U.S. stocks posted their strongest week in 17 months, despite the arrival of higher interest rates. The S&P 500 bounced back more than 6% last week, led by the Consumer Discretionary and Information Technology sectors.
As the battle between Russia and Ukraine waged on, the focus back at home was on interest rates. As expected, the Federal Reserve announced its first rate increase since 2018 on Wednesday.
The Fed hiked 25 basis-points and signaled that it expects similar increases at its six remaining meetings in 2022. At the same time, the full-year expectation for U.S. GDP growth was cut to 2.8%.
Elsewhere, U.S. retail sales and core producer price (PPI) growth fell short of expectations in February.
The Week Ahead
Adobe (ADBE) and Nike (NKE) headline a relatively quiet earnings calendar next week.
On the economic front, we’ll get a look at new home sales on Wednesday, followed by durable goods orders Thursday. March data also starts rolling in on Thursday with the preliminary purchasing managers’ index (PMI) readings for the U.S. manufacturing and services sectors.
Following the snap-back recovery in stocks over the past several quarters from Pandemic lows, we believe that investment gains will be harder to come by in 2022, given a slowing growth outlook and the prospect of higher interest rates.
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: Abbvie (ABBV)
The stock gained nearly 7% last week and we believe this outperformance can continue in the first half of 2022. Here’s why:
Abbvie develops immunology treatments, including Rinvoq (rheumatoid arthritis) and Skyrizi (psoriasis).
On Thursday, the company received an additional FDA approval for Rinvoq, for the treatment of ulcerative colitis. Earlier this year, the company said that it expects its top two products to generate a combined annual revenue of $15 billion by 2025.
Abbvie’s current growth potential was on display in February. Management delivered better-than-expected quarterly earnings. The company had a profit of $3.31 a share in the fourth quarter of 2021. This was driven by demand for its immunology products.
Abbvie returns some of these profits to investors, in the form of a 3.5% dividend yield. Management also paid down $17 billion of debt last year.
The stock is currently valued at just 11.2x expected earnings over the next four quarters. On the other hand, Abbvie is expected to average 21.9% annual earnings growth over the next three to five years, which is ahead of the broader market and industry average.
In the meantime, the stock carries a Smart Score of 9/10 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 analysts, individual investors, 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.
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