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Top 5 Stocks to Buy at Deep Discount to Boost Portfolio Gains
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Wall Street has performed impressively so far in 2021 after completing an astonishing bull run in the pandemic-ridden 2020. The momentum is likely to continue for the rest of this year as November and December are generally favorable for the U.S. stock markets.
However, despite the encouraging performance of U.S. stock markets, several stocks are currently trading at a deep discount from their 52-week high prices attained in the past six months. We believe that investment in these stocks with a favorable Zacks Rank will be fruitful to strengthen one’s portfolio. Out of these, we have selected — Dow Inc. (DOW - Free Report) , PTC Inc. (PTC - Free Report) , Dropbox Inc. (DBX - Free Report) Avis Budget Group Inc. (CAR - Free Report) and Phillips 66 (PSX - Free Report) .
Near-Term Catalysts
Year to date, the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — have rallied 17.4%, 24.8% and 23.5%, respectively. The bull run is likely to continue on the reasons discussed below.
Biden's Infrastructure Project
On Nov 15, President Joe Biden signed a bipartisan infrastructure bill of $550 billion in addition to the previously approved funds of $450 billion for five years. The law aims at establishing the United States with the world's best economic infrastructure. Total spending may go up to $1.2 trillion if the plan is extended to eight years.
The newly introduced massive infrastructure development project will be a major catalyst for the U.S. stock markets in 2022. Various segments of the economy such as basic materials, industrials, telecommunications and utilities will benefit immensely with more job creation for the economy.
On Nov 15, President Biden also urged the Congress to clear a new $1.75 trillion spending plan for investment in the social safety net and climate policy. Biden is “confident” that the House will pass the bill and eventually the Senate will clear it too.
On Nov 4, Bloomberg reported citing a National Security Council official that the White House is pressing U.S. Congress to quickly pass legislation providing $52 billion to help computer chip manufacturers and ease a shortage of the components vital for a range of industries.
Strong Projections for Holiday Sales
Retail sales in October climbed 1.7% beating the consensus estimate of 1.3%. Core retail sales (excluding auto) jumped 1.7% in October, surpassing the consensus estimate of 1%. Several market researchers have projected strong U.S. holiday sales this year supported by a sharp decline in new cases of the Delta variant of coronavirus and the nationwide COVID-19 vaccination.
The National Retail Federation has projected November/December retail sales in 2021 to go up 8.5% to 10.5% from 2020. Deloitte forecasts retail sales growth of 7% to 9% during the November-to-January period.
Digital Commerce 360 has estimated that holiday retail sales through all channels, including physical stores, are likely to rise 9.4% during the season. KPMG expects that 2021 U.S. holiday sales will be 7% higher than last year. Mastercard SpendingPulse forecasts a 7.4% year-over-year rise in U.S. holiday sales.
Solid Business Activities
Industrial production rebounded in October after a weather-indued decline in the previous month. The Fed reported that industrial production rose 1.6% in October after declining 1.3% in September. The consensus estimate was an increase of 0.8%. Year over year, industrial production rose 5.1% in October, marking its highest monthly gain since December 2019.
Within the three segments, manufacturing output — the largest component of industrial production — increased 1.2% in October. The other two segments — utilities and mining — rose 1.2% and 4.1%, respectively.
Moreover, the ISM manufacturing and services indexes and IHS Markit U.S. manufacturing and services PMI stayed elevated throughout 2021. These indicates a robust recovery of U.S. businesses from the pandemic-led devastations.
Solid Growth of U.S. GDP and Corporate Profit
In its latest projection on Nov 17, the Atlanta Fed reported that the U.S. economy will grow by 8.2% in fourth-quarter 2021. U.S. GDP grew 6.4%, 6.7% and 2%, in the first, second and third quarter of this year, respectively.
As of Nov 17, total third-quarter earnings of the market's benchmark — the S&P 500 Index — are projected to jump 40.1% from the same period last year on 17.2% higher revenues. Moreover, in fourth-quarter 2021, total earnings of the S&P 500 index are expected to up 19.3% year over year on 11.1% higher revenues.
Our Top Picks
We have narrowed our search to five large-cap stocks (market capital > $10 billion) stocks based on four criteria. First, these stocks are currently trading at a deep discount from their 52-week highs recorded within the past six months. Second, all these stocks have strong growth potential for the rest of 2021.
Third, these stocks have seen positive earnings estimate revisions in the last 30 days. Finally, each of our picks 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 five picks in the past six months.
Image Source: Zacks Investment Research
Dow Inc. should gain from cost synergy savings and productivity initiatives. Dow is focused on maintaining cost and operational discipline through cost synergy and stranded cost-removal initiatives. Actions to reduce operating costs are expected to lend support to DOW earnings in 2021.
Dow’s restructuring program is also expected to deliver margin benefits. Investment in high-return projects should also be accretive to its earnings. Management is investing in several high-return growth projects including the expansion of downstream silicones capacity.
Zacks Rank #1 DOW has an expected earnings growth rate of more than 100% for the current-year. The Zacks Consensus Estimate for current-year earnings improved 6.4% over the last 30 days. Dow is currently trading at a 18.3% discount from its 52-week high attained on May 18.
