Market News

Weekly Market Review: Ending on a Positive Note

The broader U.S. stock market averages rebounded Friday to close the week in positive territory. Real Estate and Consumer Discretionary names led the way, while the Energy sector lagged last week.

Trading was volatile, following a holiday on Monday. One concern was the continued spread of the Delta variant of COVID-19, which led to the announcement that spectators will not be allowed to attend the Tokyo Olympics.

In economic news, the Institute for Supply Management (ISM) said on Tuesday that its non-Manufacturing index declined to 60.1 in June. Some economists suggest recent data shows the U.S. economy may have peaked in the Spring. 

The Week Ahead

The second-quarter earnings season kicks off this week, with the following names highlighting the calendar:

July 13: Goldman Sachs (GS), JPMorgan Chase (JPM), and Pepsico (PEP)

July 14: Bank of America (BAC), Citigroup (C), Delta Air Lines (DAL), and Wells Fargo (WFC)

July 15: Morgan Stanley (MS) and UnitedHealth (UNH)

Refnitiv expects aggregate profit for the S&P 500 to increase 66% from a year ago, leveraged from 19% sales growth.

On the economic front, inflation will be in focus. We’ll get the June report for consumer prices on Tuesday. This will be followed by a look at producer prices on Wednesday. Retail sales will be announced on Friday.

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 Retail 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 2% last week and we believe this outperformance can continue into the second half of 2021. Here’s why:

With travel to most countries off-limits this past year, many Americans chose to hit the road and drive/camp for vacation.

This was apparent in May when management posted quarterly results that exceeded the consensus analyst estimates. Camping World earned $1.40 a share in the fourth quarter of 2020, as revenue increased 47% from the previous year to $1.52 billion.

The company expanded its gross margin by nearly four percentage points in the period and management returns cash to investors through a 4.3% dividend yield.

Despite the recent gains, the stock is currently trading at just 6.8x expected 2021 earnings of $4.25 a share. This is a steep discount to both the broader market and industry median valuation of 14.2x.

Analysts and Insiders See Value

Insiders are another group that finds value in the name. According to SEC filings, CEO Marcus Lemonis bought $100,000 worth of shares back in May.

There are several reasons why insiders may sell stock in their company; however, they usually only buy when upbeat about the future. Arguably, no one understands the day-to-day prospects of a business better than its top executives.

It’s also worth noting that Raymond James initiated coverage of the stock on July 2, with an Outperform rating. Analyst Joseph Altobello set a $45 price target (13.8% upside potential), citing the potential for market share gains.

Altobello is rated in the top-5% of the nearly 7,600 analysts tracked by TipRanks, which adds weight to the call.

In addition, Camping World 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 improving sentiment from financial bloggers and individual investors.

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.

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