A new round of vaccine optimism and diminishing political uncertainty helped stocks build on recent gains for the holiday-shortened week. Most of the major benchmarks hit record highs, with the narrowly focused Dow Jones Industrial Average gaining the most attention by crossing the 30,000 threshold for the first time. Reopening hopes boosted cyclical shares, particularly energy stocks, while health care, utilities, consumer staples, and real estate shares lagged. The market was closed Thursday for the Thanksgiving holiday, but weekly trading volumes remained unusually elevated.
Here’s a look back at how our trades fared this week.
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11-23-2020–CVS up 2.23%
CVS Health Corp (CVS) stock is off more than 10% for the year-to-date, vs. a gain of more than 9% for the S&P 500. As disappointing as that might be for long-term shareholders, it also creates a decent entry point for new investors. The benefits of its 2018 acquisition of Aetna and the expected resumption of share buybacks only reinforces the case that the stock is a bargain.
“We think valuation risk/reward remains to the upside, particularly given strong operating cash flow generation and as CVS gets closer to being able to resume share repurchases, likely in 2022,” says UBS analysts, who rate the stock at Buy.
The bottom line is that this large-cap value stock is expected to generate average annual earnings growth of almost 5% and trades at a low 10 times expected earnings.
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11-24-2020–IIPR up 1.73%
Innovative Industrial Properties (IIPR) is a rarity among marijuana stocks in that it’s a real estate investment trust (REIT). Specifically, IIPR invests in greenhouses and industrial facilities for the medical cannabis industry.
Among marijuana stocks IIPR has generally maintained the best IBD ratings over the past two years. IIPR has a Composite Rating of 92. Its EPS Rating is 74.
IIPR is a popular stock among analysts, garnering three Strong Buys and three Buys versus just one Hold and no Sell calls of any sort. IIPR stock also comes along with a 3% yield.
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11-25-2020–KR down 0.46%
Kroger Co. (KR) has an established record of topping earnings estimates, especially when looking at the previous two reports. The company boasts an average surprise for the past two quarters of 26.03%.
With this earnings history in mind, recent estimates have been moving higher for Kroger. In fact, the Zacks Earnings ESP (Expected Surprise Prediction) for the company is positive, which is a great sign of an earnings beat, especially when you combine this metric with its nice Zacks Rank.
According to Zacks research, stocks with the combination of a positive Earnings ESP and a Zacks rank of #3 (Hold) or better produce a positive surprise nearly 70% of the time. Kroger Co. is scheduled to report earnings on Thursday, December 3rd.
One more thing, Kroger sports a 2.2% dividend payout, which is a sustainably low ratio of 20% of its income after tax. That means the dividend is not likely going anywhere anytime soon.
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11-27-2020–SUSA up 0.38%
iShares MSCI USA ESG Select ETF (SUSA) is notable because of its “select” strategy, through which it places stricter requirements on components. With only 145 holdings in its portfolio, investors are not just getting an S&P fund that excludes Big Oil and Big Tobacco – you’ll instead find a top cut of the biggest companies that truly take ESG issues seriously. Big tech names like Apple are well-represented, but there are also some names that may surprise you. For example, take home-improvement company Home Depot (HD) or consulting firm Accenture (ACN). SUSA gives you a shorter list, but diversified enough to avoid relying on just the top few holdings alone.
Even amid the covid-19 pandemic, ESG has been an outperformer, which has been reflected in the popularity of the space. “Global sales of sustainable bonds, in general, have jumped this year, rising 27% to $196 billion, reflecting increasing investor demand for debt to pay for green and social projects,” a Bloomberg article said. It’s a sign of investors increased willingness to employ sustainable strategies. Sustainable strategies attracted more than $26 billion of net new money in the first half of 2020, surpassing the then-record $21.4 billion they attracted in 2019.
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