Diagnosing the Economy Ahead of World Health Day: 6 Picks

After wrapping up a robust first quarter on strong corporate profits, enthusiasm around AI and hopes that the Fed will cut rates, Wall Street's rally fizzled out to start Q2 on uncertainty over the timing of rate cuts.
Let us examine the health of the U.S. economy ahead on the World Health Day and bring to investors' attention the key developments and some solid picks for a robust investment portfolio.
Similar to the six vital nutrients required for good health, six pillars support the economy. Here, we have picked six essential market nutrients in the form of sectors and then zeroed in on stocks that have a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a higher market cap in their respective sectors using the Zacks Stock Screener. Other parameters considered include a VGM Score of B or better, positive current-year earnings estimate revisions over the past 30 or 60 days, positive current-year EPS growth, and a place in a top-ranked Zacks industry (in the top 45%).

Vitamins: Consumer Sector

The consumer sector has been enjoying strong optimism led by stronger spending power, wage growth and a lower unemployment rate. The potential rate cuts will lead to reduced borrowings, thereby increasing consumer spending. It will also lead to higher demand for all types of products and services in the economy, taking the consumer sector higher. This will continue to give the economy its regular dose of vitamins.
Within this sector, Lancaster Colony Corporation LANC, a manufacturer and marketer of specialty food products for the retail and foodservice markets, is a great pick for investors.
This Zacks Rank #2 company saw a positive earnings estimate revision of 21 cents over the past 60 days for this fiscal year (ending June 2024). It has an expected earnings growth rate of 34%. Lancaster Colony belongs to a top-ranked Zacks industry (top 28%) and has a VGM Score of B, suggesting its potential for solid growth in the months ahead. The stock has gained about 22% over the past three months.

Proteins: Financial Sector

Like protein, the financial sector, helps in carrying out a huge array of functions through its banks and financial institutions. The sector facilitates growth in every part of the country. The stocks in this sector have shown immense strength courtesy of a resilient economy and a steep yield curve.
Travelers Companies Inc. TRV has climbed about 19% over the past three months and could represent a good buying opportunity. It is principally engaged, through its subsidiaries, in providing a wide variety of property and casualty insurance and surety products and services to businesses, organizations and individuals in the United States and select international markets. The Zacks Consensus Estimate for 2024 has been revised by a couple of cents over the past 30 days and indicates substantial year-over-year growth of 34.8%. This Zacks Rank #2 company falls within a top-ranked Zacks industry (top 9%) and has a VGM Score of B.

Minerals: Medical Sector

Just like minerals are important for bone structure, healthcare is crucial to the economy. In fact, it is the backbone of an economy. Healthcare is one of the largest and fastest-growing sectors thanks to an aging population, growing middle class, and insatiable demand for new treatments and drugs for many illnesses. About 10% of economic growth comes from this sector.
The industry is currently benefiting from encouraging trends, including cutting-edge medicines, new drug approvals, accelerated pace of innovation, promising drug launches, cost-cutting efforts, an aging population, technological advancements, expanding insurance coverage, the rising middle class, demand for new drugs, and ever-increasing healthcare spending. Continuous innovation in medical technology, including telemedicine, AI in diagnostics, and personalized medicine, is improving patient care and operational efficiency. One of the beneficiaries of this trend is Zacks Ranked #1 player DaVita Inc. DVA from a top-ranked Zacks industry (top 37%), gaining 23.4% over the past three months.
This is a leading provider of dialysis services in the United States to patients suffering from chronic kidney failure, also known as end-stage renal disease. It saw solid earnings estimates of 26 cents for this year over the past 30 days to $9.23, indicating year-over-year growth of 9%. The stock has a VGM Score of B.

Carbohydrates: Technology Sector

Similar to carbs that provide energy to the muscles and brain, the technology sector powers the economy with its wide range of products and services, including electronics, software, computers and social media. The sector has been performing well this year on the continued AI boom and strong corporate earnings. As the tech sector relies on borrowing for superior growth, it is cheaper to borrow more money for further initiatives when interest rates are low. The expansion of AI applications holds the promise of ushering in fresh opportunities for growth within the sector. Hopes of cutting interest rates later this year are also adding to the strength.
Within the sector, Uber Technologies UBER, with a Zacks Rank #2 and a VGM Score of B, seems a solid choice. It develops and operates proprietary technology applications in the United States and has expanded its presence in multiple countries across the globe, including Canada, Latin America, Europe, the Middle East and Asia (excluding China). The stock, which belongs to a top-ranked Zacks industry (top 25%), saw a positive earnings estimate revision of 15 cents over the past 30 days for this year and has an expected earnings growth rate of 36.8%. It has gained nearly 23% over the past three months.

Fats: Construction Sector

The construction sector — accounting for 5.5% of GDP — provides energy backup to the economy. This is because construction activity picks up when the economy strengthens. The sector has been doing well on lower mortgage rates, which is encouraging people to buy more homes and has made refinancing cheaper. Notably, U.S. homebuilders are now feeling more confident than they have since last summer.
To tap this bullish trend, Sherwin-Williams Company SHW, which manufactures and sells paints, coatings and related products, primarily in North and South America, could be an exciting pick. The company's earnings estimates have gone up by 5 cents over the past month for this year. The current Zacks Consensus Estimate is pegged at $11.49, up 11% year over year. Sherwin-Williams has a Zacks Rank #2 and a VGM Score of B, It belongs to a top-ranked Zacks industry (top 37%). Shares of SHW are up nearly 12% over the past three months.

Water: Transport Sector

Transport enables the smooth movement of freight and passengers through different modes such as rail, trucks, ships and air. It occupies an important place in the world market and is often considered a barometer of broad economic health. The transport sector is seeing a surge on a rise in global travel demand.
SkyWest SKYW operates as a regional airline in the United States through its subsidiary SkyWest Airlines. The stock has seen a positive earnings estimate revision of $1.00 for this year over the past month 60 days and has estimated earnings growth of 729.9%. SkyWest has a Zacks Rank #1 and a VGM Score of A. It belongs to a top-ranked Zacks industry (top 19%). The stock has tumbled more than 37% over the past three months.

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