While Wall Street eagerly awaits a new stimulus deal, there was an increase in trading volume this morning due to the quarterly quadruple witching event. This is when all stock index futures and options and single equity futures and options expire. Today is also the day when Tesla (TSLA) was added to the S&P 500. 

While both events would typically be front and center in normal times, the stimulus showdown in Washington D.C. has taken the front stage. Whether a deal gets done by midnight tonight or not, I do believe a deal will be done in the near-term. That’s why I believe investors should consider companies that would directly benefit from a new stimulus deal, such as Dollar General Corporation (DG), Dollar Tree, Inc. (DLTR), and McDonald’s Corporation (MCD).

But first, let’s take a step back to see how the overall market has been performing, and I will follow that up with more insights on the stocks I mentioned.

Market Commentary

All three major indexes were in the red today. Investors are getting concerned that a stimulus deal still hasn’t been agreed upon. Last Friday, Congress was able to buy itself another week to negotiate a rescue package and a broader government spending bill. If a deal doesn’t get done by midnight tonight and negotiations continue into next week, a government shutdown could affect the vaccine’s continued rollout. 

As vaccine optimism has been driving much of the market’s recent gains, investors and traders may take notice if there is any type of halt to the vaccine rollout. Even so, the market looks like it will be up for the week as all three indexes hit record highs yesterday. Investors were hopeful for a stimulus deal after positive remarks from both parties and the Food and Drug Administration’s advisory panel voting to recommend that Moderna’s (MRNA) vaccine be authorized for emergency use.

Market Outlook

While I am still concerned about increasing COVID infections and deaths, which could get even worse after Christmas, the rollout of the Pfizer (PFE) and BioNTech (BNTX) vaccine, along with the imminent approval of MRNA’s vaccine by the FDA, gives me hope for next year. That leaves the stimulus deal as the major headwind, or tailwind, in the market right now. 

Investors appeared to discount the new jobless claims number on Thursday, as many believed it would create more urgency for Congress to come together on a deal. I hope they’re right, as data showed weakening trends in the labor market as new jobless claims rose to the highest level since early September. That means many Americans are struggling right now and need assistance. 

But the good news is that I believe a deal will get done soon and hopefully include direct payments to the people who need them. This should lead to gains for stocks that could see some of that money spent on their products. That’s why I am highlighting the three companies below.

Dollar General Corporation (DG)

The people who need stimulus checks are not going to deposit their checks into their bank accounts or invest them; they’re going to spend it on things they need, and what better place than a store that offers significant discounts on products. As I’ve written before, I believe that DG is an excellent stock to hold right now.

The company performed well from the early days of the pandemic and on, as it increased sales due to its product staples, low prices, and convenient locations. I also believe DG should receive a bounce after this quarter’s financial results are released due to strong sales from the holidays. If stimulus checks are sent out, DG should see additional revenue. 

The stock is rated a “Buy” in our POWR Ratings service. It holds a grade of “A” for Buy & Hold Grade and Industry Rank, and a “B” for Trade Grade. DG is also the #6 ranked stock in the Grocery/Big Box Retailers industry.

Dollar Tree, Inc. (DLTR)

Although not quite as big as DG, DLTR is another low-cost store where stimulus checks could be spent. At most of its stores, every product is only $1, which is perfect for Americans struggling right now. After the government’s first round of stimulus payments, DLTR reported stronger-than-expected results.

The company is also looking to expand its product line with a few at slightly higher prices (up to $5). Management is expected to roll out this program to 500 stores in the spring. The company is also expanding its online presence with the “buy online, pickup in store” program and has experimented with home delivery through Instacart and Shipt.

The stock is rated a “Strong Buy” in our POWR Ratings system. It holds a grade of “A” in every single POWR component, including its overall grade. It is also ranked #4 in the Grocery/Big Box Retailers industry.

McDonald’s Corporation (MCD)

The final stock on my list is not another discount retailer but the world’s largest fast-food company. MCD offers the $1 $2 $3 Dollar Menu, which includes a number of low-cost options for struggling consumers. While not the healthiest foods, sometimes it’s easier to grab take out than cook, and MCD offers an easy socially distant means for food.

Fast food is also typically eaten when people are stressed out, and I can’t think of another year in the past decade when the whole world was stressed out. While the company initially struggled during the pandemic, its focus on drive-thru, delivery, and take-away led to its single best month of sales growth in almost a decade in September.

The stock is rated a “Buy” in our POWR Ratings system. It holds a grade of “B” in three out of the four components that make up the POWR Ratings, including Trade Grade, Buy & Hold Grade, and Industry Rank. MCD is also ranked #14 out of 49 stocks in the Restaurants industry.

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DG shares were unchanged in after-hours trading Friday. Year-to-date, DG has gained 36.01%, versus a 16.35% rise in the benchmark S&P 500 index during the same period.

About the Author: David Cohne

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. More...

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