For Immediate Release
Chicago, IL – December 10, 2020 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Ubiquiti Inc.
UI
, Micron Technology Inc.
MU
, Discover Financial Services
DFS
, L Brands Inc.
LB
and General Motors Company
GM
.
Here are highlights from Wednesday’s Analyst Blog:
5 Top Picks, Whether Santa Rally or Year-End Pullback
U.S. stocks are firing on all cylinders with major stock indexes hitting new highs in November almost daily. Year to date, the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — have rallied 5.7%, 14.6% and 40.2%, respectively. By any means, this is an impressive performance considering the global outbreak of the pandemic and coronavirus-led economic devastations.
At present, Wall Street seems unstoppable despite the fact that a vaccine is yet to be authorized in the United States and a fresh stimulus is still awaited. However, as we enter the second week of the final month of 2020, the investor circle is busy guessing whether a Santa rally or a year-end pullback is in store.
Conditions Are Ripe for a Santa Rally
A Santa rally is a typical Wall Street phenomenon associated with unusually strong stock-market gains during the last five trading days of the year and the first two trading days of the New Year. Per Dow Jones Market Data, the Dow and the S&P 500 have gained 1.4% and 1.3%, respectively, on average since 1950 during this period.
Several economists and financial experts believe that the situation is conducive this year to witness a Santa rally. 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. 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.
On Dec 8, Treasury Secretary Steven Mnuchin unveiled a $916 billion stimulus proposal, which is slightly higher than a $908 billion aid-package proposed by a bipartisan group of senators last week. On Dec 8, Senate Majority Leader Mitch McConnell said he wants to pass a new stimulus excluding legal immunity for businesses or aid for state and local governments. He also agreed to introduce a new unemployment benefit scheme and Paycheck Protection Program small business loans.
Moreover, in its latest estimation on Dec 4, the Atlanta Fed projected that fourth-quarter 2020 GDP will grow 11.4% after increasing a record 33.1% in the third quarter. Projections for corporate earnings are also growing since July 2020. At present, the consensus estimate is that the 2021 earnings of the S&P 500 Index will increase 21.2% on 7.5% higher revenues after the projection of a 17.1% decline in earnings on 3.9% lower revenues in 2020.
Risk Factors in December
At present, a couple of risk factors may change the ongoing scenario. First, skyrocketing new COVID-19 cases may force several state governments in the United States to restrict normal economic activities during the holiday season. The FDA is yet to approve any vaccine for COVID-19. Even if a vaccine gets approval this year, nationwide implementation will take time.
According to a CNBC analysis of Johns Hopkins University data, the United States added more than 1 million new cases in last four days. More than 200,000 Americans are testing positive for the coronavirus every day on average.
Second, if the U.S. Congress fails to reach an agreement related to a fresh round of coronavirus-aid package, the economy may suffer. Recently released economic data like job market, retail sales, manufacturing and services industries clearly indicated that the pace of growth has reduced. The first round of stimulus — the CARES Act — ended in July.
Notably, all positive near-term expectations have already been factored in the current market valuations. Therefore, deviations from expectations can be detrimental as market participants may think that the stocks are overvalued. This may lead to market volatility.
Our Top Picks
While a Santa rally can push stock indexes to record high levels at the end of the year, resurgence of the pandemic and lack of stimulus can result in stock market volatility at least for a short period of time.
In order to remain safe at this stage, it will be prudent to invest in large-cap (market capital > $10 billion) stocks with strong growth potential in 2021. These companies have a stable business model and strong brand values. We have narrowed down our search to five such stocks each sporting a Zacks Rank #1 (Strong Buy). You can see
the complete list of today’s Zacks #1 Rank stocks here
.
Ubiquiti
offers a comprehensive portfolio of networking products and solutions for service providers and enterprises. The company has an expected earnings growth rate of 33.3% for the current year (ending June 2021). The Zacks Consensus Estimate for its current-year earnings has improved 20.4% over the last 30 days. The stock price has jumped 64.9% in the past three months.
Micron Technology
designs, manufactures and sells memory and storage products worldwide. It operates through four segments: Compute and Networking Business Unit, Mobile Business Unit, Storage Business Unit, and Embedded Business Unit.
The company has an expected earnings growth rate of 28.3% for the current-year (ending August 2021). The Zacks Consensus Estimate for its current-year earnings has improved 31% over the last 7 days. The stock price has climbed 6.2% in the past three months.
Discover Financial Services
offers direct banking and payment services in the United States. It operates in two segments, Direct Banking and Payment Services.
The company has an expected earnings growth rate of more than 100% for next year. The Zacks Consensus Estimate for its current-year earnings has improved 1.1% over the last 7 days. The stock price has soared 48.9% in the past three months.
L Brands
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 22.5% for next year (ending January 2022). The Zacks Consensus Estimate for its next-year earnings has improved 33.2% over the last 30 days. The stock price has surged 43.3% in the past three months.
General Motors
‘ strong demand for profitable trucks and SUVs is aiding the company’s revenues. Its hot-selling brands in the United States like Chevrolet Silverado, Equinox and GMC Sierra are also driving the top line.
The company has an expected earnings growth rate of 26.2% for next year. The Zacks Consensus Estimate for its next-year earnings has improved 6.2% over the last 30 days. The stock price has advanced 37.1% in the past three months.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss
.
This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit
https://www.zacks.com/performance
for information about the performance numbers displayed in this press release.
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