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|
|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|
|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|
|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|
|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|
|Brown & Brown, Inc.||(BRO)||FINANCIALS||INSURANCE BROKERS||105||97.50|
|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|
|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|
|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|
|Sunstone Hotel Investors, Inc.||(SHO)||REITS||REIT-HOTEL & MOTEL||90||67.50|
|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|
|BJ's Restaurants, Inc.||(BJRI)||SERVICES||RESTAURANTS||105||102.50|
|Forrester Research, Inc.||(FORR)||SERVICES||CONSULTING SERVICES||105||105.00|
|Genesco Inc.||(GCO)||SERVICES||APPAREL RETAIL||105||78.75|
|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|
|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|
|DTE Energy Company||(DTE)||UTILITIES||UTILITIES-REGULATED ELECTRIC||90||88.75|
Don't miss out. Get all the ideas we sent to members this week, plus weekly large cap, mid cap, small cap and ADR rankings. Know what sectors, industries, and stocks to buy and when to buy them. Over 400 bps of excess return in the following 52 weeks since 2017. Free trial, special introductory pricing, and you can cancel anytime. Join the conversation. Sign up for Top Stocks For Tomorrow.
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.