Best stocks to buy: May 27th, 2021
Cruise lines outperformed the market yesterday, and they are expected to show some real strength in the coming days. Carnival, Royal Caribbean, and Norwegian lead the way with some of the airlines in favor amongst investors; on the top of the list, we see
One of the best stocks to buy on May 27th is probably Morgan Stanley. Outperformer on Math 26th, this stock will probably gain some points today before they report earnings at the end of the trading day. Among the best stocks of the day, we also find Pelaton – a big outperformer yesterday – and JP Morgan.
We think that the market still has more room to run for value investors. Certain selected groups, such as financials, energies, and travels, still have a lot to give to the market, as they show low PES. Historically coming off from significant market bottoms, the best stocks can be up 150% or even 200% top the bottom. This trend, however, doesn’t involve the market as a whole. Indeed, we’ve been heavily overweighting equity this past year, and we think people should pull back a little bit on their gains. From a Value Vs. Growth perspective, the tipping point happened in November of last year, with the Pfizer announcement of the vaccine. We would agree that we see more opportunities as the economy expands in value stocks within the United States and outside it.
There is an opportunity with rising interest rates for developed markets and smaller cap stocks, especially from the value sectors. These rising interest rates allow that growth to continue at this point time.
However, regardless of the market recovery discussion, some stocks have shown a pick, with some stock sectors have entirely re-opened. Individual stock selection is more important than a broad base look at the market.
Cruise Line stocks and airline stocks such as Delta were up dramatically because they will be able to start cruising hopefully in July. Many stocks in the entertainment, lodging and hospitalities are not even close to their pre-pandemic levels.
One thing to be observing in the coming days is wage pressure Vs. Growth, especially at the lower level. That’s where we see the opportunity. The stimulus is going to roll off next year, which will reduce the possibility of inflation. This is why we think this is a short spike in inflation; we don’t think it’ll be permanent or for a long period. But inflation will happen if wages start to move up, so that would be the key indicator we would look at.
We think there will be a change in outlook in the market in the next 18 months to 2 years. Firstly, the stimulus is no longer going to exist. The stimulus was only a marginal amount of money that came into our economy as direct payments to people. We think that the stimulus is no longer going to affect the market starting from next year. Earnings and growth are expected to continue in the coming months. We expect that P ratios will be lower than earnings and growth, as they typically do during this part of the market cycle, where they tend to go down a little bit. In the next 18 months to 2 years, that’s also that period where we probably won’t have this constant discussion about inflation. At that point, we’ll know whether inflation was past tense, or we’ll see whether it’s a permanent feature.
On May 26th, the DOW closed with 10 points increase, breaking up its negative trend, the S&P500 up almost 8 points, and the NASDAQ up by about 80 points. Some of the winners on the closing bell on May 16th included Nike, Salesforce.com, Goldman Sacks, Travellers, all up between about one to almost 2%. Some of the losers on the DOW included Walgreen down 4%, Amgenoff by 1.5%, and Visa by 1%. The NASDAQ continued to be the big outperformer yesterday with a 0.52% increase. The S&P showed some gains but not too far from the flat line, and the DOW flipped positive in the final minute of trading.