Avis Budget Group Inc. provides car and truck rentals, car sharing, and ancillary services to businesses and consumers. The ability of Avis Budget Group to cater to a wide range of mobility demands helps it expand and strengthen its global foothold through organic growth.
Avis Budget Group operates through distinct global brands that focus on different market segments and complement other brands in their respective regional markets. Fleet expansion and technology enhancement efforts by CAR are likely to enhance its offerings.
Zacks Rank #1 CAR has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved 0.8% over the last 7 days. Avis Budget Group is currently trading at a 49.6% discount from its 52-week high attained on Nov 2.
PTC Inc. operates as a software and services company in the Americas, Europe, and the Asia Pacific. PTC is witnessing robust adoption of Vuforia-Chalk, Vuforia Expert Capture solution along with ThingWorx and Windchill platforms as well as the Onshape suite. The acquisition of Arena Solutions bodes well.
PTC is accelerating the software-as-a-service (SaaS) transition by improving the capacity on its Atlas platform and boosting SaaS capabilities of its core computer-aided design and product lifestyle management products.
Zacks Rank #1 PTC has an expected earnings growth rate of 5.5% for the current year (ending September 2022). The Zacks Consensus Estimate for current-year earnings improved 6.6% over the last 30 days. PTC is currently trading at a 22.2% discount from its 52-week high attained on Jul 23.
Phillips 66 is the leading player in each of its operations like refining, chemicals and midstream in terms of size, efficiency and strength. The company is a leader in the midstream business more which it generates stable fee-based revenues. Phillips 66, is well-positioned for making massive profits from higher demand for distillate fuels.
Contributions from the olefins and polyolefins business, backed by high demand, continue to drive PSX’s chemicals segment. Phillips 66’s move of expanding its footprint in the battery supply chain through NOVONIX investment is praiseworthy.
Zacks Rank #1 PSX has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved 62.4% over the last 30 days. Phillips 66 is currently trading at a 20.8% discount from its 52-week high attained on Jun 10.
Dropbox Inc. provides a collaboration platform worldwide. Its platform allows individuals, teams, and organizations to collaborate and sign up for free through the DBX’s website or app, as well as upgrade to a paid subscription plan for premium features. Dropbox’s platform enables users to store and share files, photos, videos, songs and spreadsheets.
Zacks Rank #2 DBX has an expected earnings growth rate of 60.2% for the current year. The Zacks Consensus Estimate for current-year earnings improved 3.5% over the last 30 days. Dropbox is currently trading at a 20.8% discount from its 52-week high attained on Aug 6.
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Top 5 Stocks to Buy at Deep Discount to Boost Portfolio Gains
Wall Street has performed impressively so far in 2021 after completing an astonishing bull run in the pandemic-ridden 2020. The momentum is likely to continue for the rest of this year as November and December are generally favorable for the U.S. stock markets.
However, despite the encouraging performance of U.S. stock markets, several stocks are currently trading at a deep discount from their 52-week high prices attained in the past six months. We believe that investment in these stocks with a favorable Zacks Rank will be fruitful to strengthen one’s portfolio. Out of these, we have selected — Dow Inc. (DOW - Free Report) , PTC Inc. (PTC - Free Report) , Dropbox Inc. (DBX - Free Report) Avis Budget Group Inc. (CAR - Free Report) and Phillips 66 (PSX - Free Report) .
Near-Term Catalysts
Year to date, the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — have rallied 17.4%, 24.8% and 23.5%, respectively. The bull run is likely to continue on the reasons discussed below.
Biden's Infrastructure Project
On Nov 15, President Joe Biden signed a bipartisan infrastructure bill of $550 billion in addition to the previously approved funds of $450 billion for five years. The law aims at establishing the United States with the world's best economic infrastructure. Total spending may go up to $1.2 trillion if the plan is extended to eight years.
The newly introduced massive infrastructure development project will be a major catalyst for the U.S. stock markets in 2022. Various segments of the economy such as basic materials, industrials, telecommunications and utilities will benefit immensely with more job creation for the economy.
On Nov 15, President Biden also urged the Congress to clear a new $1.75 trillion spending plan for investment in the social safety net and climate policy. Biden is “confident” that the House will pass the bill and eventually the Senate will clear it too.
On Nov 4, Bloomberg reported citing a National Security Council official that the White House is pressing U.S. Congress to quickly pass legislation providing $52 billion to help computer chip manufacturers and ease a shortage of the components vital for a range of industries.
Strong Projections for Holiday Sales
Retail sales in October climbed 1.7% beating the consensus estimate of 1.3%. Core retail sales (excluding auto) jumped 1.7% in October, surpassing the consensus estimate of 1%. Several market researchers have projected strong U.S. holiday sales this year supported by a sharp decline in new cases of the Delta variant of coronavirus and the nationwide COVID-19 vaccination.
The National Retail Federation has projected November/December retail sales in 2021 to go up 8.5% to 10.5% from 2020. Deloitte forecasts retail sales growth of 7% to 9% during the November-to-January period.
