Cyclical Stocks Pop on Vaccine Progress: 5 Solid Buys

A relentless rise in coronavirus cases across the United States has raised concerns that the government may yet again impose lockdowns, which again will hamper economic growth and corporate profits.

 

In fact, on Nov 22, Nevada became the latest state to impose shutdown measures to curb the spread of the virus. The state applied curbs on eateries, pubs and casinos along with imposing strict laws to ensure the covering of faces for a short period of time.

 

Further, expectations of further stimulus measures to rejuvenate the economy were dampened after some of the Fed’s pandemic-led emergency aid programs were terminated by Treasury Secretary Steven Mnuchin last week.

 

But, on Nov 23, optimistic news on the coronavirus vaccine front gave a new lease of life to the U.S. economy. And with fears of an economic downturn ebbing, the fate of cyclical stocks brightened. Cyclical stocks or discretionary companies moved north yesterday as consumers are now widely expected to purchase products on signs of an improving economy.

 

Notably, cyclical stocks including vehicle manufacturers, apparel goods producers, airliners and hotels rallied on expectations of sales improvement once the economy starts to recover.

 

At the same time, energy, industrial and financial shares are cyclical in nature and witnessed a jump in share prices yesterday. Particularly, energy shares scaled north as a potential breakthrough in the coronavirus vaccine space will ease concerns about the virus, and a greater number of people will take to the skies again, resulting in an uptick in demand for fuel oil.

 

Buoyed by the positivity, the Energy Select Sector SPDR (XLE), the Industrials Select Sector SPDR (XLI), the Financials Select Sector SPDR (XLF) and the Consumer Discretionary Select Sector SPDR (XLY) rose 7.1%, 1.7%, 1.9% and 1.1%, respectively, on Nov 23.

 

But which vaccine news is driving cyclical stocks? An interim analysis showed that the vaccine candidate developed by AstraZeneca PLC AZN in collaboration with the University of Oxford had an average efficacy of 70%, easily surpassing the regulatory authority’s approval threshold of a minimum 50% efficacy. It’s worth pointing out that one dosing regimen in fact demonstrated 90% effectiveness, while another had a 62% efficacy.

 

In the race to the coronavirus vaccine, AstraZeneca has now joined Pfizer Inc. PFE and Moderna, Inc. MRNA. Late-stage preliminary analysis data from Pfizer and Moderna showed that their vaccine candidates were almost 95% effective. Both Pfizer and Moderna vaccine candidates, by the way, used mRNA technology that uses genetic materials to boost the immune system in a body (read more: 3 Stocks to Win Big as Race for Coronavirus Vaccine Heats Up).

5 Top Cyclical Stocks to Invest In Right Away

Economically-sensitive cyclical stocks are not only surging now but are also likely to scale northward in the near term on positive coronavirus vaccine developments. Hence, it won’t be a bad proposition to invest in a few right now. Here are five such stocks that flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).

 

General Motors Company GM is one of the world’s largest automakers, leading the U.S. market share with around 17% of the industry’s total sales in 2019. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has risen 83.2% over the past 60 days. The company’s expected earnings growth rate for the current quarter is more than 100%.

 

Delta Apparel, Inc. DLA is a vertical manufacturer of knitwear products for the entire family. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has moved 39.8% up over the past 60 days. The company’s expected earnings growth rate for the next year is 18.1%.

 

HIGHPOINT RESOURCES CORP HPR is an exploration and production company. It focuses on the development of oil and natural gas assets, primarily in the Denver-Julesburg Basin of Colorado. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has climbed 17.2% over the past 60 days. The company’s expected earnings growth rate for the current and next quarter is 208.8% and 295.3%, respectively. You can see the complete list of today’s Zacks #1 Rank stocks here.

 

Deere & Company DE manufactures and distributes various equipment worldwide. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has moved 3.6% up over the past 60 days. The company’s expected earnings growth rate for the next year is 39.3%.

 

Capital Bancorp, Inc. CBNK is a commercial-focused national banking association, which offers commercial and consumer banking services. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved up 59.6% over the past 60 days. The company’s expected earnings growth rate for the current and next quarter is 66.7% and 119.1%, respectively.

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Deere & Company (DE) : Free Stock Analysis Report
 
AstraZeneca PLC (AZN) : Free Stock Analysis Report
 
Pfizer Inc. (PFE) : Free Stock Analysis Report
 
Moderna, Inc. (MRNA) : Free Stock Analysis Report
 
General Motors Company (GM) : Free Stock Analysis Report
 
Capital Bancorp, Inc. (CBNK) : Free Stock Analysis Report
 
Delta Apparel, Inc. (DLA) : Free Stock Analysis Report
 
HIGHPOINT RESOURCES CORP (HPR) : Free Stock Analysis Report
 
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