Weekly Market Review: Ending on a Higher Note

U.S. stocks closed with a flourish on Friday, sending the S&P 500 to a fractional gain for the week. Real Estate names led the way higher, while the Communication Services sector lagged.

On a weekly basis, the U.S. 10-year Treasury yield declined for the first time in over two months. It was reported on Friday that the PCE price index increased 1.6% in February, or 1.4 % excluding food and energy. Both readings were well below the 2 percent level that the Federal Reserve uses as a key consumer inflation threshold.

In other economic data, it was reported that new home sales declined 18.2% in February. That was the steepest drop in eight years, as all regions of the U.S. posted lower activity.

The National Association of Realtors also announced that sales of existing homes fell 6.6%. last month. The drop in activity was blamed on extreme weather across the majority of the country.

The Week Ahead

Looking ahead to next week, the first quarter ends on Wednesday and U.S. markets are closed Friday for a holiday.

Even though there is no trading, the March employment data will be reported on Friday. Consensus estimates call for the addition of 182,000 non-farm payrolls in the month, following a blowout performance in February. 

In the meantime, initial weekly jobless claims have rebounded to the lowest figure since COVID-19 business and travel restrictions were enacted. Continuing claims are now under 4 million. Although 9 million jobs have still not been recovered since the beginning of the pandemic. Another 5 million workers have dropped out of the labor force.

Following the snap-back recovery in stocks last year from Pandemic lows, we believe that investment gains will be harder to come by in 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 Healthcare name is worth a closer look and is our Stock of the Week.

Stock of the Week: Laboratory Corp. (LH)

The stock gained more than 5% this week and we believe this momentum can continue in the first half of 2021. Here’s why:

On Tuesday, the Laboratory Corp. announced that it hired Goldman Sachs, to help conduct a review of its business structure and capital allocation strategy. This move was likely influenced by activist investor Jana Partners, who recently disclosed a position in the company and has reportedly nominated new members for the board of directors. 

Management also delivered quarterly results in February that exceeded the consensus analyst estimates. The company earned $10.56 a share in the fourth quarter of 2020, as revenue increased 52% from a year ago, to $4.49 billion.

Laboratory experienced 13% organic sales growth in the period, driven by COVID-19 testing. The drug development division also posted a healthy 1.43 book-to-bill ratio for the trailing-12 months. 

The stock is currently valued at just 11.8x expected 2021 earnings of $21.35 a share. This represents a discount to both the broader market and the average industry valuation of 13.4x.

In addition, the company carries a Smart Score of 10/10 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 shares have seen insider buying, as well as improving sentiment from analysts, hedge funds 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.