Seeking Alpha

The Top Stocks To Buy If COVID-19 Causes A Sell-Off

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Includes: AAXN, ABBV, ABC, AEE, AEP, AIR, AIZ, AIZP, ASH, ASTE, AVAV, AVNT, BELFA, BELFB, BINFF, BIP, BIPAF, BJRI, BMO, BNS, BNSPF, BRO, CAMP, CAR, CCRN, CHDN, CINF, CLF, CMP, CODI, CODI.PA, CODI.PB, CODI.PC, COLB, CREE, CSGP, CTVA, CUTR, CVS, D, DCP, DCP.PB, DCP.PC, DISCA, DISCB, DISCK, DOC, DOW, DRUA, DTE, DTJ, DTP, DTW, DUK, DUK.PA, DUKB, DUKH, DVA, ED, ETH, ETR, FFIN, FLR, FOE, FORR, FPRX, FTV, FUN, GCO, GM, GPC, GTS, GVA, HAIN, HAL, HMLP, HMLP.PA, HPQ, JCOM, JLL, LEG, LFUS, MAC, MATW, MDP, MDPEB, MDT, MDU, MPLX, NBR, NEE, NWL, PAG, PCH, PDCO, PDS, PFE, PFH, PG, PPG, PRS, PRU, PVH, RDN, SCVL, SHO, SHO.PE, SHO.PF, SO, SOJB, SOJC, SOJD, SOLN, SPY, SYKE, SYY, TEN, TPR, TU, WY, XPER, ZEUS
by: Limelight Alpha Management Partners
Summary

The top sectors to target now.

The strongest-scoring stocks to add to your watchlist.

Why coronavirus driven volatility could be a great buying opportunity.

November's U.S. Presidential election created volatility, offering investors an opportunity to buy stocks on sale, and an acceleration in COVID-19 cases in the U.S. and uncertainty over President Trump's willingness to admit defeat suggest volatility may remain for a while longer.

Prior to the November 4th election, I wrote "Using any additional weakness in the coming week to buy could pay off given there's plenty of money parked in low-yielding bonds and money markets eager to shift to higher-returning assets. Legging into names on your watch list could be particularly smart on larger-than-normal down days." Since then, the S&P 500 has marched markedly higher, making a new all-time high mid month.

The rapid run-up in the S&P 500 Market ETF (SPY) was driven by a broadening out of the market, with technology stocks pausing and industrials, basics, and financials rallying. The shifting leadership was to be expected, because the sector ranking we shared in our October 28th article showed those baskets as the "best to buy" and technology was ranked neutral.

With the market currently digesting its post-Election run-up, it wouldn't be surprising if volatility remained elevated because of COVID-19's resurgence. In the past week, daily cases hit the highest levels since the pandemic began and hospitalizations are similarly climbing. An increase in the rate of positive cases resulted in New York City curtailing in-person education this week, and it's not a stretch to think that restrictions nationwide could negatively impact economic activity.

The risk the economy could suffer another drop like we experienced in the second quarter can't be ignored, but the market is a forward- looking, discounting mechanism, and a COVID-19 resurgence has been forecast for months. As such, investing models may have already taken the risk into consideration. If so, then short-term drops caused by COVID-19 news could offer investors similarly good entries into the top sectors, industries, and stocks in our rankings as we saw prior to Election Day.

The best sectors to buy now

Our system ranks the major sectors to identify baskets with tailwinds or headwinds, and to find emerging sector trends. Once we rank each sector, we spotlight the best scoring stocks within them for our members.

Our scoring methodology is explained more here, but in short, it comprises 7 factors that impact future stock prices:

  • Forward earnings growth expectations
  • Historical trends in reporting earnings that beat Wall Street estimates
  • Insider buying
  • Short-term and long-term institutional money flow
  • Forward valuation relative to historical valuation
  • Contra-trend short interest analysis
  • Quarterly seasonality over the past decade

Currently, the best large-cap sectors are industrials, financials, utilities, and consumer goods. Financials, industrials, consumer goods, and basic materials are best in mid-cap, while the top small-cap sectors are industrials, consumer goods, financials, and services. If you fish within those ponds, you'll have the greatest odds for catching alpha.

