Weekly Market Review: Breaking Through to New Highs

U.S. stocks were mixed last week. The S&P 500 index closed on Friday at a record high. Real Estate and Healthcare names rallied, while the Financial sector lagged.

Last week’s main economic news was the May U.S. consumer price index (CPI) report. It announced on Thursday that consumer prices rose 5% year-over-year last month or 3.8% excluding food and energy.

Despite a higher-than-expected CPI in May, investors bought U.S. Treasuries last week, sending the yield on the benchmark 10-year note down to 1.46%

Elsewhere, data out Tuesday suggested that many jobs are likely to be filled in the second half of the year. The JOLTS report said that the U.S. had a record 9.29 million job openings in April. The National Federation of Independent Business reported that a record 48% of small businesses had difficulty filling job openings in May.

The Week Ahead

This week will be relatively quiet on the earnings front. Adobe (ADBE), Kroger (KR), and Oracle (ORCL) are among the headliners.

Tuesday will be a busy day for economic data. First, we’ll get a look at the May U.S. producer price index (PPI). It is expected to continue to show even higher price growth than the CPI. We’ll also receive Retail Sales data from last month.

The Federal Reserve will announce its next interest rate decision on Wednesday. It is widely believed that Jerome Powell & Co. will not change their accommodative stance. But all eyes will be on the quarterly updates to the Fed’s long-term economic projections.

Following the snap-back recovery in stocks last year from Pandemic lows, we believe that investment gains will be harder to come by in 2021. As a result, deciding what and when to buy can be challenging for any investor. However, the fact remains that attractive investments are out there if you’re willing to dig a little deeper.

One such Energy name is worth a closer look and is our Stock of the Week.

Stock of the Week: Enterprise Products (EPD)

The company operates midstream energy assets across the U.S., including approximately 50,000 miles of pipelines.

The stock gained 4% last week and we believe this momentum can continue into the second half of 2021. Here’s why:

Enterprise acts like a toll collector in the energy business. This helps insulate the business from volatility in underlying commodity prices. 85% of the company’s operations are fee-based. Management says that it can be paid up to seven different times, as oil and natural gas moves throughout the production cycle.

The Energy sector has been hot of late and management agrees that the stock holds value. It was reported last month that co-CEO Randall Fowler bought 5,000 shares of the company on the open market.

There are several reasons why insiders may sell stock, but they tend to only buy when upbeat about the near-term prospects. Arguably, no one understands the day-to-day operations of a business better than its top executives.

Back in May, Enterprise also announced quarterly results that beat expectations. The company earned $0.61 a share in the first quarter, as revenue grew 22% from the previous year to $9.15 billion. Management said that the business was impacted by weather-related shutdowns in Texas during the quarter.

The rebound for energy demand is a global story and the company uses its steady cash flow to fund a quarterly dividend of $0.45 share (7.1% yield).

It’s additionally worth noting that Enterprise carries a Smart Score of 10/10 on TipRanks. This proprietary score utilizes Big Data to rank stocks based on 8 key factors that have historically been a precursor of future outperformance.

On top of the positive aspects mentioned already, the Smart Score indicates that shares have seen improving sentiment from analysts, financial bloggers and individual investors.

FYI: This is just 1 of the 20+ stocks selected for the Smart Investor portfolio. That’s where we share more detailed insights on our weekly stock picks.