New Trade for November 17th, 2020

Stocks are under pressure this morning after yesterday’s record close.  The Dow finished the session just 50 points shy of hitting 30,000 for the first  time ever.  This morning Dow futures are pointing to a nearly 300 point loss. 

Rising bond yields and improving economic growth can trigger a rotation out of growth stocks into stocks more sensitive to upcoming macroeconomic changes.  As we saw last week in a fast and furious, albeit short lived, transition from the names that have fared the best throughout the recovery, into stocks that had not yet recovered.  Was last week’s action just a teaser of a more sustained rotation that may be in the wings?  It seems to come down to one thing, and it’s when – not if – a vaccine is announced. 

Ahead of that big announcement, many investors are seeking out high quality companies with value price tags.  Our trade alert for today highlights one such company.

Merck (MRK) share price has suffered in 2020, and that makes the stock too cheap to ignore, considering the company is providing one of the life saving cancer treatments available today. Central to Merck’s fundamental performance is their blockbuster cancer drug, Keytruda, which is approved for more than 20 indications and expected to be on patent until 2028.  

Analysts forecast Merck to generate average annual earnings growth of almost 8% over the next three to five years.  The company sports a solid balance sheet and cash flow situation.  Plus a healthy 3% dividend yield that seems to be just heating up.  MRK upgraded its dividend payouts by 14.6% in 2019 then followed that up with a nearly 11% improvement for 2020.  Merck is solidly established among the best value stocks to buy if you’re looking for large-cap stability and rising payouts.  MRK has a $204.83 billion market cap and currently trades with a 17.89 profit to earnings ratio.