It took six months, from Feb 19 to Aug 18, for the S&P 500 Index to reach where it was before the coronavirus outbreak that resulted in a historic market turmoil. Within six months, the market's benchmark has erased all pandemic-induced losses.
If we compare the year-to-date performance of the three major stock indexes, we can clearly see that the Nasdaq Composite is far ahead of its peers — the S&P 500 and the Dow. However, the S&P 500 Index's all-time high on Aug 18, has more powerful implications.
A Brief Review of S&P 500's Journey in 2020
The S&P 500 Index started 2020 from where it ended 2019 with a fabulous gain of 28.9%. From Jan 2 to Feb 19, the benchmark had recorded 13 all-time highs. On Feb 19, the index had logged an all-time high of 3,393.52 and a closing high of 3,386.15.
Once the pandemic started to spread globally around Feb 20, the S&P 500 started to trickle down and fell into the bear market on Mar 12. The downfall continued till Mar 23 and by that day the index had plunged 35.4%. From Mar 24, the S&P 500 took a northward journey buoyed by unprecedented fiscal and monetary stimulus.
Finally, on Aug 18, the S&P 500 recorded its 14th all-time high so far this year at 3,395.06 and a closing high of 3,389.78. The benchmark rallied an astonishing 54.7% from Mar 23 to Aug 18 and recorded its best-ever 100-day performance just three days ago.
Why a Fresh All-Time High of S&P 500 Is So Important
Comparing the three major stock indexes, the Nasdaq Composite is up nearly 25% year to date and is aiming to surpass its last year's rally of 35.2%. The Dow still needs to gain 2.7% to enter the positive territory year to date. Meanwhile, the S&P 500 is up 4.9% so far this year. So as of now, the Nasdaq Composite is the winner.
However, Wall Street's V-shaped recovery from the coronavirus induced short bear market is predominantly being driven by a historic bull-run of the technology sector. The Nasdaq Composite is highly inclined toward the technology space, which constitutes more than 50% of the index.
The Dow consists of only 30 corporate behemoths and has no technology-concentration. Meanwhile, the S&P 500 consists of 500 stocks spread across all the sectors of the economy. The technology sector accounts for just 27.6% of the index. Other sectors account for the remaining 72.4% while health care and consumer discretionary hold 14.3% and 11.7% weight, respectively. This is why the S&P 500 is popularly known as the broad market index.
In the past six months, aside from the technology sector, consumer discretionary, materials and health care stocks also boosted the S&P 500 Index's rally. Therefore, a fresh all-time high attained by the S&P 500 Index means that the stocks of different sectors of the economy are gaining at large.
Our Selection Criteria
We will use a four-step selection criterion. First, we will choose large-cap (market capital > $10 billion) stocks due to their stable business model. Second, we will ensure that the estimated long-term (3-5 years) growth potential of these stocks is higher than the S&P 500 Index. Third, we will select stocks that have seen robust earnings estimate revisions in the last 30 days, indicating near-term business opportunities. Finally, these stock prices should have popped more than 15% in the past month.
Based on the above-mentioned criteria, we have narrowed down our search to five S&P 500 stocks, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks in the past month.
Apple Inc (NASDAQ:AAPL).'s AAPL Services and Wearables businesses are expected to drive top-line growth in fiscal 2020 and beyond. Although Apple’s business primarily runs around its flagship iPhone, the Services portfolio has emerged as its new cash cow.
The company has estimated long-term growth of 10.7% compared with the S&P 500's estimated long-term growth of 8.7%. The Zacks Consensus Estimate for current-year earnings has improved by 4.6% over the last 30 days. The stock price has surged 17.6% in the past month.
Whirlpool Corp. WHR witnessed a solid recovery in demand across all regions in June. It has chalked out plans to protect margins and enhance its liquidity position to navigate through this difficult time. Driven by the positive trend, management favorably revised its sales view for 2020.
The company has an estimated long-term growth rate of 16.7% compared with the S&P 500's estimated long-term growth of 8.7%. The Zacks Consensus Estimate for current-year earnings has improved by 22.3% over the last 30 days. The stock price has jumped 27.3% in the past month.
General Motors Co.'s GM strong demand for profitable trucks and SUVs is aiding the company's revenues. Its hot-selling brands in the United States like Chevrolet Silverado, Equinox and GMC Sierra are also driving the top line.
The company has estimated long-term growth of 9.9% compared with the S&P 500's estimated long-term growth of 8.7%. The Zacks Consensus Estimate for current-year earnings has improved by 61.6% over the last 30 days. The stock price has advanced 15.3% in the past month.
PulteGroup Inc (NYSE:PHM). PHM is engaged in the homebuilding and financial services businesses, primarily in the United States. The company has an estimated long-term growth rate of 9.4% compared with the S&P 500's estimated long-term growth of 8.7%. The Zacks Consensus Estimate for current-year earnings has improved by 43.9% over the last 30 days. The stock price has climbed 24% in the past month.
D.R. Horton Inc. DHI operates as a homebuilding company in the East, Midwest, Southeast, South Central, Southwest, and West United States. The company has an estimated long-term growth of rate 13.8% compared with the S&P 500's estimated long-term growth of 8.7%. The Zacks Consensus Estimate for current-year earnings has improved by 18.1% over the last 30 days. The stock price has appreciated 15.8% in the past month.
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Whirlpool Corporation (NYSE:WHR): Free Stock Analysis Report
Apple Inc. (AAPL): Free Stock Analysis Report
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General Motors Company (NYSE:GM): Free Stock Analysis Report
D.R. Horton, Inc. (DHI): Free Stock Analysis Report
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