6 Must-Buy Corporate Giants As Major Indexes Hit Record High
We have narrowed down our search to six stocks that are members of any of the three major indexes. These are: MRNA, NVDA, TJX, AAPL, DE and REGN.
U.S. stocks are firing on all cylinders with the major stock indexes hitting new highs in this month. On Aug 24, the S&P 500 Index recorded its 50th closing high year to date and a new all-time high. The Nasdaq Composite registered fresh closing and all-time highs. The Dow is hovering around its all-time high posted on Aug 16.
Year to date, the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — have rallied 15.6%, 19.4% and 16.5%, respectively. By any means, this is an impressive performance considering that we are still not out of the pandemic. Moreover, Wall Street has witnessed this impressive performance after finishing an astonishing bull run in 2020, exiting the coronavirus-led short bear market.
U.S. economic fundamentals remain robust and the market’s northward journey is expected to continue for the rest of 2021 despite intermittent fluctuations. Several positives are there to back up Wall Street’s bull run ahead.
Pandemic May Not Be As Severe As 2020
The economic effect of the Delta variant of coronavirus may not be as severe as last year when there was no vaccine. The rapid spread of the Delta string has slowed marginally this week.
On Aug 23, the FDA granted the first approval to the COVID-19 vaccine developed by Pfizer Inc. PFE and BioNTech SE BNTX for 16 and above years of age. The regulator also granted emergency-use authorization for those between 12 and 15 and for immunocompromised individuals who qualify for a third shot.
The full approval of the vaccine is expected to convince many Americans who are still reluctant to receive a shot despite the rapid spread of the highly-infectious Delta variant of coronavirus. More than 60% of U.S. citizens have already received at least one shot.
As the fiscal stimulus is gradually fading out, investors are looking for the next catalyst to drive the economy. At this stage, a close look into the U.S. economy reveals that the driver is endogenous — it is rock-solid aggregate demand.
The U.S. GDP exceeded the pre-pandemic level in second-quarter 2021. A section of economists and financial experts was sceptical that the U.S. economy can reach the pre-pandemic level the earliest in fourth-quarter 2021 or first-quarter 2022. This happened predominantly due to robust consumer spending that accounts for nearly 70% of the GDP.
U.S. businesses of all sizes are expanding their scale of operations and hiring more despite soaring wages and salaries to cater to robust demand. The personal savings of Americans are around an astonishing $2 trillion. The sky-high savings are allowing people to indulge in their demands that were pent up during lockdowns and in turn compelling businesses to expand their scale of operations.
Soaring Corporate Profits
As we are winding up the second-quarter 2021 earnings session, profits of the market’s benchmark S&P 500 Index are likely to hit 13-year high this year. This earnings season has witnessed broad-based growth, significant acceleration of revenues and continued positive revisions to estimates for the third quarter.
As of Aug 18, total 2021 earnings of the S&P 500 Index were projected to climb 42.3% on 12.8% higher revenues. For 2022 and 2023, S&P 500's total earnings are likely to grow 9.4% and 10.2% on 6.6% and 4.8% higher revenues, respectively.
Biden’s Infrastructure Plan
On Aug 24, in a 220-212 party-line vote, the House of Representatives passed a $3.5 trillion budget resolution and advanced a $1 trillion bipartisan infrastructure bill. On Aug 10, the U.S. Senate passed a bipartisan infrastructure bill of $550 billion in addition to the previously approved funds of $450 billion for five years. Total spending may go up to $1.2 trillion if the plan is extended to eight years.
Infrastructure projects such as roads, bridges, passenger rails, airports, drinking water and waste-water systems, high-speed Internet, and climate-related infrastructure will benefit.
Our Top Picks
We have narrowed down our search to six stocks that are members of any of the three major indexes based on four selection criteria. First, select large-cap (market capital > $50 billion) stocks as these companies have a stable business model. Second, these stocks have provided good returns in the past three months and still have strong upside left for 2021.
