The 3 Best Stocks for a Second Coronavirus Lockdown

It's certainly been an interesting week in the markets. We have a possibly contested election, a significant acceleration in COVID cases, yet the market still went up. It seems Wall Street is comfortable with a likely Biden presidency, assuming there will be gridlock with a Republican-controlled Senate. But rising COVID cases could lead to a second lockdown, and I have three stocks that are poised to benefit.

Many tech stocks have benefited from social distancing and people being forced to work from home, but I believe the companies preparing for a second lockdown are the best to invest in now. This includes Amazon.com, Inc. (AMZN), Abbott Laboratories (ABT), and Domino's Pizza Inc. (DPZ).

Now let's take a step back to see how the broader market has performed this week, and I will follow that up with more insights on the stocks I mentioned.

Market Commentary

Today the stock market was flat, while we waited for the final results from the election. The S&P 500 closed out the week up 7.3%, with healthcare and tech stocks leading the way. This was the best week for the index since mid-April. The Nasdaq Composite Index was even better, up 9% for the week.

While we received news that the economy created 638,000 jobs last month, which was more than expected, the market's real focus was the election. As of this afternoon, Joe Biden had 264 electoral votes, and President Trump had 214. It is becoming increasingly likely that Biden will win. 

So why did the market go up? Investors are happy with the possibility of a divided government that could mean no regulatory actions taken against big tech companies and no corporate tax increase. Plus, some form of fiscal stimulus will likely be passed early next year.

Market Outlook

Even with a strong week in the markets, two issues could lead many of us to stay cooped in our homes yet again. The first is the possibility of unrest, as the President continues to make unsubstantiated voter fraud claims. The second is the soaring rates of new COVID cases.

While the first issue is concerning, it's still only a possibility. The second issue is already here and will likely lead to some form of a lockdown in the United States. European countries have already been imposing stay at home protocols to halt a second wave, and the U.S. situation seems even direr. 

The U.S. set a new single-day record for new coronavirus cases on Wednesday, as cases went above 100,000 for the first time. Five states, including Maine, Minnesota, Indiana, Nebraska, and Colorado, set single-day case records. That record was broken the next day, as 116,707 new cases were recorded on Thursday, with 20 states seeing their highest daily counts.

With more than 50,000 people currently hospitalized, we are edging closer to a situation where hospitals will be at capacity, which would trigger lockdowns. If lockdowns were to occur, we need to consider stocks that would benefit from a second lockdown. The following three stocks are already ready for a second lockdown and are poised to gain in the months ahead.

Amazon.com, Inc. (AMZN)

The first is AMZN. Not only has the stock soared this year due to the new stay at home and e-commerce shopping trends, but it is also on target to spend all of its fourth-quarter profits on making its logistics and supply chains safe. The company has already spent $4 billion on COVID precautions.  

The company is poised to see further e-commerce market share gains and a sizable upside for its rapidly growing AWS business. It posted better than expected Q3 results and remains well-positioned to benefit from a further shift to e-commerce and cloud computing.

AMZN is rated a "Buy" in our POWR Ratings system. It holds a grade of "A" in Industry Rank, and a "B" in Trade Grade, Buy & Hold Grade, and Peer Grade. The stock is also ranked #4 in the Internet industry.

Abbott Laboratories (ABT) 

Another company that's ready for a second lockdown is ABT. The company has spent a lot of money creating testing for COVID, and rising case counts will reward its efforts. Over the next couple of months, ABT should see significantly higher revenues due to Covid-19 test-related sales.

ABT is also poised to gain from its portfolio of recent and upcoming offerings, including the Freestyle Libre 2, which measures glucose for adults and children who have diabetes, and its structural heart products. The company posted its third-quarter results last month and had better-than-expected earnings and revenues.

ABT is rated a "Buy' in our POWR Ratings system. It holds a grade of "A" in Trade Grade and Peer Grade, and a "B" in Buy & Hold Grade and Industry Rank. It is also ranked #8 out of 240 stocks in the Medical – Pharmaceuticals industry.

Domino's Pizza Inc. (DPZ)

We have covered tech and health so far, but here is a cyclical consumer stock that should shine in another lockdown. While many hungry consumers were able to order delivery, they have DPZ to thank for starting the trend decades ago with its "30 Minute Guarantee."

The company posted Q3 same-store sales of nearly 18% in the U.S., and I still see further upside as more people will be ordering over the next couple of months. DPZ already had the infrastructure in place to serve consumers as the pandemic started. It has since increased its investment in technology-driven initiatives, resulting in new ways to order a pizza.

DPZ is rated a "Buy" in our POWR ratings with a grade of "A" in Industry Rank and a "B" in Buy & Hold Grade and Peer Grade. The stock is also ranked #6 in the Restaurants industry.

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SPY shares rose $0.77 (+0.22%) in after-hours trading Friday. Year-to-date, SPY has gained 10.35%, versus a % rise in the benchmark S&P 500 index during the same period.

David Cohne has 20 years of experience as an investment analyst and writer. Prior to StockNews, David spent eleven years as a Consultant providing outsourced investment research and content to financial services companies, hedge funds, and online publications. David enjoys researching and writing about stocks and the markets. He takes a fundamental quantitative approach in evaluating stocks for readers.

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