Digital Commerce 360 has estimated that holiday retail sales through all channels, including physical stores, are likely to rise 9.4% during the season. KPMG expects that 2021 U.S. holiday sales will be 7% higher than last year. Mastercard SpendingPulse forecasts a 7.4% year-over-year rise in U.S. holiday sales.
Solid Business Activities
Industrial production rebounded in October after a weather-indued decline in the previous month. The Fed reported that industrial production rose 1.6% in October after declining 1.3% in September. The consensus estimate was an increase of 0.8%. Year over year, industrial production rose 5.1% in October, marking its highest monthly gain since December 2019.
Within the three segments, manufacturing output — the largest component of industrial production — increased 1.2% in October. The other two segments — utilities and mining — rose 1.2% and 4.1%, respectively.
Moreover, the ISM manufacturing and services indexes and IHS Markit U.S. manufacturing and services PMI stayed elevated throughout 2021. These indicates a robust recovery of U.S. businesses from the pandemic-led devastations.
Solid Growth of U.S. GDP and Corporate Profit
In its latest projection on Nov 17, the Atlanta Fed reported that the U.S. economy will grow by 8.2% in fourth-quarter 2021. U.S. GDP grew 6.4%, 6.7% and 2%, in the first, second and third quarter of this year, respectively.
As of Nov 17, total third-quarter earnings of the market's benchmark — the S&P 500 Index — are projected to jump 40.1% from the same period last year on 17.2% higher revenues. Moreover, in fourth-quarter 2021, total earnings of the S&P 500 index are expected to up 19.3% year over year on 11.1% higher revenues.
Our Top Picks
We have narrowed our search to five large-cap stocks (market capital > $10 billion) stocks based on four criteria. First, these stocks are currently trading at a deep discount from their 52-week highs recorded within the past six months.
Second, all these stocks have strong growth potential for the rest of 2021.
Third, these stocks have seen positive earnings estimate revisions in the last 30 days. Finally, each of our picks 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 five picks in the past six months.
Dow Inc. should gain from cost synergy savings and productivity initiatives. Dow is focused on maintaining cost and operational discipline through cost synergy and stranded cost-removal initiatives. Actions to reduce operating costs are expected to lend support to DOW earnings in 2021.
Dow’s restructuring program is also expected to deliver margin benefits. Investment in high-return projects should also be accretive to its earnings. Management is investing in several high-return growth projects including the expansion of downstream silicones capacity.
Zacks Rank #1 DOW has an expected earnings growth rate of more than 100% for the current-year. The Zacks Consensus Estimate for current-year earnings improved 6.4% over the last 30 days. Dow is currently trading at a 18.3% discount from its 52-week high attained on May 18.
Avis Budget Group Inc. provides car and truck rentals, car sharing, and ancillary services to businesses and consumers. The ability of Avis Budget Group to cater to a wide range of mobility demands helps it expand and strengthen its global foothold through organic growth.
Avis Budget Group operates through distinct global brands that focus on different market segments and complement other brands in their respective regional markets. Fleet expansion and technology enhancement efforts by CAR are likely to enhance its offerings.
Zacks Rank #1 CAR has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved 0.8% over the last 7 days. Avis Budget Group is currently trading at a 49.6% discount from its 52-week high attained on Nov 2.
PTC Inc. operates as a software and services company in the Americas, Europe, and the Asia Pacific. PTC is witnessing robust adoption of Vuforia-Chalk, Vuforia Expert Capture solution along with ThingWorx and Windchill platforms as well as the Onshape suite. The acquisition of Arena Solutions bodes well.
PTC is accelerating the software-as-a-service (SaaS) transition by improving the capacity on its Atlas platform and boosting SaaS capabilities of its core computer-aided design and product lifestyle management products.
Zacks Rank #1 PTC has an expected earnings growth rate of 5.5% for the current year (ending September 2022). The Zacks Consensus Estimate for current-year earnings improved 6.6% over the last 30 days. PTC is currently trading at a 22.2% discount from its 52-week high attained on Jul 23.
Phillips 66 is the leading player in each of its operations like refining, chemicals and midstream in terms of size, efficiency and strength. The company is a leader in the midstream business more which it generates stable fee-based revenues. Phillips 66, is well-positioned for making massive profits from higher demand for distillate fuels.
Contributions from the olefins and polyolefins business, backed by high demand, continue to drive PSX’s chemicals segment. Phillips 66’s move of expanding its footprint in the battery supply chain through NOVONIX investment is praiseworthy.
Zacks Rank #1 PSX has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved 62.4% over the last 30 days. Phillips 66 is currently trading at a 20.8% discount from its 52-week high attained on Jun 10.
Dropbox Inc. provides a collaboration platform worldwide. Its platform allows individuals, teams, and organizations to collaborate and sign up for free through the DBX’s website or app, as well as upgrade to a paid subscription plan for premium features. Dropbox’s platform enables users to store and share files, photos, videos, songs and spreadsheets.
Zacks Rank #2 DBX has an expected earnings growth rate of 60.2% for the current year. The Zacks Consensus Estimate for current-year earnings improved 3.5% over the last 30 days. Dropbox is currently trading at a 20.8% discount from its 52-week high attained on Aug 6.