Third, these stocks witnessed solid earnings estimate revisions for 2021 within the last 7 to 30 days. Fourth, each of these stocks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our six picks in the past three months.
Image Source: Zacks Investment Research
Apple Inc.'s AAPL Services and Wearables businesses are expected to drive top-line growth in fiscal 2021 and beyond. Although Apple’s business primarily runs around its flagship iPhone, the Services portfolio has emerged as the company’s new cash cow. Its focus on autonomous vehicles and augmented reality/virtual reality technologies presents growth opportunities in the long haul.
This Zacks Rank #1 company has an expected earnings growth rate of 70.4% for the current year (ending September 2021). The Zacks Consensus Estimate for current-year earnings improved 7.7% over the last 30 days.
Deere & Co. DE is likely to benefit from growth in non-residential investment and strong order activity from independent rental companies. Focus on investing in new products equipped with the latest technology and features to help make farming automated and to expand in precision agriculture will drive growth in the long haul.
This Zacks Rank #1 company has an expected earnings growth rate of more than 100% for the current year (ending October 2021). The Zacks Consensus Estimate for current-year earnings improved 1.9% over the last 7 days.
Regeneron Pharmaceuticals Inc. REGN is benefiting from strong demand for Eylea and Dupixent. Continued growth in Eylea and Dupixent through further penetration in existing indications and a promising late-stage pipeline aid its prospects. The approval of Libtayo in the lucrative indication of NSCLC and BCC should also boost sales.
This Zacks Rank #1 company has an expected earnings growth rate of 72.1% for the current year. The Zacks Consensus Estimate for current-year earnings improved 0.4% over the last 30 days.
The TJX Companies Inc. TJX is benefiting in every major category as well as region for HomeGoods and Home Sense. It is also benefiting from its robust store and e-commerce growth efforts. The company remains committed toward boosting growth, through effective marketing initiatives and loyalty programs.
This Zacks Rank #1 company has an expected earnings growth rate of more than 100% for the current year (ending January 2022). The Zacks Consensus Estimate for earnings for current-year earnings improved 9.5% over the last 7 days.
Moderna Inc. MRNA is a biotechnology company, which develops therapeutics and vaccines based on messenger RNA for the treatment of infectious diseases, immuno-oncology, rare diseases, cardiovascular diseases, and auto-immune diseases.
The company’s COVID-19 vaccine demonstrated a strong uptake in multiple countries where it received authorization for temporary use in the past few months. It expects more than $19 billion in vaccine sales in 2021. Advance purchase agreements with several countries worth $20 billion in aggregate for 2022 are already in place.
This Zacks Rank #2 company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved 1.3% over the last 30 days.
NVIDIA Corp. NVDA is benefiting from the coronavirus-induced work-from-home and learn-at-home wave. It is also benefiting from strong growth in GeForce desktop and notebook GPUs, which are boosting gaming revenues.
Moreover, a surge in Hyperscale demand remains a tailwind for the company’s Data Center business. Expansion of NVIDIA GeForce NOW is expected to drive user base. Further, a solid uptake of artificial intelligence-based smart cockpit infotainment solutions is a boon.
This Zacks Rank #2 company has an expected earnings growth rate of 68% for the current year (ending January 2022). The Zacks Consensus Estimate for current-year earnings improved 6.1% over the last 7 days.
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Regeneron Pharmaceuticals, Inc. (REGN): Free Stock Analysis Report
Apple Inc. (AAPL): Free Stock Analysis Report
Pfizer Inc. (PFE): Free Stock Analysis Report
The TJX Companies, Inc. (TJX): Free Stock Analysis Report
NVIDIA Corporation (NVDA): Free Stock Analysis Report
Deere & Company (DE): Free Stock Analysis Report
Moderna, Inc. (MRNA): Free Stock Analysis Report
BioNTech SE Sponsored ADR (BNTX): Free Stock Analysis Report
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