Are These The Best Epicenter Stocks To Buy This Week?
Investors who are waiting for a rebound in the epicenter stocks are finally seeing real action this week. This came after encouraging data from Pfizer (PFE Stock Report) and BioNTech (BNTX Stock Report). Both companies announced Monday that their coronavirus vaccine was more than 90% effective in preventing Covid-19 among those without evidence of prior infection. While the development seems quite promising, there is still a long way before we can hopefully eradicate COVID-19. Nevertheless, positive vaccine results ignited hopes of a faster reopening of the economy. You can see that investors are moving back into top epicenter stocks in droves.
What Exactly Is An Epicenter Stock?
Epicenter stocks refer to the likes of consumer discretionary stocks, travel stocks, or energy stocks, just to name a few. They were among the hardest hit at the peak of the pandemic earlier this year. This grouping of stocks has been a frequent discussion on Wall Street. Fundstrat’s Tom Lee was an early user of this term. Epicenter stocks could be the speediest to recover when we get a vaccine. Granted, these epicenter stocks have had a good run as we start the week after Pfizer’s vaccine news. But the question here is, can these stocks extend their rally starting this week?
“I think people are going to stop having anxiety everyday…I think we see the beginning of the end. That’s a big deal,” said Tom Lee, Fundstrat head of research. “I think the market was happy to wait until we got vaccine progress before we got the rotation. There was a huge amount of underperformance in these cyclical and epicenter stocks. We could see months and months of this. This could rally for a while.”
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Top Epicenter Stocks To Watch Now: Carnival Corporation
Apart from top airline stocks getting a boost, investors have also been bidding cruise-line stocks like Carnival Corporation (CCL Stock Report) during the start of the week. Although the ‘no sail order’ has been lifted on U.S. cruise ships, investors have to note that these cruise-line companies won’t resume their operations within this year. With the coronavirus cases continuing to reach daily record numbers, these cruise companies must demonstrate adherence to stringent health measures before they are allowed to set sail.
Sure, the vaccine news has lifted the sentiment among epicenter stocks. There’s a shred of hope that the cruise line would be able to resume their operations sooner than they have initially expected. But to say that Carnival is out of the woods, I wouldn’t be so sure yet. It’s perfectly understandable that consumers can’t wait for the cruises to set sail again. But investors have to note that there will still be some logistical challenges with the vaccine even after it has obtained regulatory approval.
One good news is that the bookings with cruise-line companies have remained solid even though these companies are suspended until next year. Of course, the vaccine news appears to suggest that the worst may be over. Now that investors appear to be rushing back into this space, could we expect this battered cruise-line stock to return to pre-pandemic levels as operations appear to be resuming in no time?
Top Epicenter Stocks To Watch Now: General Electric
Another stock making huge gains earlier this week is General Electric (GE Stock Report). The company saw its stock price skyrocketed 16% before closing at 8% higher on Monday following the positive vaccine news. Sure, the vaccine news was the key catalyst for this cyclical stock. But the truth is, that’s not all. The company’s healthcare unit also announced a multi-year partnership with Genesis Care.
The company has recently reported better than expected third-quarter results, showing real signs of operational improvements at the company. Considering the fact that profit margin has improved in the company’s power, renewable energy, and healthcare segments, investors could expect higher profitability over the long term when the company keeps finding ways to improve the operating margin. Of course, its aviation segment continues to be weak. But that is an industry-wide problem. It’s not like there is much the company can do about it at the moment.
Taking into consideration the potential recovery in aviation and the positive performance in other segments, GE could be looking at strong cash flow generation in the next few years. This could present an attractive case for investors looking for value in a market that remains challenging. The recent quarterly results have certainly strengthened the case. The question is, would you be patient enough to hold on to GE stock?
Top Epicenter Stocks To Watch Now: ExxonMobil
Lastly, shares of ExxonMobil (XOM Stock Report) surged nearly 13% on Monday, the biggest single-day gain since March. This came after the global oil prices were storming higher following the positive vaccine news from Pfizer. Currently, the Organization of the Petroleum Exporting Countries (OPEC), together with Russia and a few other producers, are cutting 7.7 million barrels per day (BPD). Although they are considering easing those cuts to 5.7 million BPD from January, it is not clear how things will go from here. Should some level of cuts persist, it would provide further support to oil prices.
“Whether the vaccine will come soon enough to warrant pushing ahead with production increases in January is another thing,” wrote Craig Erlam, an analyst at currency broker OANDA. “Producers have plenty of cause for playing it safe but if vaccine news between now and year-end returns prices back to more sustainable levels regardless, they may find there isn’t as much desire to postpone increases as there was a week or two ago.”
No doubt, these oil companies have been one of the hardest-hit industries in the face of the pandemic. Most of them saw their value halved when the pandemic struck. So, when a vaccine appears to be working safely and effectively, it is no surprise that they are likely going to be one of the biggest beneficiaries. With all recent positive developments surrounding the industry, would you bet on XOM stock now for a quick rebound?