Weekly Market Review: March Kicks Off With Mixed Results

Trading volatility remained elevated last week, as the broader market averages posted mixed results. The Dow Jones Industrial Average gained nearly 2%, while the Nasdaq Composite lost a similar amount.

The Energy sector was the big winner last week and Consumer Discretionary stocks lagged. The yield on the benchmark 10-year U.S. Treasury note continued to press higher, which had some investors worried that significant inflation is looming around the corner.

Rising long-term interest rates are also a signal that the U.S. economy is recovering, which was confirmed by the February jobs report Friday. 379,000 non-farm payrolls were added last month, which surpassed expectations. The figure for January was also revised higher and the headline unemployment rate ticked down to 6.2%.

The U.S. labor market could continue to improve in the near term, as more areas of the economy reopen for business. Texas announced the end to its mask mandate on Tuesday and will allow all business to operate at full capacity. Mississippi soon followed suit and several other states announced a reduction of business and travel restrictions.

Elsewhere, the U.S. Senate passed President Biden’s $1.9 trillion stimulus plan on Saturday. The amended bill is expected to be voted on in the House of Representatives on Tuesday, where Democrats control a majority of the seats.

What to Expect Next Week

We’ll get the next reads on the state of inflation next week, beginning with the Consumer Price Index (CPI) on Wednesday. We’ll receive the report on producer prices (PPI) Friday, where expectations are for year-over-year growth to exceed the key 2% threshold.  

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 at and is our Stock of the Week.

Stock of the Week: Anthem (ANTM)

The company is a health insurer, covering 43 million Americans. The stock gained 10% this week and we believe this momentum can continue in the first half of 2021. Here’s why:

Following it annual Investor Day earlier in the week, Anthem was upgraded at Truist on Thursday, from Hold to Buy. Analyst David MacDonald set a price target of $375, representing 12.4% upside potential.

The company also has strong operating momentum, as evidenced by the solid quarterly results it posted in January. Anthem earned $2.54 a share in the fourth quarter of 2020, up 16% from the previous year, on $31.5 billion revenue. Management increased insurance members by nearly 5% in 2020, while keeping a tight lid on costs.

At current levels, the stock is valued at 13.4x expected full-year earnings of $24.81. Anthem is trading at a discount to the broader market and median industry valuation of 14x.

Insiders are another group that see value in the company. It was reported last month that a member of the Board of Directors bought $500,000 worth of Anthem shares, on the open market. There are several reasons why insiders may purchase their own stock; however, they usually only buy when bullish about the near-term outlook.

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.

Anthem stock analysis

On top of the positive aspects mentioned already, the Smart Score indicates that shares have seen improving sentiment from 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.