The month of September has lived up to its notorious reputation of being a weak month for stocks so far. Month-to-date, all the major bourses are in the negative territory. The S&P 500 and the Dow Jones Industrial Average dropped 5% and 2.5%, respectively, while the teach-heavy Nasdaq Composite has performed the worst, losing almost 9%.
Talking about the S&P 500, it lost 2.4% on Sep 23, and ended in the red in the past five out of six trading sessions. And the losses almost dragged the S&P 500 into the correction territory. The Dow, in the meantime, lost 1.9% and the Nasdaq shed 3%, mostly because of the decline in Tesla shares.
Wednesday’s losses, nonetheless, left the S&P 500 9.6% off its all-time record high of September. Similarly, the Dow and the Nasdaq were down 9.4% and 11.8% from their February and September record close, respectively, per Dow Jones Market Data.
So, what’s really weighing on the stock market? Primarily, decline in tech stocks soured the mood in Wall Street. Tech behemoths that raked in superb gains in the summer had to pull back on becoming overvalued. Additionally, Fed officials highlighted the immediate requirement for more fiscal stimulus measures to support the economy marred by the coronavirus pandemic. Of course, Fed’s concern about the economy didn’t go down well with investors.
Earlier, even though an array of packages has been passed by the government, Fed Chair Jerome Powell as well as Charles Evans, Chicago Fed president, urged the Congress to do more to support the economy. In fact, Richard Clarida, the Fed vice-chairman, recently raised the alarm by saying “the economy is recovering robustly, but we are still in a deep hole.”
Meanwhile, both Democrats and Republicans are fighting over a suitable Supreme Court nominee to replace Justice Ruth Bader Ginsburg, which in turn may delay new stimulus plan. And how can we forget that election is knocking at the door, which will lead to more acrimonious relation among House members and further delay the passing of a new relief package.
Rise of a second wave of coronavirus is also dampening investors’ confidence. In the U.S. states of Texas, Colorado, Oklahoma and Wisconsin, new coronavirus cases have cropped up. Europe is also faced with a worsening COVID-19 situation. And with more coronavirus infections spreading across the globe, possibility of new lockdown measures is rising. Such measures certainly won’t be of any help for corporates and may even hamper economic growth.
How to Prepare for the Doldrums?
Given the aforesaid factors, it seems like the Wall Street is facing turbulent times. Taking this bearish scenario into consideration, let’s take a look at which stocks are worth a bet. Investors should build a strategy on low-risk assets and a combination of parameters that lead to better returns. The best way to go about doing this is by creating a portfolio of low-beta stocks, which are inherently less volatile than the markets they trade in. In this case, a low beta ranges from 0 to 1.
Also, in order to boost your returns, we have zeroed in on stocks that have seen positive earnings estimate revision over the past two-month period. Rising earnings estimates generally indicate that the stock will outperform the market in the near future. After all, earnings estimates are one of the most powerful metric that measures the fundamental strength of the company. To top it, these stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Caseys General Stores, Inc. CASY operates convenience stores under the Casey's and Casey's General Store names in 16 Midwestern states, mainly Iowa, Missouri and Illinois. The company has a beta of 0.87. The Zacks Consensus Estimate for its current-year earnings has moved up 26.6% over the past 60 days. The company’s expected earnings growth rate for the current and next quarter is 19.5% and 25.3%, respectively.
Frontline Ltd. FRO is a shipping company. The company has a beta of 0.36. The Zacks Consensus Estimate for its current-year earnings has risen 13.2% over the past 60 days. The company’s expected earnings growth rate for the current year is 223.2%.
Deere Company DE is currently the world’s largest producer of agricultural equipment. The company has a beta of 0.99. The Zacks Consensus Estimate for its current-year earnings has climbed 19.3% over the past 60 days. The company’s expected earnings growth rate for the next year is 35.9%.
Target Corporation TGT has evolved from just being a pure brick-&-mortar retailer to an omni-channel entity. The company has a beta of 0.87. The Zacks Consensus Estimate for its current-year earnings has moved 44.2% north over the past 60 days. The company’s expected earnings growth rate for the current and next year is 11.9% and 7.6%, respectively.
Sportsmans Warehouse Holdings, Inc. SPWH is an outdoor sporting goods retailer. The company has a beta of 0.83. The Zacks Consensus Estimate for its current-year earnings has climbed 91.4% over the past 60 days. The company’s expected earnings growth rate for the current quarter and year is 104% and 229.8%, respectively.
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Target Corporation (TGT) : Free Stock Analysis Report
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