Since last Thursday’s big sell-off — in fact, down 8% overall last week — our editorial team at Zacks Investment Research wrote countless articles on how and where to “buy the dip.” It turns out to have been good advice: following lower pre-markets to start a new trading week, the indexes rallied (the Dow swung more than 1000 points during the day) to finish in positive territory across the board: Dow +0.62%, S&P 500 +0.83%, the Nasdaq +1.43% and the big winner, the Russell 2000, up 2.30%.
A new announcement from the Fed rekindled the buying appetite, whereby a new bond-purchasing program up to $750 billion follows a March program of bond-buying by the Fed. This time around, the bond purchasers will be not new issuances but already existing bonds on the open market. This is designed to keep bond rates low, thereby moving investors to equities in search of stronger returns.
Such excess liquidity has already provided some sooner-than-expected positive economic developments, and while the balance sheets will be a mess for quite some time, digging out of this once-in-a-lifetime (we hope) pandemic hole was precisely what the doctor ordered. That we see such clear evidence of a turnaround is welcome news, especially following 2+ months of devastatingly bad economic data.
Buying dips is a great way to get high-quality stocks at a discount. Those moments when bearish momentum takes temporary control of the markets are nearly always a good time to go shopping. Selecting stocks with a strong Zacks Rank (#1 or #2 — Strong Buy or Buy) along with a solid history of earnings reports make for excellent ways to spruce up one’s portfolio.
Speaking of earnings reports, national homebuilder Lennar Homes LEN posted a big beat on fiscal Q2 (ending May) earnings: $1.65 per share, versus $1.29 expected and the $1.30 per share reported in the year-ago quarter. Revenues came in slightly ahead of the $5.29 billion expected for the quarter, to $5.30 billion. Home Sales revenues slipped 5%, with a Multi-Family operating loss of ($0.6 million), but homes sales Gross Margins rose. Clearly, people were expecting good news; LEN shares were up 7.17% ahead of the earnings release.
Zacks Responds to Pot Stock "Gold Rush"
With almost unimaginable profit potential, legalized marijuana is skyrocketing from $9 billion in 2017 to an expected $32 billion in 2020 to a possible $146 billion by 2025. Not since the Repeal of Prohibition has there been such a release of pent-up demand.
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