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Top-Ranked ETFs & Stocks to Buy From Bargain Industries

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Sweta Killa
·6 min read
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After logging in their worst performance in March in decades, U.S. stocks were off to a good start this week on signs of stabilization in COVID-19 infections. The new coronavirus cases have slowed down in major U.S. hot spots including New York, indicating that initiatives like social distancing and stay-at-home are working in getting the spread of the virus under control.

Per the new report from the University of Washington's Institute for Health Metrics and Evaluation, the estimated death toll from the coronavirus pandemic in the United States has been lowered by 26% from 82,000 to 60,000 over the next four months. The updated projection has also brought forward the peak day of deaths to Apr 12 where an estimated 2,212 deaths are expected to occur over 24 hours.

Additionally, the comments from New York Governor Andrew Cuomo that hospitalizations of coronavirus patients are down and the rate of rise in deaths has leveled off in the hardest-hit state also added to the strength. Further, the surge in oil price on the hopes of a truce in the Saudi-Russian oil price war and China buying crude also led to the spike (read: Energy ETFs & Stocks Jump in Thursday Trading).

Apart from this, the large fiscal and monetary stimulus is expected to provide a boost to the stocks. Notably, the S&P 500 Index has bounced back by nearly 23% from its Mar 23 low though volatility remained high. According to Bespoke Investment Group, coronavirus stock-market volatility is creating the largest daily price swings since 1929 crash as the S&P 500 Index saw historic average daily price change of up or down 4.8% over the last five weeks.

Given recovering fundamentals, investors should take advantage of the beaten-down prices. For them, we have highlighted four solid ETF & stock picks each from the industries that are currently undervalued per our methodology and have a solid Zacks Rank. All these have a Zacks Rank #1 (Strong Buy) or 2 (Buy).
 
Consumer Loans: P/E Ratio – 3.78, Industry Rank (top 10%)

Financial Select Sector SPDR Fund XLF: This fund follows the Financial Select Sector Index and provides exposure to companies in the diversified financial services, insurance, banks, capital markets, mortgage real estate investment trusts, consumer finance, and thrifts and mortgage finance industries. It holds 66 stocks in its basket and charges investors 13 bps in annual fees. The fund has accumulated nearly $14.8 billion in AUM and trades in volumes of 62.1 million shares on average per day. It has a Zacks ETF Rank #2 with a Medium risk outlook (read: ETFs to Gain as Wall Street Cheers US Stimulus Package).

MR. COOPER GROUP INC COOP: It provides quality servicing, origination and transaction-based services principally to single-family residences primarily in United States. It saw solid earnings estimate revision of $1.85 over the past two months for this year and has an estimated earnings growth rate of 14.5%. The stock has a Zacks Rank #1 and a VGM Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.

REIT And Equity Trust: P/E Ratio – 4.24, Industry Rank (top 27%)

VanEck Vectors Mortgage REIT Income ETF MORT: This ETF follows the MVIS US Mortgage REITs Index, which measures the performance of U.S. mortgage real estate investment trusts. It holds 26 stocks in its basket with AUM of $84 million and average daily volume of 111,000 shares. The product charges 42 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk outlook (read: 5 Sector ETFs at the Forefront of Wall Street Rally).

ARMOUR Residential REIT Inc. ARR: It invests primarily in residential mortgage-backed securities issued or guaranteed by a United States Government-chartered entity. Though the stock has a modest estimated negative year-over-year earnings growth rate of 0.9% for this year, it saw positive earnings estimate revision of 10 cents over the past two months. The stock has a Zacks Rank #1 and a Value Score of A.

Building Products-Home Builders: P/E Ratio – 5.99, Industry Rank (top 16%)

iShares U.S. Home Construction ETF ITB: This ETF provides exposure to U.S. companies that manufacture residential homes by tracking the Dow Jones U.S. Select Home Construction Index. It holds a basket of 44 stocks and charges 42 bps in annual fees. Homebuilding takes the top spot at 66.8%, followed by 12.8% in building products and 10.3% in home improvement retail. The product has amassed $689.5 million in its asset base and trades in heavy volume of around 2.9 million shares a day on average. It charges 42 bps in annual fees and has a Zacks ETF Rank #2 with a High risk outlook (read: Is the 'Worst Behind Us'? ETFs to Buy).

TRI Pointe Group Inc. TPH: This company is involved in the design, construction and sale of single-family homes. It saw solid earnings estimate revision of 10 cents over the past two months for this year and has an estimated earnings growth rate of 6.8%. The stock has a Zacks Rank #1 and a VGM Score of A.

Medical - Generic Drugs: P/E Ratio – 6.49, Industry Rank (top 11%)

VanEck Vectors Pharmaceutical ETF PPH: This ETF offers exposure to companies involved in pharmaceuticals, including pharmaceutical research and development as well as production, marketing and sales of pharmaceuticals by tracking the MVIS US Listed Pharmaceutical 25 Index. It holds 25 stocks in its basket with AUM of $185.8 million and average daily volume of about 75,000 shares a day. Expense ratio is 0.36%. The fund has gained 3.1% in a week and has a Zacks ETF Rank #2 with a Medium risk outlook.

Allergan plc AGN: This pharma company is engaged in the development, manufacturing, marketing, sale and distribution of branded pharmaceuticals, device, biologic, surgical and regenerative medicine products. Though the stock has a modest estimated negative year over year earnings growth rate of 0.7% for this year, it saw solid earnings estimate revision of 55 cents over the past two months. The stock has a Zacks Rank #2 and a VGM Score of B (read: Biotech Stocks, ETFs to Gain on COVID-19 Vaccine & Drug Progress).

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Allergan plc (AGN) : Free Stock Analysis Report
 
Financial Select Sector SPDR ETF (XLF): ETF Research Reports
 
TRI Pointe Group, Inc. (TPH) : Free Stock Analysis Report
 
ARMOUR Residential REIT, Inc. (ARR) : Free Stock Analysis Report
 
iShares U.S. Home Construction ETF (ITB): ETF Research Reports
 
VanEck Vectors Pharmaceutical ETF (PPH): ETF Research Reports
 
VanEck Vectors Mortgage REIT Income ETF (MORT): ETF Research Reports
 
MR. COOPER GROUP INC (COOP) : Free Stock Analysis Report
 
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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report