Industrials has scored highly in our ranking since summer, while financials and basics strength is more recent. Technology's taken a back seat to those baskets, but certain industries, including semiconductors, have been particularly strong, and remain intriguing. Overall, staying industry and stock-specific is a good strategy for approaching neutral and below-average sectors. (see further below for a list of top stocks in all sectors).

Source: Top Stocks for Tomorrow.

The top-rated stocks to buy

We rank over 1,500 institutional-quality stocks every week to spot potential winners.

Overall, our research is a great source of new ideas because stocks follow earnings over time, insiders buy for one reason. Money flow reflects institutional sentiment, and seasonal patterns can rhyme.

This week, we highlighted over 150 top stocks to our members across large-cap, mid-cap, and small-cap, including these 90 stocks representing the 10 highest-scoring in each basket (some baskets have fewer than 10 high-scoring ideas). This list crisscrosses industries and style, so I'm certain a few names will dovetail with your approach. For convenience, I've also highlighted stocks making the biggest jump in our score this week.

Best by Sector 11/19/2020 4 WEEK MA
Company Name Symbol Sector INDUSTRY SCORE SCORE
BASIC MATERIALS
Cleveland-Cliffs Inc. (CLF) BASIC MATERIALS STEEL 110 108.75
Dow Inc. (DOW) BASIC MATERIALS CHEMICALS 105 103.75
Compass Minerals International, Inc. (CMP) BASIC MATERIALS OTHER INDUSTRIAL METALS & MINING 105 102.50
MDU Resources Group, Inc. (MDU) BASIC MATERIALS BUILDING MATERIALS 105 95.00
Corteva Inc. (CTVA) BASIC MATERIALS AGRICULTURAL INPUTS 105 103.75
Avient Corporation (AVNT) BASIC MATERIALS SPECIALTY CHEMICALS 105 101.25
PPG Industries, Inc. (PPG) BASIC MATERIALS SPECIALTY CHEMICALS 100 98.75
Ashland Global Holdings Inc. (ASH) BASIC MATERIALS CHEMICALS- MAJOR DIVERSIFIED 100 87.50
Olympic Steel, Inc. (ZEUS) BASIC MATERIALS STEEL 100 95.00
Ferro Corp. (FOE) BASIC MATERIALS SPECIALTY CHEMICALS 100 98.75
CONSUMER GOODS
Tenneco Inc. (TEN) CONSUMER GOODS AUTO PARTS 115 97.50
Newell Brands Inc. (NWL) CONSUMER GOODS HOUSEHOLD & PERSONAL PRODUCTS 110 107.50
The Hain Celestial Group, Inc. (HAIN) CONSUMER GOODS PACKAGED FOODS 110 97.50
Ethan Allen Interiors Inc. (ETH) CONSUMER GOODS FURNISHINGS, FIXTURES & APPLIANCES 105 101.25
Cedar Fair, L.P. (FUN) CONSUMER GOODS LEISURE 105 80.00
General Motors Company (GM) CONSUMER GOODS AUTO MANUFACTURERS 105 103.75
PVH Corp. (PVH) CONSUMER GOODS APPAREL MANUFACTURING 105 105.00
Leggett & Platt, Incorporated (LEG) CONSUMER GOODS FURNISHINGS, FIXTURES & APPLIANCES 100 97.50
