U.S. markets may only have been open for trading three-and-a-half days this week; however, investors celebrated the Thanksgiving holiday by pushing stock prices to record highs.
The S&P 500 gained 2.2% for the week. On Tuesday, the Dow Jones Industrial Average crossed 30,000 for the first time. The rally occurred on low volume which tends to amplify price volatility.
Another reason for the rally is that investors like certainty. President-elect Joe Biden announced on Tuesday that Janet Yellen will be his nominee for Treasury Secretary, replacing Steve Mnuchin. Given her track record as former Chair of the Federal Reserve, it is believed that Yellen will promote more economic stimulus in 2021 and beyond.
Coronavirus Update
It may no longer be top news in the financial press, but the coronavirus pandemic is still with us.
AstraZeneca (AZN) announced on Monday that its vaccine had efficacy rates as high as 90%. The idea that multiple vaccines could soon be available is welcome news. Meanwhile, we passed the tragic milestone of 60 million reported global cases this week.
If the pandemic continues to spread, it could hamper the positive trajectory of the economic recovery reported in recent months.
What to Expect Next Week
As the calendar turns to December, technology names like Salesforce (CRM) and Zoom (ZM) headline the earnings calendar next week.
On the economic front, we’ll get the November jobs data on Friday. Economists are looking for the addition of 650,000 non-farm payrolls last month and for the headline unemployment rate to remain at 6.9%.
Following the snap-back recovery in stocks from March lows, we believe that investment gains will be harder to come by heading into 2021.
As a result, deciding what and when to buy can be challenging for any investor.
However, the fact remains that attractive investments are out there, if you’re willing to dig a little deeper.
One such Consumer name is worth a closer look and is our Stock of the Week.
Stock of the Week: Camping World (CWH)
The company sells and services recreational vehicles (RVs) and related camping supplies.
The stock gained more than 8% this week. We believe this momentum can continue throughout the final weeks of 2020. Here’s why:
Camping World appears to be a beneficiary of the coronavirus, despite most stores being closed in the Spring. With travel to most countries and even some states off-limits, many Americans are hitting the road for vacation.
This was apparent earlier in early November when the retailer posted quarterly results that exceeded the consensus analyst estimates. The company earned $1.58 a share in the third quarter, as revenue increased 21% from the previous year to $1.68 billion.
Management earmarked some of these newfound profits to a new $100 million stock buyback program. Camping World is also returning cash to investors through dividends.
On Nov. 18, the retailer declared dividends worth $1 a share. Investors at the close of trading on Dec. 11 will qualify for the payment on Dec. 29. Including these new payouts, the company is indicating a yield north of 4% over the past four quarters.
Despite the recent gains, the stock is currently trading at just 9.4x expected 2021 earnings of $3.34 a share. This is a steep discount to both the broader market and the industry median valuation of 14.4x.
One group that sees value in Camping World is those inside the retailer. According to a recent SEC filing, a member of the Board of Directors bought $4.9 million worth of shares on the open market. There are several reasons why an insider may sell shares, but they generally only buy if they’re bullish about the near-term prospects.
In addition, it’s worth noting that the company carries a Smart Score of 8/10 on TipRanks. This proprietary score utilizes Big Data to rank stocks based on 8 key factors that have historically been a precursor of future outperformance.
On top of the positive aspects mentioned already, the Smart Score indicates that the shares have seen improving sentiment from analysts and financial bloggers.
FYI: This is just 1 of the 20+ stocks selected for the Smart Investor portfolio. That’s where we share more detailed insights on our weekly stock picks.
