If stocks are headed higher, these ‘battleground’ underperformers are worth a look, says Jefferies

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On the last day of an unforgettable quarter, better-than-expected factory data from China (even if some are a bit skeptical about that) is helping to set up investors for what could be another positive session.

That mixes with hope for slowing infections around the world — though U.S. cases continue to rise — vaccine developments and kitchen-sink measures from governments and central banks.

And it might make sense to see some interest by investors after a near 22% decline seen for the Dow industrials












DJIA, +3.19%










 this quarter, the biggest since late 1987. Though, of course, there remains plenty of uncertainty about everything amid the pandemic.

Our call of the day comes from Jefferies equity strategists Steven G. DeSanctis and Eric Lockenvitz, who highlight a “Battleground” of stock names that they like. The appeal is that those names aren’t heavily owned by hedge funds, but rather long-only investors, who would expect those stocks to appreciate.

“The Battleground portfolio held up on the way down, but has lagged on the way up,” which means catch-up time for that group of more defensive names that focus on health care and technology. Included in that bunch are Apple












AAPL, +2.85%










 and Walmart












WMT, +5.12%.










Here’s that list:



The strategists also zero in on the role they believe hedge funds played in the recent market meltdown. They note that those funds loaded up on stocks going into the equity maelstrom, in a moment of incredibly bad timing, with the unwind coinciding with stocks melting down two weeks ago. Similar activity was seen in December 2018 and autumn 2008, they note.

DeSanctis and Lockenvitz say those hedge funds will likely start crowding back into their “tried and true” favorites — such as Microsoft












MSFT, +7.03%,










Google-parent Alphabet












GOOGL, +3.25%,










Facebook












FB, +5.84%,










Visa












V, +2.48%,










Amazon.com












AMZN, +3.36%,










Mastercard












US:MSFT,










Disney












DIS, +3.53%,










Union Pacific












UNP, +0.83%










 and more.

The market

Dow












YM00, -0.12%,










S&P












ES00, -0.25%










and Nasdaq












NQ00, +0.14%










futures are up, but have pared gains, with European stocks












SXXP, +0.82%










higher and after a mostly positive session for Asia, barring a drop for Japan stocks. Oil












CL00, +7.72%










 is also seeing an impressive bounce after hitting 2002 lows on Monday.

The chart

Our chart comes from UBS, which has taken a look at savings intentions by households based on earnings. The higher the income, the more the savings, and vice versa. For example, it shows 28% of those earning more than $200,000 plan to save more:



The buzz

Amazon












US:AMZN










 has fired a Staten-Island worker for organizing a walkout aimed at better protection for employees against coronavirus.

New York City saw a coronavirus death every 2.9 minutes on Monday. Italy’s crippling coronavirus outbreak could get worse amid unrest in the underdeveloped southern half of the country. And in Spain the curve has just gone up again, with another record number of deaths.

Video-streaming service Zoom












ZM, -0.54%,










whose stock has soared recently due to increasing use during the pandemic, is reportedly being probed by the New York Attorney General for data privacy and security. The company said it is ready and willing to respond to any questions.

The quote

“Our ability to go out and be able to test, identify, isolate, and contact trace, will be orders of magnitude better than what it was just a couple of months ago.” That was White House coronavirus task-force member Dr. Anthony Fauci, about a second virus wave he expects in the fall.

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Source : MTV