One of the thumb rules of investing is to locate the right stock at the right price. It makes no sense in putting ones’ hard-earned money on a stock for which all the positives are already captured in the price. Nevertheless, a number of investors continue to do invest just this way, assuming stocks will surge indefinitely.
At the same time, investors tend to get rid of scrips whose prices declined - sometimes without even going into the reason behind the sell-off. It has been observed that often stocks are unfairly punished because of macroeconomic factors that may not have any significant bearing on their company businesses.
In fact, contrary to the assessment of the general investor, pricing weaknesses often present the greatest investment opportunity.
Moving Past Concerns
The U.S. economy seems to have rebounded from the worst of the coronavirus crisis with renewed activity. As a proof of the resurgence, all three major stock indexes are now around 40% above their March lows. However, several macro-economic factors continue to weigh on the market.
In its recent commentary, the Fed acknowledged that the economy is still struggling to regain momentum with a "long road" to recovery. Investors also remain worried about a second wave of coronavirus infections, while the omnipresent U.S.-China tensions remain a concern. And despite retail sales and employment numbers making a strong comeback in May, they are still down significantly - highlighting the damage caused by the pandemic.
Clearly, investors have ample reasons to worry about. However, most of these issues have been existent for quite some time now and have already influenced the market. Further fall in stock price just because of these factors may not be justified. Nonetheless, some stocks continue to do so. So, why not invest in these companies now that they have become cheaper?
But obviously, one must first come to the conclusion that the stocks are indeed on sale and that the decline in price is not the true reflection of its fundamentals. There are several such stocks in the market; one just needs to answer the correct knock on the door.
Using the Zacks Methodology
With the help of the Zacks Stock Screener, we have zeroed in on five stocks that have witnessed a slump this past week, with shares down more than 10%. While these companies have sold off significantly in the past few sessions, they have a favorable Zacks Rank #1 (Strong Buy) or 2 (Buy).
You can see the complete list of today’s Zacks #1 Rank stocks here.
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Here are our choices:
United Natural Foods, Inc. UNFI: United Natural Foods is the leading distributor of natural, organic and specialty food and non-food products in the United States and Canada. The FY 2020 Zacks Consensus Estimate for this Providence, RI-based company indicates 20.2% earnings per share growth over FY 2019.
The Zacks #1 Ranked company is gaining on the spike in demand, stemming from the coronavirus-led stockpiling. This apart, integration synergies related to SUPERVALU are aiding the company’s performance.
Perdoceo Education Corporation PRDO: Perdoceo Education (formerly known as Career Education Corporation) - headquartered in Schaumburg, IL - offers online and on-campus post-secondary education services. The firm has an excellent earnings surprise history having surpassed estimates in each of the last four quarters, the average being 24.5%.
The coronavirus pandemic has forced schools and colleges to shift online as a measure to control the outbreak. Riding on the online wave with remote study becoming more and more common, Perdoceo Education – with a Zacks Rank #1 - is set to play a key role in the transition.
Adient plc ADNT: Adient is one of the world’s largest automotive seating suppliers. This Dublin, Ireland-based company’s expected EPS growth rate for three to five years currently stands at 30.1%, comparing favorably with the industry's growth rate of 14.1%.
Adient - with a Zacks Rank of 2 - recently fortified its liquidity after successfully issuing $600 million senior secured notes. The company’s diverse customer base and regional presence has helped it to create strong market position. As the current global automotive environment remains uncertain, Adient has concentrated on reducing its cash burn to weather the storm.
Puma Biotechnology, Inc. PBYI: Puma Biotechnology is a biopharmaceutical company focused on the development and commercialization of innovative treatments that enhance cancer care. Over 30 days, the Los Angeles, CA-based company with a Zacks Rank of 2 has seen the Zacks Consensus Estimate for 2020 improve 14.3%.
Puma Biotech's only marketed drug Nerlynx is approved for early-stage breast cancer patients in the United States and other countries. Recently, the FDA approved Nerlynx’s combo to address the third-line breast cancer. This should drive its sales in future quarters.
Scorpio Tankers Inc. STNG: Scorpio Tankers is a leading refined products seaborne transportation company. The 2020 Zacks Consensus Estimate for this Monaco-based company indicates astounding 760.6% earnings per share growth over 2019.
As producers keep pumping more oil into an oversupplied market, countries are running out of traditional inland storage facilities. This has prompted traders to buy giant tankers as floating storage, allowing them to move the (cheap) commodity onto ships and wait for an eventual recovery in prices. With its diverse and large fleet, #2 Ranked Scorpio Tankers is primed to take advantage of the upcycle.
5 Stocks to Soar Past the Pandemic: In addition to the companies you learned about above, we invite you to learn about 5 cutting-edge stocks that could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of the decade.
See the 5 high-tech stocks now>>
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United Natural Foods, Inc. (UNFI) : Free Stock Analysis Report
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Career Education Corporation (PRDO) : Free Stock Analysis Report
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