S&P 500 Hits New Highs: 5 Growth Stocks to Buy

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The S&P 500 index hit a new intra-day high of 3,994.91, closing the Mar 31 trading session at 3,972.89, up 0.4% on the rally in tech stocks.

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Notably, the S&P 500 was up 4.3% in March 2021, its best monthly performance since November 2020. For the first quarter, the S&P 500 was up 5.8%.

The index’s rally can be attributed to the unprecedented government stimulus. Markedly, early March, the American Rescue Plan worth $1.9 trillion got approved, under which Americans would get $1400 check and extended unemployment insurance. The plan also allocated billions of dollars for coronavirus testing.

Stimulus Boosts Consumer Confidence & Job Addition

Notably, in March 2021, U.S. Consumer Confidence rose to the highest level since the onset of the pandemic. The Conference Board’s Consumer Confidence Index stands at 109.7 in March compared with 90.4 in February.

Moreover, per the latest report from payroll processing firm ADP, private companies added 517,000 workers in March, reflecting healthy growth from 176,000 in February. The growth rate in payrolls was the fastest since September 2020.

Further stimulus is on the way with President Joe Biden’s Mar 31 announcement of an infrastructure package worth more than $2 trillion. The package not only includes projects for roads and bridges but also includes high-speed broadband, upgrading electrical grid, building and retrofitting affordable housing and electric vehicle development.

Biden’s first part of the package primarily targets job creation. The President is expected to unveil the second part in a few weeks’ time that will aim at improving education and expand paid leave as well as health-care coverage.

However, the plan proposes a hike in corporate tax rate to 28% to fund the package, which is likely to alienate some market participants as well as the Republicans who oppose a tax rate hike. Moreover, expectations in inflation rate pickup owing to massive stimulus have become a concern in recent times.

Nevertheless, the optimism around continuing stimulus-fueled U.S. economic recovery is anticipated to drive momentum in the S&P 500. Growth stocks, which have been out of favor in recent times, are expected to witness investor attention not only because of solid prospects but also due to dip in valuation.

Here we pick five stocks that carry a favorable combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Per the Zacks’ proprietary methodology, stocks with such a perfect mix of elements offer solid investment opportunities.

These stocks have also outperformed the S&P 500 composite on a year-to-date basis.

Year-to-date Performance

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Best Buys

L Brands LB is riding on healthy demand amid improving consumer spending trend. Relaxation in the pandemic-induced restrictions and government stimulus payments have been tailwinds. The company recently raised its first-quarter fiscal 2022 earnings guidance (second time within a month) driven by improving sales trends.

L Brands currently flaunts a Zacks Rank of 1 and a Growth Score of A. The Zacks Consensus Estimate for its fiscal 2022 earnings is pegged at $4.69 per share, having moved 15% north in the past 30 days. Earnings are expected to increase 35.6% from the prior-year reported number.

Lennar LEN benefits from the V-shaped recovery in new single-family home demand throughout the country. Moreover, this Zacks #1 Ranked stock, with a Growth Score of A, is riding on robust housing market fundamentals backed by low interest rates, a solid stimulus package and persistent undersupply of new as well as existing inventory.

The Zacks Consensus Estimate for 2021 earnings is pegged at $10.98 per share, having been revised 17.2% upward in the past 30 days. Earnings are expected to grow 40% from the figure reported in the previous year.

Weyerhaeuser WY benefits from solid housing market and ongoing momentum in repair/remodel markets. Post-COVID preference for larger single-family homes and record low inventory for existing home sales are key catalysts. Focus on operational excellence and initiatives to boost financial flexibility have been acting as tailwinds for this Zacks Rank #1 company.

Weyerhaeuser has a Growth Score of B. The Zacks Consensus Estimate for its 2021 earnings is pegged at $1.97 per share, having been revised 18.7% upward in the past 30 days. Earnings are expected to rise 52.7% from the figure reported in the previous year.

Nucor NUE is expected to benefit from strength in the non-residential construction market. Strong rebound in automotive market demand following the pandemic-driven slump is a key catalyst. This Zacks Rank #1 company is focused on achieving greater penetration in automotive. Higher steel prices should also drive its margins.

Nucor has a Growth Score of B. The Zacks Consensus Estimate for its 2021 earnings is pegged at $7.86 per share, having been revised 77.4% upward in the past 30 days. Earnings are expected to surge 135.3% from the figure reported in the previous year.

Generac Holdings GNRC is benefiting from robust demand for its home standby generators due to higher power outages, while the “Home as a Sanctuary” trend gains traction. The company is riding on its push into the California market and expansion into clean energy technologies. This Zacks Rank #2 company has a Growth Score of A.

The Zacks Consensus Estimate for Generac’s 2021 earnings stands at $8.66 per share, having moved 2.4% north over the past 30 days. Earnings are expected to grow 34% from the figure reported in the preceding year.

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