U.S. stocks went out mixed on Friday and ended the holiday-shortened week about 2.5% lower. Energy names led the way down while the Materials sector managed a fractional gain.
On Thursday, the Senate failed to pass a $300 billion coronavirus relief bill. In addition, both initial and continuing jobless claims increased on Thursday for the first time in several weeks.
Coronavirus Update
While it may no longer be the top news story in the financial press, the coronavirus pandemic is still with us.
It was reported on Tuesday that due to safety concerns Astrazeneca’s (AZN) vaccine trial in the U.K. was put on hold. If the pandemic continues to spread, it could hamper the positive trajectory of economic recovery reported in recent months.
What to Expect Next Week
The S&P 500 closed above its 50-day moving average of 3,322 on Friday, having briefly fallen below that figure earlier in the day. This is a key technical level that many Bulls will be watching next week to see if it continues to provide downside support.
Next week will also be relatively busy on the economic front. There will be multiple looks at the state of the housing market. Wednesday offers a look at August retail sales. Also on Wednesday, the latest interest rate decision and press conference from Jerome Powell and the FOMC.
Following the snap-back recovery in stocks the past few months, we believe that investment gains will be harder to come by in the second half of the year.
As a result, deciding what and when to buy can be challenging for any investor.
However, the fact remains that attractive investments are out there, if you’re willing to dig a little deeper.
One such Consumer name is worth a closer look and is our Stock of the Week.
Stock of the Week: Camping World (CWH)
The company sells recreational vehicles (RVs) and related camping supplies. The stock gained 13% this week and we believe this positive momentum can continue throughout the remainder of 2020. Here’s why:
In many ways, the retailer is a beneficiary of the coronavirus even though most stores were closed in March and April. With travel to most countries, and even some states, off-limits many Americans are choosing to hit the road and drive/camp for vacation this year.
This was apparent when Camping World posted quarterly results last month that surpassed the consensus analyst estimates. The company earned $1.62 a share in the second quarter, as revenue increased 9% from a year ago, to $1.61 billion.
The retailer expanded margins in the period, as it was able to meet higher demand because of a strong digital presence and the infrastructure to deliver RVs directly to customers.
Insiders and Analysts See Value
At current levels, the company appears inexpensive at just 13.5x expected 2020 earnings of $2.56; which is a discount to the broader market.
CEO Marcus Lemonis agrees the stock has value. According to SEC filings, he has purchased over $2.5 million worth of Camping World on the open market, in the past month.
There are several reasons why an insider may sell shares, but they generally only buy if they’re bullish about the near-term prospects. Arguably, no one understands a company’s outlook better than its chief executive.
Wall Street is also bullish on Camping World. JP Morgan upgraded the stock on Tuesday, from Neutral to Overweight. Analyst Ryan Brinkman set a $40 price target, representing 16.1% upside potential.
In addition, it’s worth noting that the stock 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 improving sentiment from investors (both professional and individuals) and financial bloggers.
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.
