It was a tale of two markets last week; as U.S. stocks were hit hard early, but mounted a sharp recovery beginning Wednesday, to ultimately finish higher.
Cyclical groups, such as Energy and Financials led the way higher last week. On the other hand, rate-sensitive groups, like Real Estate and Utilities lagged.
All eyes were on the Federal Reserve last Wednesday, which signaled that it may soon taper its $120 billion of monthly bond buying. This news saw the yield on benchmark 10-year U.S. treasury notes move back up around 1.45%.
Elsewhere, the preliminary purchasing managers’ index readings were released by IHS Markit on Thursday and suggested a slowdown of both U.S. and European economic activity in September.
The Week Ahead
The third quarter comes to an end on Thursday and Bed Bath & Beyond (BBBY) and Micron (MU) highlight a relatively quiet earnings calendar.
On the economic front, we’ll get a look at September U.S. consumer confidence on Tuesday, followed by the ISM manufacturing index Friday. The PCE deflator will also be released on Friday, which is the Fed’s key inflation measure.
Following the snap-back recovery in stocks last year from Pandemic lows, we believe that investment gains will be harder to come by in 2021.
As a result, deciding what and when to buy can be challenging for any investor.
However, the fact remains that attractive investments are out there, if you’re willing to dig a little deeper.
One such Consumer name is worth a closer look and is our Stock of the Week.
Stock of the Week: Camping World (CWH)
The company sells and services recreational vehicles (RVs) and related camping supplies.
The stock gained nearly 4% last week and we believe this outperformance can continue in the final months of 2021.
Here’s why:
With travel to most countries off-limits this past year, many Americans chose to hit the road and drive/camp for vacation.
This activity has translated to Camping World’s earnings, which exceeded expectations back in August. The company earned $2.51 a share in the second quarter, as revenue increased 28% from the previous year.
Management also bought back $45 million worth of stock in the period and added $125 million to its future buyback authorization.
In addition the retailer doubled its quarterly dividend in August, to $0.50 a share (5.1% yield). Investors at the close of trading on Sept. 10 qualified for the payment on Sept. 28.
We view a dividend increase as one of the most bullish signals that management can send investors, particularly one of this magnitude.
Despite the recent gains, the stock is currently trading at just 6.3x expected 2021 earnings of $6.25 a share. This is a steep discount to both the broader market and industry median valuation of 12.1x.
Wall Street agrees that Camping World has value. All four active analysts tracked by TipRanks have a Buy rating and the average price target of $54.50 represents 37.9% upside potential.
In the meantime, the stock carries a Smart Score of 10/10 on TipRanks. This proprietary score utilizes Big Data to rank stocks based on 8 key factors that have historically been a precursor of future outperformance.
On top of the positive aspects mentioned already, the Smart Score indicates that shares have seen improving sentiment from financial bloggers.
FYI: This is just 1 of the 20+ stocks selected for the Smart Investor portfolio. That’s where we share more detailed insights on our weekly stock picks.