U.S. stocks rallied on Friday to end the week and the month of May on a positive note. The S&P 500 gained 3% this holiday-shortened week led by cyclical groups like Financials and Industrial names.
Investors are back in a “risk-on” mood, as the world’s top economies gradually reopen. At the same time, the U.S. topped 40 million jobs lost since the coronavirus-related shutdown, as measured by Thursday’s weekly jobless claims.
A key driver of investment sentiment these days remains uncertainty about the global spread of the coronavirus. At this point, the number of worldwide cases is around 6 million, with over 367,000 deaths reported. That figure includes more than 1.8 million cases in the U.S., where about 105,000 have died.
The Week Ahead
Looking ahead to next week, we’ll get U.S. May auto sales on Tuesday, followed by the jobs report on Friday. Economists are calling for the loss of 8.5 million non-farm payrolls across the country last month and for the headline unemployment rate to approach 20%.
The question remains: will this be the peak for job losses? Many of the jobs cut in the U.S. the past few months, will likely not come back for several months, if at all. That said, the market is a forward-looking pricing mechanism and has been factoring in an eventual economic recovery since late March.
We know that deciding what and when to buy can be challenging for any investor. This is especially true when uncertainty is high and sentiment can quickly shift from Bull to Bear.
However, the fact remains that attractive investments are out there, if you’re willing to dig a little deeper.
One such Retail name is worth a closer look and is our Stock of the Week.
Stock of the Week: Lowe’s (LOW)
The company operates about 2,200 home-improvement stores throughout North America. The stock gained nearly 7% this week and we believe this momentum can continue throughout 2020. Here’s why:
Earlier this month, management posted quarterly results that surpassed the consensus analyst estimates. The retailer earned $1.77 a share in the April quarter, as revenue increased 11% from a year ago, to $19.68 billion.
Same-store sales grew 11.2% in the period, compared to just 6.4% improvement for top competitor Home Depot (HD), over the same time frame. On the conference call, Lowe’s said that store traffic remained robust in May.
Following the quarter, the company was upgraded at Stifel Nicolaus, from Hold to Buy. Analyst John Baugh set a price target of $149, representing 14.3% upside potential from current levels.
Baugh is rated in the top-4% of the more than 6,600 analysts tracked by TipRanks, which lends credence to the call.
In addition, hedge fund investor Bill Ackman recently boosted his stake in the retailer by 42% (to $1.1 billion), according to an SEC filing.
It’s also worth noting that LOW carries a Smart Score of 10/10 on TipRanks. This proprietary score utilizes Big Data to rank stocks based on 8 key factors that have historically been a precursor of future outperformance.
On top of the positive aspects mentioned already, the Smart Score indicates that the company has seen insider buying and strong price technicals, as well as improving sentiment from financial bloggers.
Lowe’s is a retailer that was deemed an essential business during the coronavirus lockdown and shoppers confirmed this in the most recent quarter. As commercial construction activity picks up in the second half of the year, we believe store traffic will remain strong.
FYI: This is just 1 of the 20+ stocks selected for the Smart Investor portfolio. That’s where we share more detailed insights on our weekly stock picks.
You may also want to learn more about how we use TipRanks indicators to find stocks that are primed to outperform. Discover the Smart Investor portfolio here >>
Wishing you a world of investment success!
