The S&P 500 is up 20% thus far in 2021 as the index is building off a strong showing in 2020, when it rallied an impressive 16%. But that also means that finding some good buys in the markets right now is no easy task given that many stocks are trading at elevated prices. However, by focusing on trends and patterns that are likely to persist throughout the remainder of this year and possibly continue into 2022, investors can still identify investments with a lot of upside.
Three stocks to watch as we enter the fall are Walgreens Boots Alliance (WBA +0.00%), Camping World Holdings (CWH +10.39%), and Hasbro (HAS +0.14%). Of those, only Hasbro and its modest 5% gain has underperformed the S&P 500 this year, but all three could be solid pickups. Here's why:
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1. Walgreens Boots Alliance
Pharmacy retailer Walgreens Boots Alliance has done well this year, getting a boost from COVID-19 vaccination traffic. The problem? Investors are concerned that the boost won't continue as vaccination rates rise across the country. That's why the stock didn't rally when the company released its most recent quarterly results on July 1 even though Walgreens beat analyst expectations -- including an impressive 6.4% year-over-year rise in same-store sales for the period ending May 31.
But investors who are down on the healthcare stock may want to reconsider. Booster shots look like they will be a certainty this year as health officials consider potentially offering them five months after people became fully vaccinated. That could lead to an influx of volume for Walgreens and other pharmacies. Also, concerns over the delta variant are high, so much so that rival pharmacy CVS Health is limiting sales of rapid COVID-19 tests to prevent shortages as demand rises. This suggests that Walgreens too may continue to benefit from robust COVID-19 traffic. Plus, after record-low flu cases last fall, a more normal cold and flu season could lead to some renewed traffic for those ailments in the latter half of 2021.
Over the past three months, shares of Walgreens have fallen 9% while the S&P 500 has risen 7%. There's an opportunity here for investors to buy what's a solid value stock, trading at a price-to-earnings multiple of just 18. By comparison, the average holding in the Health Care Select Sector SPDR Fund sports a multiple of 27. Investing in Walgreens is a low-risk move that can pay off in spades for investors.
2. Camping World Holdings
People are eager to be traveling once again. American Express Travel says that 64% of the people it surveyed in a recent poll would forgo social media for a whole month if it meant they'd be able to travel safely.
But with international travel complicated by COVID-19 and many countries imposing their own health restrictions, domestic travel may be far more likely this year. And for cash-strapped travelers, renting out a recreational vehicle for a vacation may be among the more desirable options. Camping World is trying to meet that demand by offering more than 3,500 RV rentals costing less than $5 per day.
And it appears to be working: As the company reported in its second-quarter results on Aug. 3, sales of $2.1 billion were up an impressive 28%. And that was for the period ending June 30, which was still in the early stages of summer and before the busy Fourth of July weekend. Camping World is likely to continue to see strong demand this year, which may be heightened amid the surge of the delta variant and people scrapping international travel plans.
The stock has fallen 10% in the past three months, so now could be a great time to buy it on the dip.
3. Hasbro
Hasbro is your ideal stay-at-home stock to buy if you're worried about lockdowns and a lack of travel -- anywhere. The company, which has close to 1,500 gaming and toy brands in its portfolio (including Monopoly and Transformers), has products to keep consumers of all ages entertained.
For its latest quarter ended June 27, Hasbro's revenue of $1.3 billion was up an impressive 54% year over year. Sales from consumer products grew by 33%, entertainment revenue rose by 47%, and digital gaming sales more than doubled. Even compared with 2019's sales, the overall top line was up 9%.
While investors may be concerned about the impact inflation will have on Hasbro's products and the outlook for the remainder of the year, the company stated on its Q2 earnings call that it is raising prices, which should offset rising expenses in freight and commodities. Although Hasbro didn't raise its guidance on its strong Q2 results, that's a safe approach to take given the pandemic and the uncertainty ahead. But now that the delta variant looks to be causing concern and could keep people at home more than expected, it wouldn't be surprising if Hasbro were to deliver some strong numbers to close out 2021.
The stock is up just a modest 3% over the past three months, but could go a lot higher if demand for Hasbro's products remains strong toward the end of the year, which at this point looks probable.
