Evercore ISI revealed its "ReboundPortfolio " on Monday, laying out which stocks it expects to outperform as the US economy bounces back.- The rollout of a
coronavirus vaccine and a complete economic reopening will extend investors' pivot to risky assets and cyclical sectors, analysts led by Dennis DeBusschere said. - The portfolio includes some stocks hit hardest by the pandemic including retailers, airlines, hotels, and oil producers.
- Though tech giants fueled the market's summer rally,
Evercore expects Apple, Amazon, Facebook, and Alphabet to keep climbing through 2021. - Visit the Business Insider homepage for more stories.
Distribution of a COVID-19 vaccine and complete economic reopening will fuel a massive market rotation, and Evercore ISI expects a handful of stocks to thrive through the bounce-back.
The firm unveiled its "Rebound Portfolio" on Monday, a collection of companies expected to outperform the broader market as the US emerges from the coronavirus pandemic. Where Evercore's Quarantine Portfolio focused on companies profiting from telework and quarantine trends, its new group aims to gain on positive vaccine developments, steady GDP growth, and renewed travel activity.
"A clear shift has taken place in the fourth quarter relative to the third quarter," analysts led by Dennis DeBusschere said in a note to clients.
They continued: "Effective vaccines, economic activity adapting to a world with COVID, and the firming economic growth all encourage increased optimism about the outlook for risk assets despite the US falling off the stimulus cliff and the worst COVID wave to date."
Expectations for a bounce-back in travel activity led Evercore to include several transport and hospitality stocks. Delta Air Lines, Hilton, Marriott, and United Airlines make up some of the additions. Greater oil demand are set to lift Chevron and Halliburton, the firm added.
Retailers including Macy's, Nordstrom, Best Buy, and Ulta Beauty were included. The sector was among those hit hardest by widespread quarantine orders and a plunge in discretionary spending.
A select few mega-cap tech names made the list despite comprising many stay-at-home portfolios. Apple, Amazon, Facebook, Alphabet, and Uber were included, as were smaller tech names like Teradyne and Cisco.
Recent weeks have already seen Evercore's Rebound Portfolio outperform its Quarantine Portfolio. Encouraging vaccine progress from Pfizer, Moderna, and AstraZeneca lifted hopes for a return to normal in 2021 and boosted investors' risk appetites. Volatility, value, and risk-on factors overtook quality and momentum plays. Strong labor-market demand and home sales also bolstered the value rotation, Evercore's analysts said.
"How far equities and risk-on factors rise through year-end is largely a function of how much of the expected improvement in 2021 is discounted this year, but the outlook for risk assets remains attractive today," they added.
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