Wall Street has been in free fall since the beginning of this year, with the exception of the second half of March. The day-to-day fluctuations of the major indices are higher than what we saw in February-March 2020, during the coronavirus epidemic.
Market participants are faced with the real effect of the pandemic, as the impact of the coronavirus and its variants on day-to-day activities is now much less. As real business returns to normal and fiscal and monetary stimuli have ceased, the pain of the pandemic is being felt among investors.
The complete devastation of the global supply chain system, soaring inflation and the ongoing geopolitical conflict between Russia and Ukraine have raised serious doubts about global economic growth.
Over the past month, the major indices have been trading within a specific range. Despite these headwinds, several good stocks are available for investment. We applied our VGM style note to narrow the search to five stocks. These are – Nucor Corp. NUDE, Dynamic Steel Inc. STLD, Marathon Petroleum Corp. MPC, Valero Energy Corp. VLO and Packing Company of America PKG.
Upselling: the new theme
US inflation is currently at its highest level in 40 years and the Fed has moved from an ultra-dovish policy regime to an ultra-hawkish one. The central bank ended the $120 billion-a-month quantitative easing program in March and raised the benchmark policy rate by 25 basis points in the same month and 50 basis points in May. It also gave a clear signal that two more 50 basis point rate hikes are coming in June and July and that the systematic $9 trillion balance sheet reduction began on June 1.
Much of the economists and financial experts have already warned of an impending recession in 2022 or 2023. These negatives have converted the market sentiment into extremely bearish sentiment. As sentiment turns completely bearish, ‘sell up’ is the buzzword and not ‘buy down’. At this point, Wall Street needs a trigger to rebound. However, this silver line is still not visible.
Over the past month, the Dow has been trading between 31,000 and 33,000. The S&P 500 and Nasdaq Composite trading range was 4,000 to 4,200 and 11,850 to 12,250, respectively, during the same period. In April and May, Wall Street tried to bounce back several times. However, the rallies could not be sustained in the absence of effective positive catalysts.
Panic selling by market participants for several reasons, such as harsher than expected hawkish comments from senior Fed officials, disappointing outlook for the US economy given by CEOs of various banking giants, COVID-19 restrictions 19 from China and weak economic data, the soaring yield of the benchmark US 10-year Treasury note and the geopolitical conflict in Eastern Europe brought Wall Street’s relief rallies to a premature halt.
Our top picks
We narrowed our search to five large-cap U.S. companies that show strong growth potential for the remainder of 2022. These stocks have seen positive earnings estimate revisions over the past 30 days. In addition, these companies regularly pay dividends. Finally, each of our picks carries a Zacks Rank #1 (Strong Buy) and a VGM Score of A or B. You can see the full list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks over the past month.
Image source: Zacks Investment Research
Nucor is committed to expanding its production capabilities and growing its business through strategic acquisitions. NUE has already commissioned some of its growth projects. These should drive growth and strengthen Nucor’s position as a low-cost producer.
NUE is also experiencing strong momentum in the non-residential construction market and strong demand in the heavy equipment market. NUE remains focused on achieving greater automotive market penetration due to the segment’s long-term growth opportunities. Higher steel prices due to tight supply and higher end market demand are also expected to boost Nucor’s margins.
Nucor forecasts a profit growth rate of 27.9% for the current year. The Zacks consensus estimate for current-year earnings has improved 42.8% over the past 30 days. NUE has a current dividend yield of 1.55%.
Marathon Oil is poised for further price gains based on a slew of positives. MPC’s $21 billion in sales from its Speedway retail business provided it with a much-needed cash injection. The deal also comes with a 15-year fuel supply agreement under which Marathon Petroleum will supply 7.7 billion gallons of gasoline annually to 7-Eleven, ensuring a stable revenue stream.
MPC’s exposure to more stable cash flows from the logistics segment diversifies the revenue stream and provides protection against volatility in the refining business. Consequently, Marathon Petroleum is poised for significant capital appreciation and is considered a preferred downstream operator to own now.
Marathon Petroleum has an expected earnings growth rate of over 100% for the current year. The Zacks consensus estimate for current-year earnings has improved 15.5% over the past 30 days. MPC has a current dividend yield of 2.20%.
steel dynamics should benefit from acquisitions as well as strong liquidity and efforts to increase capacity. The acquisitions of Heartland and United Steel Supply have bolstered Steel Dynamics’ shipping capabilities. In addition, the acquisition of Zimmer should support the raw materials supply strategy of its new flat-rolled steel mill in Texas.
STLD should also take advantage of its investments to strengthen its capacities and modernize its facilities. Steel Dynamics is running several projects that should increase capacity and increase profitability. The electric arc furnace flat-rolled steel plant is expected to strengthen its steel production capacity and its production capacity for value-added products.
Steel Dynamics forecasts a profit growth rate of 33.8% for the current year. The Zacks consensus estimate for current-year earnings has improved 12.8% over the past 30 days. STLD has a current dividend yield of 1.64%.
Valero Energy is the largest independent refiner and marketer of petroleum products in the United States. VLO offers the most diversified refining base with a capacity of 3.2 million barrels per day in its 15 refineries located across the United States, Canada and the Caribbean.
The majority of Valero Energy’s refining plants are located on the Gulf Coast, with easy access to export facilities. VLO’s presence on the Gulf Coast has helped it grow its export volumes in recent years and capitalize on high distillate margins.
Additionally, Valero Energy intends to quadruple its renewable diesel production capacity by 2023. With the adoption of low-carbon fuel policies by economies around the world, the demand for renewable fuel is expected to increase. in the next few days. Additionally, VLO should capitalize on the growing demand for distillate fuel.
Valero Energy forecasts a profit growth rate of more than 100% for the current year. The Zacks consensus estimate for current-year earnings has improved 12.2% over the past 30 days. VLO has a current dividend of 2.89%.
packaging company manufactures and sells corrugated cardboard and corrugated packaging products in the United States. PKG continues to benefit from strong packaging demand supported by e-commerce and growing food, beverage and drug packaging needs.
PKG’s Packaging segment will benefit from increased shipments of corrugated products with three additional shipping days. For the Paper segment, the company expects prices and mix to rise. Packaging Corporation continues to implement price increases that will help offset the impact of high operating costs, freight costs and supply chain issues on margins.
Packaging Corporation has an expected profit growth rate of 24.2% for the current year. The Zacks consensus estimate for current-year earnings has improved 10.3% over the past 30 days. PKG has a current dividend yield of 2.51%.
Zacks names ‘only one best choice for doubling up’
From thousands of stocks, 5 Zacks experts have each picked their favorite to skyrocket by +100% or more in the coming months. Of these 5, Research Director Sheraz Mian selects one to have the most explosive advantage of all.
It’s a little-known chemical company that’s up 65% year-on-year, but still very cheap. With relentless demand, rising earnings estimates for 2022 and $1.5 billion for stock buybacks, retail investors could jump in at any moment.
This company could rival or surpass other recent Zacks stocks which are expected to double, such as Boston Beer Company which jumped +143.0% in just over 9 months and NVIDIA which jumped +175.9% in one. year.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.