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Best Stocks From Top Wall Street Stories of First Half

U.S. stocks have been booming this year with the major bourses skyrocketing to new peaks. With millions of Americans now fully vaccinated and pandemic restrictions being rolled back, the U.S. economy is strongly recovering from the pandemic lows. An expanded stimulus, huge infrastructure spending and strong corporate earnings are acting as huge catalysts. However, rising inflation fears and Biden’s potential tax hike plan acted as dampeners in between.

Below we discuss some of the events that dominated the headlines in the first half of this year and influenced the market in a big way:

Biggest Vaccination Drive

The biggest vaccination rollout in history is underway with 323.3 million doses of COVID-19 vaccines administered and 381.3 million doses distributed in the country as of Jun 27, per the U.S. Centers for Disease Control and Prevention. President Joe Biden early this month doubled down on his administration’s efforts to get more Americans vaccinated against COVID-19 by Jul 4. Biden wants 70% of U.S. adults to receive at least one dose of a COVID-19 vaccine and 160 million adults to get fully vaccinated by Independence Day.

This drive for vaccinations has led to strong growth in the economy and thus fueled a broad-based rally, especially in the cyclical sectors. As the cyclical sectors are tied to economic activities, these outperform when economic growth improves. Some of the top-ranked stocks from these spaces include Dillards Inc. DDS, Golden Entertainment Inc. GDEN and Timken Steel Corporation TMST. These stocks have a Zacks Rank #1 (Strong Buy) or 2 (Buy) suggesting their outperformance in the months ahead. You can see the complete list of today’s Zacks #1 Rank stocks here.

Further, these stocks are expected to generate solid earnings growth in the current fiscal year (DDS – 665.7%, GDEN – 125.6%, and TMST – 302.1%). All these stocks have more than doubled in the first half.

Stimulus and Infrastructure Plan

Biden signed the $1.9 trillion coronavirus stimulus bill in March. The package includes another round of $1,400 stimulus checks, $350 billion in state and local aid, $25 billion in rental and utility assistance, and enhanced federal unemployment benefits. It also extends a $300 per week unemployment insurance boost until Sep 6 and expands the child tax credit for a year.

The next big thing is the infrastructure deal. Biden and a bipartisan group of 21 senators recently reached a historic $1.2 trillion deal, which includes $579 billion in new spending over eight years, focusing only on physical infrastructure such as roads, bridges, rail, broadband Internet, water and sewer pipes, and electric vehicles. Going by a CNBC article, the proposal will allocate about $312 billion to transportation, with $109 billion going for development in roads, bridges and other major projects, $66 billion in passenger and freight rail, and $49 billion in public transit.

These stimulus packages have been bolstering investors’ confidence in the economy. While there are several top-ranked stocks that investors could bet on to tap the booming economy, small caps seem to be the best choice as these are more domestically focused and outperform when the economy improves. Notably, the small-cap index, Russell 2000- is enjoying the longest streak of monthly win since 1995. BuildABear Workshop Inc. BBW has soared 300% so far this year and is expected to rise further with estimated earnings growth of 190.3% for the current fiscal year. It carries a Zacks Rank #2 and a VGM Score of B.

Oil Price Skyrockets

Oil price has been soaring on improving demand outlook as the economies across the world are opening up. Oil demand could exceed the pre-pandemic levels by the end of 2022, per the International Energy Agency. Per WSJ, option traders are betting on the return of $100 oil by the end of next year, a level not seen since 2014. Additionally, declining inventories and a slowdown in supply increase are adding to the strength. OPEC expects stockpiles to decline by at least 2 million barrels a day from September through December.

Driven by an oil surge, energy has been one of the best performing sectors of this year. Aemetis Inc AMTX has been this year’s biggest winner in the space, rising 395.6%. The stock has a Zacks Rank #3 (Hold).

Value and Growth Tug-Of-War

Value and growth investing is caught in a tug-of-war this year. This is especially true, as value trades have powered the stock market rally for most of this year due to inflationary pressure. Value investing has attracted investors’ interest thanks to improvement in corporate earnings growth, the expectation for quicker inflation and rising bond yields. As such, value play Alcoa Corp. AA, with a Zacks Rank #1 and a Value Score of B, has been the outperformer this year. It has gained more than 56%.

On the other hand, optimism surrounding economic growth has boosted the appeal for growth stocks. The latest rounds of upbeat economic data reflect strong confidence in the economy, thereby driving the growth stocks. GameStop Corp. GME is the best performing growth stock of the first half with a Zacks Rank #3 and a Growth Stock of B. It logged in massive gains of more than 1000% due to a meme frenzy. Estimated earnings growth is pegged at 42.5% for this year.

Return of Solid Earnings Growth

The earnings picture improved in a great way in the first quarter and is likely to continue its trend in the second quarter. Total Q2 earnings for the S&P 500 Index are expected to be up 61.1% from the same period last year on 18.0% higher revenues, which would follow 49.3% earnings growth on 10.3% higher revenues in Q1, per Earnings Trends. Investors should note that the overall earnings tally reached a new all-time quarterly record in Q1.

Generac Holdings Inc. GNRC from the S&P 500 Index appears a lucrative choice to bet on the solid earnings trend. The stock has Zacks Rank #2 and Earnings ESP of 5.42%. It has surged about 80% so far this year and an delivered earnings surprise of 26.11%, on average, over the past four quarters.

Bitcoin, Like the Internet Itself, Could Change Everything

Blockchain and cryptocurrency has sparked one of the most exciting discussion topics of a generation. Some call it the “Internet of Money” and predict it could change the way money works forever. If true, it could do to banks what Netflix did to Blockbuster and Amazon did to Sears. Experts agree we’re still in the early stages of this technology, and as it grows, it will create several investing opportunities. Zacks’ has just revealed 3 companies that can help investors capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly.

See 3 crypto-related stocks now >>

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
Dillards, Inc. (DDS): Free Stock Analysis Report
Alcoa Corp. (AA): Free Stock Analysis Report
GameStop Corp. (GME): Free Stock Analysis Report
BuildABear Workshop, Inc. (BBW): Free Stock Analysis Report
Generac Holdings Inc. (GNRC): Free Stock Analysis Report
Timken Steel Corporation (TMST): Free Stock Analysis Report
Aemetis, Inc (AMTX): Free Stock Analysis Report
Golden Entertainment, Inc. (GDEN): Free Stock Analysis Report
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