The S&P 500 Index has been hitting a series of record highs lately buoyed by a wave of upbeat corporate earnings and resurgence in economic growth. In fact, the benchmark logged in eight consecutive gains, representing its longest winning streak since 2017, and closed above the 4,700 milestone for the first time ever. With this surge, the S&P 500 is up 25.2% so far this year.
Notably, Q3 earnings from 445 S&P 500 members that have reported so far are up 42.9% from the same period last year on 18.6% lower revenues, with 80.2% beating EPS estimates and 74.4% beating revenue estimates. Though earnings and revenue growth has come down in the ongoing Q3 earnings season from the first-half’s breakneck speed, it is still very high. Aggregate Q3 earnings for the S&P 500 Index are on track to reach a new all-time quarterly record, surpassing the record set in the preceding quarter (read: ETFs to Ride on a Solid Start to Q3 Earnings).
Hiring picked up in October after a slowdown in summer. The United States added 531,000 jobs and unemployment dropped to 4.6%. Additionally, a Pfizer PFE COVID-19 drug, which when used with an HIV drug, has reduced that the risk of hospitalization and deaths substantially by 89%. The dual news has bolstered investors’ sentiment about economic growth.
The Fed’s tapering announcement added to the strength. The central bank will begin tapering bond purchases “later this month” and will reduce buying by $15 billion a month, putting it on track to end the quantitative easing by the middle of next year. The move indicates a solid recovery in the U.S. economy.
Further, the House of Representatives has passed the $1.2 trillion infrastructure bill. This would put $550 billion of new funding into transportation projects, the utility grid and broadband. The bill, which is awaiting President Joe Biden signature, has given another reason for the stocks to cheer (read: 5 Top-Ranked ETFs Outperforming to Start November).
Against such a backdrop, the proxy version of the S&P 500 Index, SPDR S&P 500 ETF Trust SPY, has surged 26.5% this year. Let’s take a closer look at the fundamentals of SPY and its best stocks:
Inside the SPY
The ETF holds 506 stocks in its basket with each accounting for no more than 6.3% of assets. This suggests a nice balance across each security and prevents heavy concentration. The fund is widely spread across sectors with information technology, consumer discretionary, healthcare, financials and communication services accounting for a double-digit allocation each. It has AUM of $424.9 billion and charges 9 bps in fees per year. The product trades in heavy volume of around 67.1 million shares a day on average, ensuring higher liquidity with a tight bid/ask spread, leading to lower trading costs for investors (see: all the Large Cap Blend ETFs here).
SPY has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook. Though most stocks in the fund’s portfolio have been in deep green so far this year, we have highlighted seven stocks from different industries that gained in triple-digits and led the rally:
Best-Performing Stocks of SPY
Devon Energy DVN: This independent energy company is engaged primarily in the exploration, development and production of oil and natural gas. The stock has soared 179.1% so far in 2021 and its earnings are expected to grow to $3.26 per share this year from a loss of 9 cents reported last year. It has a Zacks Rank #2 (Buy) and Growth Score of A.
Bath & Body Works Inc. BBWI: This company is a specialty retailer and home to America's Favorite Fragrances, offering exclusive fragrances for body and home, fragrance mist, body lotion and body cream, 3-wick candles, home fragrance diffusers and liquid hand soap. It surged has 149.5% and has an estimated earnings growth rate of 17.6% for the fiscal year (ending January 2022). The stock has a Zacks Rank #3 (Hold) and a Growth Score of A.
Fortinet (NASDAQ:FTNT) FTNT: This company is a provider of network security appliances and Unified Threat Management network security solutions to enterprises, service providers and government entities worldwide. The stock has skyrocketed 136.4% and has expected earnings growth of 15.2% for this year. It has a Zacks Rank #3 and a Growth Score of A.
NVIDIA NVDA: It is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit, or GPU. The stock has climbed 136% and has an estimated earnings growth rate of 65.6% for the fiscal year (ending January 2022). It has a Zacks Rank #2 and Growth Score of A.
Moderna (NASDAQ:MRNA) MRNA: This clinical-stage pharmaceutical company is primarily focused on discovering and developing messenger RNA (mRNA) based therapies. It has jumped 134.2% so far in 2021 and its earnings are expected to grow to $29.07 per share this year from a loss of $1.96 reported last year. Moderna has a Zacks Rank #3 and Growth Score of A (read: How Are Biotech ETFs Reacting to These Q3 Earnings Releases?).
Ford Motor F: This company designs, manufactures, markets and services cars, trucks, sport utility vehicles, electrified vehicles, and Lincoln luxury vehicles. It has gained 129.2% this year and has an estimated earnings growth rate of 336.6% for this year. The stock has a Zacks ETF Rank #3 and Growth Score of B.
Gartner (NYSE:IT) IT: It is reportedly the world’s leading information technology research and advisory firm. The stock has risen 108.4% and has expected earnings growth of 77.7% for this year. It has a Zacks Rank #1 and Growth Score of B. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
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Ford Motor Company (NYSE:F): Free Stock Analysis Report
Devon Energy Corporation (NYSE:DVN): Free Stock Analysis Report
Pfizer Inc. (NYSE:PFE): Free Stock Analysis Report
NVIDIA Corporation (NASDAQ:NVDA): Free Stock Analysis Report
Moderna, Inc. (MRNA): Free Stock Analysis Report
Gartner, Inc. (IT): Free Stock Analysis Report
Fortinet, Inc. (FTNT): Free Stock Analysis Report
SPDR S&P 500 ETF (SPY): ETF Research Reports
Bath & Body Works, Inc. (BBWI): Free Stock Analysis Report
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