5 Discounted Picks as Americans Head Into Summer of Freedom
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“Post COVID” is the new buzzword, with prospects of a full-fledged economic reopening, boosting investor sentiment. The first two days of June have seen a surge in Wall Street on Biden’s “all-of-America sprint” with a buoyant target of completing the nation’s vaccination rollout by Jul 4.
The NASDAQ Composite ended Wednesday, adding 20 points to end the day or up 0.14%. The Dow gained 25.07 points while the benchmark S&P 500 improved 6.07 points or 0.14% the same day.
Addressing June as the national month of action in terms of vaccination, Biden is upbeat about heading into an all-American summer of “freedom” after a long and dark winter that the nation has endured. This vaccine rollout mission has infused strong optimism into the broader market.
Airlines stocks are gaining steam on the prospect of a bright summer vacation this time around. In fact, according to a CNN article, at the start of June, there has been a significant increase in the number of air travelers, up more than six times higher than a year ago. American Airlines (AAL) has gained 6.5% over the past two trading days. United Airlines (UAL) too improved 3.3% on accelerated customer demand.
With air travel volume on the rise, the price of vacation including airfare, hotel fare and car rentals are increasing to the pre-pandemic level. Domestic leisure fares are near 2019 levels, per a CNN article.
Consequently, all the economically sensitive sectors, which touched their all-time lows in the wake of the pandemic have seen a sharper rise than the stable sectors amid the post-COVID sensation. On the speculation that no vacation destination will be unoccupied this summer, investors are rushing toward beaten-down sectors, including cruise lines, airlines, hotel and casino operators as well as travel and entertainment-booking companies.
The U.S. Global Jets ETF has risen 1.5% so far in June. In the same period, Invesco Dynamic Leisure and Entertainment ETF that includes hotels, restaurants and casinos has rallied 12.7%.
Some Discounted Stocks Likely to Bounce Back This Summer
In the current situation, investors should definitely buy the dip in the sector. However, it’s not easy to pick these underperformers as amateurish screening might lead to a value trap, ignoring factors like upside potential and fundamentals. Hence, we have taken the help of the Zacks Stock Screener to make this task relatively simpler. Amid the current market correction, we have shortlisted five stocks from the relevant sectors that carry a Zacks Rank #1 (Strong Buy) or 2 (Buy) but are undervalued in terms of several metrics. You can see the complete list of Zacks #1 Rank stocks here.
Image Source: Zacks Investment Research
OneWater Marine Inc. (ONEW – Free Report) : This is one of the largest and fastest-growing premium recreational boat retailers in the United States. In its last reported quarter, the company saw 74% year-over-year rise in revenues on growing consumer demand. The latest vaccine drive is expected to provide an additional impetus in the summer months for the company. The stock currently sports a Zacks Rank #1. It has discounted current-year P/E ratio of 9.18, P/B of 3.56 and P/S of 0.63 compared with the industry’s respective indexes of 14.85, 3.97 and 2.05.
Vista Outdoor Inc. (VSTO – Free Report) : This is a global designer, manufacturer and marketer of consumer products in the outdoor sports and recreation markets. The company is expected to record huge number of new entrants in the Shooting Sports. Further, Domestic bike sales are expected to climb up in the summer months. This Zacks Rank #1 stock is trading cheaper in terms of current year (ending Mar 2022) P/E ratio of 12.64 compared with the industry’s 14.85. Further, its P/S ratio of 1.16 favorably compares with industry’s 2.05.
Extended Stay America, Inc. (STAY – Free Report) : The company owns, operates, develops, and manages hotels in the United States. The company’s impending $6-billion takeover by affiliates of The Blackstone Group Inc. and Starwood Capital Inc. creates significant upside potential, making it a lucrative investment target at this moment. This Zacks Rank #2 stock too is trading at a discount in terms of P/B ratio, which is pegged at 3.18 compared with the industry’s 5.52. Further its P/S ratio of 3.49 compares favorably with industry’s 5.85.
Academy Sports and Outdoors, Inc. (ASO – Free Report) : Academy Sports and Outdoors is a leading full-line sporting goods and outdoor recreation retailer in the United States. The company’s product assortment focuses on key categories of outdoor, apparel, footwear and sports & recreation through both leading national brands and a portfolio of 19 private label brands. The stock currently sports a Zacks Rank #1. It has discounted current-year P/E ratio of 10.19 (industry’s P/E being 14.85), P/B of 3.51 (3.97) and P/CF of 9.23 (17.65).
American Axle (AXL – Free Report) : This is a leading supplier of driveline and drivetrain systems, modules and components for the light vehicle market. The company’s collaboration with Inovance and REE Automotive bode well for American Axle’s prospects and is set to fuel electrification revenues. As COVID-19 subsides, people are expected to go for discretionary spending on vehicle purchases. The stock currently sports a Zacks Rank #1. It has discounted current-year P/E of 8.08 ratio (industry’s P/E being 15.05), P/S of 0.28 (1.07) and P/CF of 2.51 (12.55).
Infrastructure Stock Boom to Sweep America
A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.
The only question is “Will you get into the right stocks early when their growth potential is greatest?”
Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.
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