

On May 4, President Joe Biden announced that the latest target of his administration is to get 70% of U.S. adults receive at least one dose of a COVID-19 vaccine and have 160 million adults fully vaccinated by Jul 4.

Easing of Restrictions

With the growing number of vaccinations and stiff reduction in COVID-19 cases, the U.S. regulatory authorities are gradually removing lockdown-related restrictions to restore normal economic activities. Most of the businesses that were closed due to lockdowns have reopened with new social distancing norms.

Both manufacturing and services are busy restoring pre-pandemic levels of activity at a faster-than-expected speed. The Transportation Security Administration reported that more than 1.9 million people opted for air travel for the Memorial Day weekend.

Strong Consumer Spending

Despite the elimination of government stimulus, consumer spending rose 0.5% in April, in line with the consensus estimate, after jumping to an upwardly revised 4.7% in March. The personal savings rate also remained solid at 14.9% in April.

Notably, Americans saved a historic high of around $2.3 trillion during lockdowns. This should be the key driver of demand that was pent up despite the systematic termination of government or Fed stimulus. Notably, consumer spending is the largest component of U.S. GDP.

Our Top Picks

Momentum investing calls for a continued appraisal of stocks, ensuring that an investor does not pick a beaten-down name or overlook a thriving one. Momentum investors buy high on the anticipation that a stock will only ascend in the short to intermediate term.

We have narrowed down our search to five large-cap (market capital > $10 billion) momentum stocks that witnessed robust earnings estimate revisions in the last 7 to 30 days and have strong upside left for 2021.These stocks popped more than 10% in the past three months. 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 three months.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

Target Corp. TGT operates as a general merchandise retailer in the United States. It offers beauty and household essentials, food assortments, including perishables, dry grocery, dairy, and frozen items; and apparel, accessories, home decor products, electronics, toys, seasonal offerings, and other merchandise.

The company has an expected earnings growth rate of 25.6% for the current year (ending January 2022). The Zacks Consensus Estimate for current-year earnings has improved 2.1% over the last 7 days. The stock price has soared 30.8% in the past three months.

L Brands Inc. LB operates as a specialty retailer of women's intimate and other apparel, personal care, and beauty and home fragrance products. It operates in three segments: Victoria's Secret, Bath & Body Works, and Victoria's Secret and Bath & Body Works International.

The company has an expected earnings growth rate of 67.3% for the current year (ending January 2022). The Zacks Consensus Estimate for its current-year earnings has improved 25.9% over the last 30 days. The stock price has jumped 25.2% in the past three months.

KKR & Co. Inc. KKR operates as an investment management firm managing investments such as private equity, energy, infrastructure, real estate, credit strategies and hedge funds.

The company has an expected earnings growth rate of 75.8% for the current year. The Zacks Consensus Estimate for its current-year earnings has improved 18.6% over the last 30 days. The stock price has climbed 19.9% in the past three months.

CF Industries Holdings Inc. CF is one of the largest manufacturers and distributors of nitrogenous fertilizer and other nitrogen products globally. Its principal nitrogenous fertilizer products are ammonia, granular urea, urea ammonium nitrate solution and ammonium nitrate.

The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for its current-year earnings has improved 37.5% over the last 30 days. The stock price has surged 15.6% in the past three months.

Weyerhaeuser Co. WY is one of the leading U.S. forest product companies with operations primarily in Southern California, Nevada, Washington, Texas, Maryland and Virginia. It caters to a diverse clientele spread over the United States, Canada, Japan, Europe and other regions.

The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved 15.1% over the last 7 days. The stock price has advanced 12.4% in the past three months.

Time to Invest in Legal Marijuana

If you’re looking for big gains, there couldn’t be a better time to get in on a young industry primed to skyrocket from $17.7 billion back in 2019 to an expected $73.6 billion by 2027.

After a clean sweep of 6 election referendums in 5 states, pot is now legal in 36 states plus D.C. Federal legalization is expected soon and that could be a still greater bonanza for investors. Even before the latest wave of legalization, Zacks Investment Research has recommended pot stocks that have shot up as high as +285.9%

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Target Corporation (TGT) : Free Stock Analysis Report

Weyerhaeuser Company (WY) : Free Stock Analysis Report

CF Industries Holdings, Inc. (CF) : Free Stock Analysis Report

KKR & Co. Inc. (KKR) : Free Stock Analysis Report

L Brands, Inc. (LB) : Free Stock Analysis Report

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