Sysco Corporation (SYY) CONSUMER GOODS FOOD DISTRIBUTION 100 91.25
The Procter & Gamble Company (PG) CONSUMER GOODS HOUSEHOLD & PERSONAL PRODUCTS 100 97.50
ENERGY
MPLX LP (MPLX) ENERGY OIL & GAS MIDSTREAM 105 85.00
Nabors Industries Ltd. (NBR) ENERGY OIL & GAS DRILLING 90 62.50
Precision Drilling Corporation (PDS) ENERGY OIL & GAS DRILLING 90 75.00
DCP Midstream, LP (DCP) ENERGY OIL & GAS MIDSTREAM 85 82.50
Halliburton Company (HAL) ENERGY OIL & GAS EQUIPMENT & SERVICES 85 77.50
Hoegh LNG Partners LP (HMLP) ENERGY OIL & GAS MIDSTREAM 85 72.50
FINANCIALS
Prudential Financial, Inc. (PRU) FINANCIALS INSURANCE-LIFE 110 88.75
Columbia Banking System, Inc. (COLB) FINANCIALS BANKS-REGIONAL 110 93.75
First Financial Bankshares, Inc. (FFIN) FINANCIALS BANKS-REGIONAL 110 97.50
The Bank of Nova Scotia (BNS) FINANCIALS BANKS-DIVERSIFIED 105 85.00
Bank of Montreal (BMO) FINANCIALS BANKS-DIVERSIFIED 105 103.75
Cincinnati Financial Corporation (CINF) FINANCIALS INSURANCE-PROPERTY & CASUALTY 105 93.75
Radian Group Inc. (RDN) FINANCIALS INSURANCE-SPECIALTY 105 101.25
Assurant, Inc. (AIZ) FINANCIALS INSURANCE-SPECIALTY 105 100.00
Brown & Brown, Inc. (BRO) FINANCIALS INSURANCE BROKERS 105 97.50
HEALTHCARE
Cutera, Inc. (CUTR) HEALTHCARE MEDICAL DEVICES 105 106.25
DaVita Inc. (DVA) HEALTHCARE SPECIALIZED HEALTH SERVICES 105 100.00
Five Prime Therapeutics, Inc. (FPRX) HEALTHCARE BIOTECHNOLOGY 105 91.25
Triple-S Management Corporation (GTS) HEALTHCARE HEALTHCARE PLANS 105 96.25
AbbVie Inc. (ABBV) HEALTHCARE DRUG MANUFACTURERS 100 77.50
Pfizer Inc. (PFE) HEALTHCARE DRUG MANUFACTURERS 100 80.00
Patterson Companies, Inc. (PDCO) HEALTHCARE MEDICAL DISTRIBUTION 100 98.75
CVS Health Corporation (CVS) HEALTHCARE HEALTHCARE PLANS 100 77.50
Medtronic plc (MDT) HEALTHCARE MEDICAL DEVICES 100 85.00
AmerisourceBergen Corporation (ABC) HEALTHCARE MEDICAL DISTRIBUTION 100 87.50
INDUSTRIALS
Fluor Corporation (FLR) INDUSTRIALS ENGINEERING & CONSTRUCTION 110 110.00
Compass Diversified Holdings LLC (CODI) INDUSTRIALS CONGLOMERATES 105 83.75
Matthews International Corporation (MATW) INDUSTRIALS CONGLOMERATES 105 88.75
Granite Construction Incorporated (GVA) INDUSTRIALS ENGINEERING & CONSTRUCTION 105 103.75
AAR Corp. (AIR) INDUSTRIALS AEROSPACE & DEFENSE 105 81.25
Astec Industries, Inc. (ASTE) INDUSTRIALS FARM & CONSTRUCTION MACHINERY 105 95.00
Axon Enterprise (AAXN) INDUSTRIALS AEROSPACE & DEFENSE 105 106.25
AeroVironment, Inc. (AVAV) INDUSTRIALS AEROSPACE & DEFENSE 105 103.75
Avis Budget Group (CAR) INDUSTRIALS RENTAL & LEASING SERVICES 105 107.50
Cross Country Healthcare, Inc. (CCRN) INDUSTRIALS STAFFING & EMPLOYMENT SERVICES 105 98.75
REITS/ Real Estate
