Stocks surged to start November after a rough last few weeks of October. The climb came despite the uncertainty of the election and what’s next on the virus front, as some parts of Europe and the U.S. roll out increased lockdown measures.
With this in mind, we are going to try to block out the noise of the election and the coronavirus and focus on what we do know. First, the earnings picture continues to improve for the third quarter, as strong results come in from some of the biggest names on Wall Street. And the fourth quarter outlook is also trending in the right direction, which helps show investors that the worst part of the pandemic-driven downturn is likely over.
The S&P 500 is projected to post strong overall earnings growth in fiscal 2021, and data last week showed that the economy grew at a record pace in Q3, up 7.4% over Q2, and at a 33.1% annual rate. Meanwhile, interest rates are likely to remain historically low through at least 2023, based on the Fed’s moves. All these factors help set up a bullish case for stocks.
Clearly, the market could remain volatile in the near-term as Wall Street digests what happens in Washington and around the U.S. in terms of the Senate elections. Nonetheless, investors with a longer-term horizon might want to consider buying tech stocks that look poised to grow during the coronavirus economy and beyond…
Best Buy
BBY
Best Buy has proven it’s ready to succeed in the Amazon age. Like most other retailers, big and small, the company invested in its own e-commerce offerings. These efforts paid off during the second quarter, when many of its stores were open by appointment only for the first six weeks due to coronavirus-based requirements. The consumer electronics firm has also been the beneficiary of remote work and schooling, as people purchased laptops, tablets, and more.
BBY topped Q2 estimates, with sales up 4% and adjusted earnings up 58%. Plus, BBY’s domestic comparable sales popped 5%, with comparable digital sales up 242%. Looking ahead, Zacks estimates call for Best Buy’s adjusted Q3 EPS to soar 50% on nearly 12% higher revenue. BBY’s earnings and sales are projected to climb this year and next and its positive earnings revisions help it land a Zacks Rank #2 (Buy) right now.
Best Buy boasts “A” grades for Value and Growth in our Style Scores system, as well as a “B” for Momentum. It is also part of the Retail – Consumer Electronics industry that rests in the top 13% of our over 250 Zacks industries. The stock has surged 250% in the last five years against the S&P 500’s 63% climb. This includes a 60% jump in the past year. Investors should also note that BBY shares have popped nearly 20% in the last three months, while the market has moved sideways. And Best Buy stock currently rests about 4% off its highs.
Despite its strong run and outperformance, Best Buy’s 1.86% dividend yield beats the S&P 500 average and the 30-year Treasury’s 1.65%. Best Buy also trades at a solid discount against its highly-ranked industry. And investors might want to consider BBY for its ability to grow in the remote landscape and for years to come, as consumer electronics proliferate because let’s face it, people are addicted to tech.
Taiwan Semiconductor Manufacturing Company
TSM
Taiwan Semiconductor is the world’s largest semiconductor manufacturer, with roughly 55% market share. This means that it’s helping drive the chip revolution and it will likely continue to for years to come, as some of the biggest and most innovative names in the market, including the likes of Nvidia
NVDA
, turn to TSMC to manufacture their chips. TSMC runs a dedicated semiconductor foundry business and it claims to boast the “world’s largest semiconductor design ecosystem” and has enabled “85% of worldwide semiconductor start-up product prototypes.”
TSMC’s revenue has climbed by 29% or higher in the trailing four periods, including in Q3. Peeking ahead, Zacks estimates call for its Q4 revenue to jump another 24% to help lift its adjusted earnings by 26%. The stock’s earnings revisions help it land a Zacks Rank #2 (Buy) at the moment. TSM is also part of an industry that rests in the top 4% of our over 250 industries and its 1.53% dividend yield crushes the 10-year Treasury. Plus, shares of TSM have topped their industry in the last five years and in 2020.
Companies turn to foundries such as TSMC for their integrated circuit production because the costs and time involved have grown enormous. This makes the idea of building chips in-house far less attractive, if not impossible for many. Therefore, it might be worth considering TSMC because it is set to help support the ever-expanding chip industry for years. “We expect our sequential growth to be supported by strong demand for our industry-leading 5-nanometer technology, driven by 5G smartphone launches and HPC-related applications,” CFO Wendell Huang said in prepared Q3 remarks.
Microsoft
MSFT
Microsoft’s cloud computing expansion proved once again to be its most important bet in years when it topped Q1 FY21 estimates last week. MSFT’s adjusted earnings surged 32%, with sales up 12%. The company’s Intelligent Cloud united jumped 20% to $13 billion, which made it the biggest top-line contributor of its three core spaces.
MSFT’s Azure-driven cloud business is thriving alongside Amazon
AMZN
. Plus, its Office offerings remain nearly as vital as ever. This helped its Productivity and Business Processes space, which includes LinkedIn and more, climb 11% in Q1.
Microsoft’s cloud efforts are now a part of nearly every facet of the company. Meanwhile, its Xbox content and services revenue surged 30% last quarter. And its portfolio of remote work offerings helps it compete against Zoom Video
ZM
and others. The company’s EPS outlook has improved since its recent report to help it land a Zacks Rank #2 (Buy). Looking ahead, Zacks estimates project MSFT’s full-year revenue will climb roughly 10% in both FY21 and FY22, with its adjusted earnings expected to jump 15% and 10%, respectively.
Microsoft’s projected top-line growth would follow three straight years of between 13% to 15% revenue expansion. It last held $137 billion in cash and equivalents and its 1.10% dividend yield beats the 10-year U.S. Treasury and Apple’s
AAPL
0.74%. Plus, MSFT stock hovers around 10% off its early September highs.
Legal Marijuana: An Investor’s Dream
Imagine getting in early on a young industry primed to skyrocket from $17.7 billion in 2019 to an expected $73.6 billion by 2027.
Although marijuana stocks did better as the pandemic took hold than the market as a whole, they’ve been pushed down. This is exactly the right time to get in on selected strong companies at a fraction of their value before COVID struck. Zacks’ Special Report, Marijuana Moneymakers, reveals 10 exciting tickers for urgent consideration.
Download Marijuana Moneymakers FREE >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report