Skip to main content

3 Sectors To Buy When The Market Pulls Back 

Friday, April 9, 2021 | Thomas Hughes
3 Sectors To Buy When The Market Pulls Back 

The Market Is Getting Frothy 

It’s been only a month since the S&P 500's last 5% correction and 5 months since the last 10% correction but we think another is on the way. Not because of any underlying weakness in the market but because of frothiness. At 21.9X forward earnings, the S&P 500 (CBOEINDEX: SPX) is trading at valuations not seen in decades making it an attractive time to take profits off the table if nothing else. One of many possible catalysts for this correction is the Q1 earnings season but there are others like rising interest rates, Biden's tax plans, and a resurgence of COVID-19. As for earnings, the expectations are high and we’ve already seen evidence this quarter of great not being good enough. 

Most recently, reports from Conagra (NYSE: CAG) and Constellation Brands (NYSE: STZ)  came in both better than expected and with positive guidance, and yet shares are down in the wake of the reports. If this trend continues we could easily see a 5% correction turn into a 10% to 20% correction when it’s all said and done. In our view, this will be yet another entry point into what we view as the early stages of a long-term bull market in U.S. equities. 

Evercore Singles Out Home Improvement

Evercore issued an update on its internal Home Improvement Lead indicator. According to them, the indicator has edged down from its high in January but still points to some upside in the sector. Based on strength in housing, the flight to suburbs, new household creation, and labor market data we think this is grossly understating the point. Sales at retailers like Home Depot (NYSE: HD), Lowes (NYSE: LOW), and Tractor Supply Company (NASDAQ: TSCO) have been accelerating and the pace of growth is only going to slow because of tough comps to last year’s COVID surge. 

Among the drivers of growth in the sector, Evercore lists supply constraints (low inventory), pro constraints (can’t find people to do the work), and reduced spending per unit compared to past home-improvement cycle peaks. In our view, the home improvement cycle is tied to secular trends in the workforce that have another decade to run. Evercore is leaning toward businesses with higher exposure to professional services due to its view DIY’ers will hand off their projects to pros as they become available and COVID-19 restriction fade and we think that a good idea. Retailers like Home Depot and Lowes offer exposure to both. 

Three Sectors To Buy When The Market Pulls Back 

J.P. Morgan Is Looking At The Home Builders 

The analysts at J.P. Morgan issued on the home builders after conducting their quarterly pre-earnings preview. They see the sector pulling back a bit after the Q1 reporting season following a period of relative strength. In their view, stock prices are pricing in a great quarter with no room for exception and that has it set up for weakness should earrings fail to impress. In our view, the recent strength in the home builders is pricing in an extended period of industry strength characterized by high demand, rising prices, and expanding capacity. It may be several years before the cycle runs out and the home builder stocks should move higher until then. 

Along with the builders, J.P. Morgan sees an opportunity in building products as well. They’ve called out Whirlpool (NYSE: WHR) and Masco (NYSE: MAS) and we think names like Haverty (NYSE: HVT) and Aaron’s (NYSE: AAN) should be included as well. These company’s both pay solid dividends with growth and dividend growth in their futures. 

Three Sectors To Buy When The Market Pulls Back 

eCommerce Is The New Commerce 

eCommerce stocks have been on the move this year as well with post-pandemic winners like Williams-Sonoma (NYSE: WSM) and Shoe Carnival (NASDAQ: SCVL) up 80% and 65% YTD because of it. eCommerce sales accelerated to 44% growth in 2020 because of the pandemic and those gains are not only sticky but the basis for future growth. Looking forward, the eCommerce industry is expected to continue taking share from traditional outlets along with widening use of the Internet. Any weakness in price action is likely to be short-lived in the face of labor market improvement, consumer confidence, and spending data, and a buying opportunity that shouldn’t be missed.

Three Sectors To Buy When The Market Pulls Back 

Featured Article: Market Capitalization


7 Electric Vehicle (EV) Stocks That Have Real Juice

I’ll start with a disclaimer. You won’t see Tesla (NASDAQ:TSLA) or Nio (NYSE:NIO) on this list. And that’s not because I’m being contrarian. I just view Tesla and Nio as the known quantities in the electric vehicle sector. The goal of this presentation is to help you identify stocks that may be flying under your radar.

Many EV stocks went public in 2020 via a special purpose acquisition company (SPAC). There is both good and bad to that story. The good is that investors have many options for investing in the EV sector. Many of the companies that have entered the market are attempting to carve out a specific niche.

The potentially bad news is that these stocks are very speculative in nature. Whereas companies like Tesla and Nio have a proven (albeit recent) track record, there are things like revenue and orders that investors can analyze. With many of these newly public companies, investors are being asked to buy the story more than the stock and that is always risky.

However, in this special presentation, we’ve identified seven companies that look like they have a story that is compelling enough that investors should be rewarded in 2021.

View the "7 Electric Vehicle (EV) Stocks That Have Real Juice".


Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Haverty Furniture Companies (HVT)2.1$42.06-6.2%2.09%20.12Buy$36.00
Williams-Sonoma (WSM)1.7$168.09-7.2%1.40%32.39Hold$144.26
The Home Depot (HD)2.2$317.00-4.1%2.08%27.42Buy$313.57
Lowe's Companies (LOW)2.6$195.54-4.8%1.23%27.66Buy$186.15
Tractor Supply (TSCO)2.1$182.41-4.6%1.14%28.32Hold$172.25
The Aaron's (AAN)1.8$29.48-7.0%1.36%14.89Hold$52.70
Whirlpool (WHR)2.6$240.00-2.5%2.08%18.39Hold$194.50
Shoe Carnival (SCVL)1.4$58.00-6.5%0.97%70.73Buy$39.50
Compare These Stocks  Add These Stocks to My Watchlist 

MarketBeat - Stock Market News and Research Tools logo

MarketBeat empowers individual investors to make better trading decisions by providing real-time financial data and objective market analysis. Whether you’re looking for analyst ratings, corporate buybacks, dividends, earnings, economic reports, financials, insider trades, IPOs, SEC filings or stock splits, MarketBeat has the objective information you need to analyze any stock. Learn more about MarketBeat.

MarketBeat is accredited by the Better Business Bureau

© American Consumer News, LLC dba MarketBeat® 2010-2021. All rights reserved.
326 E 8th St #105, Sioux Falls, SD 57103 | U.S. Based Support Team at [email protected] | (844) 978-6257
MarketBeat does not provide personalized financial advice and does not issue recommendations or offers to buy stock or sell any security.

Our Accessibility Statement | Terms of Service | Do Not Sell My Information

© 2021 Market data provided is at least 10-minutes delayed and hosted by Barchart Solutions. Information is provided 'as-is' and solely for informational purposes, not for trading purposes or advice, and is delayed. To see all exchange delays and terms of use please see disclaimer. Fundamental company data provided by Zacks Investment Research. As a bonus to opt-ing into our email newsletters, you will also get a free subscription to the Liberty Through Wealth e-newsletter. You can opt out at any time.