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Vaccine Hopes Drive Demand for Value Stocks: 5 Picks

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Tirthankar Chakraborty
·5 min read
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Rise in coronavirus cases and an all-time high coronavirus-related hospitalization in the United States are boosting tech stocks. After all, the spread of the deadly disease raised concerns about economic growth and many believed that could initiate fresh lockdown measures.

 

It’s worth pointing out that tech stocks are often perceived as a hedge against a weak economy. Moreover, rise in new coronavirus cases could easily compel people to stay and work from home, a secular trend that bodes well for tech stocks.

 

But recently, a breakthrough in the coronavirus vaccine space resulted in a shift in investors’ interest to underrated value stocks from growth stocks, especially tech. Value stocks are often part of cyclical industries that tend to do well during the earlier part of an economic recovery.

 

Of course, these economically-sensitive companies are seeing an uptick in share prices since an advance in coronavirus vaccine will certainly pep up the economy. Travel activities are also expected to pick up and people will return to work and public places.

 

Notable among them are leisure and hospitality companies, transportation and travel related corporations, restaurants, pubs and finance firms that for quite sometime were worst hit by the pandemic but are actually undervalued stocks that boast solid fundamentals and growth potentials.

 

So, what’s the coronavirus news that revived the fortunes of struggling value stocks? Pfizer Inc PFE in collaboration with German biotech firm BioNTech SE BNTX recently confirmed that their COVID-19 vaccine has been more than 90%  successful in preventing the spread of the deadly virus among participants with no prior COVID-19 symptoms. 

 

Both the companies have used the messenger RNA (mRNA) technology, and Pfizer Chairman and CEO, Dr. Albert Bourla, confirmed that they are “a significant step closer to providing people around the world with a much-needed breakthrough to help bring an end to this global health crisis. We look forward to sharing additional efficacy and safety data generated from thousands of participants in the coming weeks.” (read more: 2 Stocks to Watch on Pfizer's 90% Effective COVID-19 Vaccine).

 

Coming back to value stocks, historically, growth stocks underperformed value post-election. Interestingly, value stocks have given an average return of 6.6% in the six months post-presidential election compared to growth’s 3.1% since 1980, per a study by Larry McDonald and his team at the Bear Traps Report, as quoted in a MarketWatch article (read more: Value to Outperform Growth Post Election: 5 Stocks to Buy Now).

 

5 Stocks to Cash in on the Value Investing Trend

Since the rotation from growth stocks, predominantly tech, to value stocks is underway in the markets, it will be judicious to invest in such stocks now. Thanks to our style score system, we have been able to identify five value stocks. Our research shows that stocks with a Value Score of A or B when combined a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer the best opportunities in the value investing space.

 

Red Robin Gourmet Burgers, Inc. RRGB is a full-service casual dining restaurant chain that serves an assorted range of burgers. The company currently has a Zacks Rank #2 and a Value Score of B. The Zacks Consensus Estimate for its current-year earnings has moved up 6.7% over the past 60 days. The company’s expected earnings growth rate for the next quarter is 88.2%.

 

Matson, Inc. MATX operates as an ocean transportation and logistics company. It offers shipping services in places like Hawaii. The company currently has a Zacks Rank #1 and a Value Score of B. The Zacks Consensus Estimate for its current-year earnings has risen 38.2% over the past 60 days. The company’s expected earnings growth rate for the current year is 57.1%.

 

Malibu Boats, Inc. MBUU operates as a designer, manufacturer and marketer of sport boats, primarily in the United States. The company currently has a Zacks Rank #2 and a Value Score of B. The Zacks Consensus Estimate for its current-year earnings has climbed 1.6% over the past 60 days. The company’s expected earnings growth rate for the current year is 35.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.

 

Farmers National Banc Corp. FMNB operates in the banking, trust, retirement consulting, insurance and financial management industries. The company currently has a Zacks Rank #1 and a Value Score of B. The Zacks Consensus Estimate for its current-year earnings has moved 6.1% north over the past 60 days. The company’s expected earnings growth rate for the current year is 8.5%.

 

Northrim BanCorp Inc NRIM is a full-service commercial bank that provides a full range of personal and business banking services. The company currently has a Zacks Rank #1 and a Value Score of A. The Zacks Consensus Estimate for its current-year earnings has risen 27.1% over the past 60 days. The company’s expected earnings growth rate for the current year is 63.5%.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market. 

 

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.  

 

Click here for the 6 trades >>


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Pfizer Inc. (PFE) : Free Stock Analysis Report
 
Red Robin Gourmet Burgers, Inc. (RRGB) : Free Stock Analysis Report
 
Matson, Inc. (MATX) : Free Stock Analysis Report
 
Northrim BanCorp Inc (NRIM) : Free Stock Analysis Report
 
Malibu Boats, Inc. (MBUU) : Free Stock Analysis Report
 
Farmers National Banc Corp. (FMNB) : Free Stock Analysis Report
 
BioNTech SE Sponsored ADR (BNTX) : Free Stock Analysis Report
 
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