Weyerhaeuser Company (WY) REITS REIT-SPECIALTY 95 92.50
CoStar Group, Inc. (CSGP) REITS REAL ESTATE SERVICES 95 93.75
Jones Lang LaSalle Incorporated (JLL) REITS REAL ESTATE SERVICES 95 93.75
The Macerich Company (MAC) REITS REIT-RETAIL 90 76.25
Physicians Realty Trust (DOC) REITS REITS 90 70.00
PotlatchDeltic Corporation (PCH) REITS REIT-SPECIALTY 90 91.25
Sunstone Hotel Investors, Inc. (SHO) REITS REIT-HOTEL & MOTEL 90 67.50
SERVICES
Genuine Parts Company (GPC) SERVICES SPECIALTY RETAIL 110 101.25
Tapestry, Inc. (TPR) SERVICES LUXURY GOODS 110 110.00
Penske Automotive Group, Inc. (PAG) SERVICES AUTO & TRUCK DEALERSHIPS 105 102.50
Shoe Carnival, Inc. (SCVL) SERVICES APPAREL RETAIL 105 102.50
Churchill Downs (CHDN) SERVICES GAMBLING 105 107.50
BJ's Restaurants, Inc. (BJRI) SERVICES RESTAURANTS 105 102.50
Discovery, Inc. (DISCA) SERVICES ENTERTAINMENT 105 82.50
Forrester Research, Inc. (FORR) SERVICES CONSULTING SERVICES 105 105.00
Genesco Inc. (GCO) SERVICES APPAREL RETAIL 105 78.75
Meredith Corporation (MDP) SERVICES PUBLISHING 105 80.00
TECHNOLOGY
CalAmp Corp. (CAMP) TECHNOLOGY COMMUNICATION EQUIPMENT 110 85.00
Cree, Inc. (CREE) TECHNOLOGY SEMICONDUCTOR EQUIPMENT & MATERIALS 110 110.00
HP Inc. (HPQ) TECHNOLOGY COMPUTER HARDWARE 105 97.50
Bel Fuse Inc. (BELFB) TECHNOLOGY ELECTRONIC COMPONENTS 105 96.25
Littelfuse, Inc. (LFUS) TECHNOLOGY ELECTRONIC COMPONENTS 105 106.25
Fortive Corp. (FTV) TECHNOLOGY SCIENTIFIC & TECHNICAL INSTRUMENTS 105 102.50
J2 Global, Inc. (JCOM) TECHNOLOGY SOFTWARE-INFRASTRUCTURE 105 90.00
Sykes Enterprises, Incorporated (SYKE) TECHNOLOGY INFORMATION TECHNOLOGY SERVICES 105 103.75
Xperi Holding Corporation (XPER) TECHNOLOGY SEMICONDUCTER EQUIPMENT & MATERIALS 105 76.25
TELUS Corporation (TU) TECHNOLOGY TELECOM SERVICES 100 80.00
UTILITIES
Dominion Energy, Inc. (D) UTILITIES UTILITIES-DIVERSIFIED 110 91.25
Duke Energy Corporation (DUK) UTILITIES UTILITIES-REGULATED ELECTRIC 105 103.75
The Southern Company (SO) UTILITIES UTILITIES-REGULATED ELECTRIC 100 98.75
Ameren Corporation (AEE) UTILITIES UTILITIES-REGULATED ELECTRIC 100 97.50
American Electric Power Company, Inc. (AEP) UTILITIES UTILITIES-REGULATED ELECTRIC 95 96.25
NextEra Energy, Inc. (NEE) UTILITIES UTILITIES-REGULATED ELECTRIC 95 93.75
Brookfield Infrastructure Partners L.P. (BIP) UTILITIES UTILITIES-DIVERSIFIED 90 81.25
Consolidated Edison, Inc. (ED) UTILITIES UTILITIES-REGULATED ELECTRIC 90 80.00
Entergy Corporation (ETR) UTILITIES UTILITIES-DIVERSIFIED 90 87.50
DTE Energy Company (DTE) UTILITIES UTILITIES-REGULATED ELECTRIC 90 88.75

Disclosure: I am/we are long CMP, PFE, PVH. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.