As we end the week, stocks were in the green, but volatility and uncertainty are still weighing on investors’ minds. The week started strong before three days of declines. Even in this volatility, I see one area of the market trending higher, at least in the near term. I have selected three stocks I feel should see substantial gains, but let’s see what has been happening in the market before getting to them.

Market Commentary

As I already mentioned, stocks ended Friday slightly higher as retail sales beat expectations. U.S. retail sales rose for a fifth straight month in September as consumers have been spending money in preparation for a continuation of working and studying from home. Investors are more concerned about three lingering issues: the strength of the economy, the continued spread of the coronavirus, and the ongoing negotiations over additional fiscal stimulus.

As the pandemic seemed to slow over the summer and hopes that the economy was recovering, recent news has been a little concerning. In the recent October jobs report, Nonfarm payrolls rose by a lower than expected 661,000 in September, indicating a loss in momentum on the jobs front.

The recent uptick in positive COVID cases is also becoming a concern. More than six states reported record numbers of new coronavirus cases and pushed the U.S. single-day total above 60,000 for the first time in months. This could become a headwind for the remainder of the year and beyond.

The third issue is the continued negotiations in Washington regarding a new stimulus bill. While both Democrats in the House and the President want a larger bill, Republicans in the Senate are balking at the price tag. This fight could drag on until after the election, resulting in increased uncertainty in the markets.

Outlook

Given the state of increased COVID cases, an economic recovery losing steam, and a stalemate and Congress, I see continued volatility over the near term. Once there is a clear winner in the election and a second stimulus deal gets done, I see the broad markets continuing its rise due to a combination of negative real interest rates and government stimulus.

In the meantime, I see one area of the market trending higher as we head into the election. And that is corona stocks. I have been forecasting a second wave of the virus for quite some time, and I believe it’s just getting started. That means we should allocate our portfolios to stocks that have benefited from the pandemic and should continue to as the epidemic rages on.

While earnings for the third quarter are coming in now, we know technology, utilities, and healthcare were the only sectors to show positive earnings growth last quarter, and that should continue as COVID cases pile up.

Here are three stocks I see benefiting from current market conditions.

Zoom Video Communications (ZM) 

ZM has been one of the hottest stocks this year. It gained 4.2% today, adding to its already absurd 721.6% year to date gain. It was even up 44.6% during September when the rest of the market was down. As the pandemic worsens, I see this stock going up more. As cases rise, people who have returned to work will need to work from home again, and many organizations have relied on Zoom for their video conferencing needs. As more schools close down in response to the new outbreaks, children will be primarily learning from home.

In addition to the pandemic, the company should also benefit from an expansion of its clientele, including its international presence and the launch of its Zoom from Home solutions. Our POWR Ratings also agree, rating the stock a “Strong Buy.”

Pfizer (PFE) 

The next stock on this list is the front runner, along with BioNTech (BNTX) of Germany, to have the first COVID vaccine on the market. As of today, the company said it is targeting late November for its COVID vaccine application. But PFE is not a one-trick pony. The company is one of the largest and most profitable pharmaceutical companies in the world. PFE should see strong sales growth in its Ibrance, Inlyta, and Eliquis drugs.

Plus, it has a deep and promising pipeline of new drugs in the fields of oncology, internal medicine, rare diseases, and immunology. For a large established pharmaceutical company, PFE has been showing strong momentum with a “Buy” rating in our POWR Ratings, along with an “A” Trade Grade. Keep an eye over the next couple of weeks as the company reports earnings on October 27th.

Peloton Interactive (PTON) 

The last stock on the list should benefit from the double whammy of rising cases and colder weather. Aside from bodybuilders, not many people want to venture out in the cold and risk catching the virus for 45 minutes on the local gym’s treadmill. Plus, I see many gyms closing as cases rise. Exercise equipment company PTON is well-positioned to cash in as more people exercise at home. Like ZM, the stock has been popular this year, up 362.4% year to date. It was also up 29.4% in September, while other stocks were dropping.

In its most recent quarter, the company fitness subscriptions grew 113% year-over-year. Earnings are expected to grow an absurd 241.7% next year. This momentum is reflected in our POWR Ratings with a grade of “A” across the board, in its overall rating, and in the four components that make up the POWR Ratings.

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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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