U.S. stocks rallied 4% on Monday, following early upbeat results from a coronavirus vaccine trial by Moderna (MRNA).
The broader markets bounced around for the remainder of the week, ending Friday on a positive note. Industrial and Energy names led the way higher, while Healthcare stocks lagged.
Historically, trading activity slows down during the summer months. However, as with a lot of things in 2020, the traditional playbook can be tossed out the window.
As a reminder, U.S. markets will be closed on May 25 for a holiday.
The main driver of volatility these days remains fear of the global spread of the coronavirus. At this point, there have been about 5.3 million global cases, with over 340,000 deaths reported. That figure includes around 1.6 million cases in the U.S., where more than 98,000 have died.
All 50 states have begun to partially re-open for business, even as key metrics show the disease is still growing in some areas. We believe that how this next phase evolves over the summer months will drive economic activity and investor sentiment in the near term.
The Week Ahead
Looking ahead to next week, HP (HPQ) kicks off the earnings calendar on Wednesday, followed by Costco (COST) and Salesforce.com (CRM) on Thursday.
On the economic front, we’ll get the Fed’s Beige Book Wednesday, which offers an economic update at the regional level. Thursday offers a look at April U.S. durable goods orders and weekly unemployment claims, in addition to the first revision of March-quarter GDP growth.
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 Transportation name trading at a discount to the market is worth a closer look and is our Stock of the Week.
Stock of the Week: Fedex (FDX)
The company is a leading provider of shipping, freight, and logistics services. The stock gained nearly 9% this week and we believe this momentum can continue throughout 2020. Here’s why:
Fedex’s business has been largely resilient during the coronavirus-related slowdown, due in part to the increase in e-commerce activity over the past several weeks. As the global economy begins to gradually re-open, the company is also leveraged to a resumption of business activity.
Last month, Bank of America/Merrill Lynch upgraded the stock from Neutral to Buy. Analyst Ken Hoexter set a price target of $140, representing 19.7% upside potential.
Fedex appears reasonably valued at just 11.7x expected fiscal 2021 (ending May) earnings of $10.01 a share. This represents a discount to both the broader market and the 14.1x forward multiple sported by chief competitor United Parcel (UPS).
The industry landscape is improving, as Amazon.com (AMZN) reported in April that it’s pulling back from a strategy to deliver more third-party packages. Both FedEx and UPS have respective global networks that provide significant economies of scale, providing a significant barrier to entry for potential future competitors.
It’s also worth noting that FDX carries a Smart Score of 9/10 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, in addition to improving sentiment from hedge funds and financial bloggers.
Fedex’s fiscal year ends at the end of this month and management won’t post quarterly earnings again until late June. In the meantime, we believe the stock offers a low-cost way to benefit from the eventual re-opening of the global economy, following this pandemic.
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!