Weekly Market Review: New Month Brings Familiar Gains

The broader U.S. market averages rallied about 2% this past week, led by the Energy and Technology sectors. Outside of stock prices, bonds and the U.S. dollar also made notable moves this week, as investors positioned their portfolios for the early days of 2021. 

A selloff in bonds sent the yield of the benchmark, 10-year U.S. Treasury note to 0.97%. The U.S. Dollar Index (DXY) is also now at its lowest level in almost two years.  

In economic news, the November jobs report on Friday presented a mixed picture. The U.S. economy added 245,000 non-farm payrolls last month, which was below expectations. On the other hand, the headline unemployment rate improved to 6.7%.

Coronavirus Update

It may no longer be the top news story in the financial press, but the coronavirus pandemic is still with us.

Moderna (MRNA) announced more positive clinical data for its potential COVID-19 vaccine on Monday and filed for emergency approval from the Food and Drug Administration. 

The U.K. approved Pfizer’s (PFE) vaccine on Wednesday. However, the company announced a day later that it would only meet half of its distribution target by the end of the year, because of logistical delays. 

Elsewhere, Los Angeles and San Francisco are among two major cities that renewed business and travel restrictions this week, meant to curb the resurgence of the disease.  

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

Looking ahead to next week, we expect talks about a new round of economic relief could continue to heat up. Both sides in Washington D.C. are reportedly moving closer to a deal that could help bridge the economic gap for businesses and individuals, until vaccines can be widely implemented. 

In earnings action, Broadcom (BRCM), Costco (COST) and Oracle (ORCL) are notable names on the reporting calendar next Thursday. 

On the economic front, we’ll get a look at both consumer and producer inflation next week. It will be worth noting if increases in these areas confirm recent moves in the U.S. Dollar and bond yields.  

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: Acco Brands (ACCO)

The company makes a wide range of stationery, under brands such as Mead and Swingline, in addition to other consumer products.

The stock gained 7% this week and we believe this momentum can continue throughout the final weeks of 2020. 

Here’s why:

For one, Acco delivered quarterly results in October that exceeded expectations. The company earned $0.19 a share in the third quarter, as revenue fell 12% from a year ago, to $441.1 million.

Acco also acquired privately-held PowerA in November, for $340 million. PowerA makes video game controllers, expanding the company’s presence in the consumer technology space. The purchase is expected to be accretive to earnings in the first year. 

Following the acquisition, Keybanc upgraded the stock from Sector Weight to Overweight. All three active analysts tracked by TipRanks rate Acco a Buy and the average price target of $11.33 represents 32.7% upside potential.

In the meantime, Acco is valued at just 8.2x expected forward earnings of $1.04 a share. That is a discount to both the broader market and median industry valuation of 17.4x. It looks particularly attractive against a backdrop where the company is expected to average 39.8% annual earnings growth over the next two years. 

Insiders agree the stock holds value. According to an SEC filing last month, a member of the board of directors purchased 50,000 shares on the open market. 

Acco also sports a solid 3% dividend yield. Management will make its next quarterly payment of $0.065 a share on Dec. 18, to investors at the close of trading on Nov. 20. 

In addition, it’s worth noting that the company 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 the shares have seen improving sentiment from 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.