4 S&P 500 Retail Stocks That Appear to Be Solid Bets for 2H
The economy has had a roller-coaster ride so far this year. Starting on an upbeat note, the year took a nasty turn with the outbreak of the novel coronavirus that snapped the Wall Street’s longest ever bull run in March. In fact, the S&P 500 index fell around 30% earlier this year, reaching as low as 2,191.86 on Mar 23. Since then, the index has surged roughly 40% and is steadily heading toward a 52-week high of 3,393.52. Notably, the index gained approximately 20% in second-quarter 2020 — its best quarterly performance since 1998 —courtesy of some positive news.
Well looking at the bullish run some market pundits are of the opinion that the worst days may be behind for the financial markets with people gradually learning the art of living amid the pandemic. On the contrary, some fear that the euphoria may not last long enough given the spike in coronavirus cases following the easing of stay-at-home and quarantine restrictions. Also, renewed tension between the United States and China may upset the market.
It goes without saying that the government’s timely interventions to shore up the economy and the discovery of COVID-19 vaccine are paramount to keep the optimism alive.
Let’s Introspect
Without doubt, this deadly virus has severely impacted industries across the board, taking a toll on employment and household income. Nonetheless, stimulus measures undertaken to support households, firms and financial market coupled with the resumption of commercial and industrial activities post the coronavirus lockdown have provided much needed impetus to the market. Media reports of an additional infrastructure package also contributed to the stock market rally.
Again, the addition of 4.8-million jobs in June and the decline in unemployment rate to 11.1% from 13.3% in May were other catalysts behind those green shoots in the market. The economy had created 2.7 million jobs in the month of May. Clearly, the massive financial assistance — from business loans to stimulus checks for individuals — acted as tailwinds and bolstered consumer sentiment. Consumer Confidence reached a three-month high in June. Per Conference Board data, the Index rose to 98.1 last month from a revised reading of 85.9 in May.
With the gradual reopening of the economy and people back on streets, consumer spending activity — one of the pivotal factors of the economy — is likely to regain momentum. In fact, U.S. retail and food services sales in May climbed 17.7%, following declines of 14.7% and 8.3% in April and March, respectively, as Americans flocked to restaurants and bars, bought apparel, spent on gasoline, and purchased sports equipment, furniture and electronics and appliances. No wonder, sales at non-store retailers continued to increase.
Such encouraging economic data instill optimism that the economy is gradually making its way out of the woods. Amid such a scenario, the Retail – Wholesale sector is likely to witness a sharp rebound. As social distancing has become the norm of the day, industry participants will be playing dual in-store and online roles. Initiatives such as building omni-channel, enhancing supply chain and providing faster delivery options, be it curbside pickup or delivery at home, are worth mentioning.
It is hard to predict how the second half of 2020 will unfold but you can still add some solid stocks to your portfolio. Here we have shortlisted four Retail-Wholesale stocks on the basis of a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a VGM Score of A or B.
4 Prominent Picks
Dollar General Corporation DG, a discount retailer, is worth betting with a Zacks Rank #1 and a VGM Score of A. The company has a trailing four-quarter positive earnings surprise of 16.9%, on average. It has a long-term earnings growth rate of 12.4%. Moreover, the Zacks Consensus Estimate for its current financial year earnings suggests an improvement of 31.4% from the year-ago period. The stock has rallied 21.5% so far in the year. You can see the complete list of today’s Zacks #1 Rank stocks here.
We also suggest investing in The Kroger Co. KR, which operates supermarkets and multi-department stores. The company has a trailing four-quarter positive earnings surprise of 4%, on average. The stock has a Zacks Rank #1 and a VGM Score of A. Moreover, the Zacks Consensus Estimate for its current financial year earnings indicates growth of 26.4% from the year-ago period. Notably, the stock has appreciated 15.6% year to date.
Investors can count on Domino's Pizza, Inc. DPZ, with a long-term earnings growth rate of 12.8%. This pizza company has a trailing four-quarter positive earnings surprise of 12.7%, on average. The stock has a Zacks Rank #2 and a VGM Score of B. Moreover, the Zacks Consensus Estimate for its current financial year earnings indicates growth of 18.3% from the year-ago period. The stock has advanced 27.3% so far in the year.
Lowe's Companies, Inc. LOW, a home improvement retailer, is also a solid bet with a Zacks Rank #2 and a VGM Score of A. The company has a trailing four-quarter positive earnings surprise of 13.1%, on average. It has a long-term earnings growth rate of 16.1%. Moreover, the Zacks Consensus Estimate for its current financial year earnings suggests an improvement of 16.4% from the year-ago period. Moreover, the stock has rallied 13.3% year to date.
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Dominos Pizza Inc (DPZ) : Free Stock Analysis Report
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The Kroger Co. (KR) : Free Stock Analysis Report
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