3 Reasons Why Growth Investors Shouldn't Overlook Willdan (WLDN)

According to the Stock Trader’s Almanac, stocks normally offer solid returns on the Wednesday before Thanksgiving and the Friday after combined, albeit at a low volume. Although the trend has dwindled lately, one may be interested in knowing if there are any hot stocks and ETFs that can be tapped this Thanksgiving.

This makes us analyze: Will the U.S. stock market continue the age-old winning trend this year, too, or not? Let’s find out.

Markets Hovering Close to All-Time High

Wall Street has hit several new highs this year, with the S&P 500 up about 25% in 2024. The S&P 500 hit an all-time high of 6,017.31 on Nov. 11, 2024. The Trump bump, hopes for low rates and deregulation, Fed optimism and the AI rally have made this ascent possible. The Dow Jones and small caps hit new all-time highs on Nov. 25, 2024.

The forward rally from here depends largely on the news coming out on the U.S.-China trade front in Trump 2.0. The USMCA deal between the U.S., Mexico, and Canada is also under pressure. Hence, a potential inflation rebound may leave a dent on the U.S. economic growth momentum. However, just before Thanksgiving, the mood is moderately upbeat around U.S. stocks.

Energy Market on Upbeat Mode

Signs of escalation of the Russia-Ukraine war kept investors cautious of supply disruptions,causing a rally in oil ETFs like USO in the past week (as of Nov. 22, 2024). The partial restart of production in Norway's Johan Sverdrup oilfield limited gains.

Note that, for the first time, Ukraine used U.S. ATACMS missiles to strike Russian territory onNov. 19, 2024.Russian foreign minister Sergei Lavrov termed the attack as a Western escalation. Russian President Vladimir Putin lowered the threshold for a possible nuclear strike.

There are also signs of higher crude oil purchases by top importer China.China's crude imports are on track to end November at or close to all-time highs, StoneX energy analyst Alex Hodes said, referencing data from vessel tracker Kpler, as quoted on Reuters.

If this is not enough, President-elect Trump favors fossil fuel production. On the technology front, the relentless and huge demand for energy for feeding the data center in order to support the AI boom also have power to push up energy prices. United States Oil Fund LP USO gained 4.7% last week and 1.6% past month.

AI Boom in Fine Fettle

We expect the AI boom to remain strong in the next few quarters. Investors are closely watching NVIDIA’s Blackwell ramp. The next-generation AI chip, Blackwell, has demand from companies like OpenAI and others building AI data centers. NVIDIA plans to address concerns about delays in Blackwell chip shipments.

Agreed, NVIDIA failed to impress investors this earnings season with its less lofty guidance. Investors should also note that while AI innovations will continue, they tend to be incremental and moderate rather than groundbreaking. Hence, slowing sales momentum is natural in a maturing industry (read: Forget Guidance Woes: Buy Semiconductor ETFs on NVDA's Dip).

ETF & Stock Picks

Against this backdrop, we bet big on a year-end rally. Investors are likely to see a solid bounce in equities this Thanksgiving and after.

ETF Bets

ETF picks are all top-ranked.

SPDR Dow Jones Industrial Average ETF DIA – Zacks Rank #1 (Strong Buy)

Dow Jones trade is normally beneficial during the Trump presidency as it has more value focus than the S&P 500 and the Nasdaq. The Dow closed at a fresh new high to start the Thanksgiving week.

First Trust RBA American Industrial Renaissance ETF AIRR – Zacks Rank #2 (Buy)

Trump’s administration is expected to revamp its “America First” approach, offering new or enhanced tax breaks and subsidies to boost domestic manufacturing. Industrial stocks and ETFs should get a boost out of this policy.

iShares Russell Mid-Cap Value ETF IWS – Zacks Rank #2

Smaller and mid-cap ETFs tend to do well from the Trump bump. Mid-cap ETFs offer the best of both worlds — large and small caps. A value focus on this ETF should also be beneficial due to talks of Trump tariffs and the resultant geopolitical concerns.

Vanguard Financials ETF VFH – Zacks Rank #1

Banks are well-positioned to benefit from Trump’s deregulation and lower corporate tax policies. The reduced regulations should lower compliance costs and increase profit margins for financial institutions and banks.

Stock Bets

Stock picks are top ranked, with a Value and Growth Score of A each and P/E of less than 20 times.

Willdan Group WLDN – P/E 18.96x, Rank #2

Willdan Group is a provider of professional technical and consulting services to utilities, private industry, and public agencies at all levels of government.

Carnival CCL – P/E 18.75x, Rank #1

Carnival operates as a cruise and vacation company. As a single economic entity, Carnival Corporation & Carnival plc forms the largest cruise operator in the world.

Cencora Inc. COR – P/E 16.44x, Rank #2

Cencora is one of the world’s largest pharmaceutical services companies focused on providing drug distribution and related services to reduce health care costs and improve patient outcomes.

Abercrombie & Fitch ANF – P/E 14.69x, Rank #2

Abercrombie & Fitch Co. operates as a specialty retailer of premium, high-quality casual apparel for men, women, and kids through a network of approximately 757 stores across North America, Europe, Asia and the Middle East, as well as the e-commerce sites.

Zacks Investment Research

Willdan Group, Inc. WLDN has secured a three-year, $4.5 million contract with the City of Bellflower, CA, to provide building division operations and fire plan inspection services. This agreement not only strengthens Willdan’s foothold in Los Angeles County but also demonstrates its ability to deliver critical municipal services.

“We thank the City of Bellflower for selecting us,” said Mike Bieber, Willdan’s CEO. “This contract expands our work in Los Angeles County, and we’re looking forward to supporting the City’s current and future needs.”

The City of Bellflower, home to nearly 80,000 residents and 4,000 businesses, values high-quality governance and services. City manager Ryan Smoot emphasized Willdan’s expertise and collaborative approach, stating that the company will ensure a “seamless transition” in its service delivery.

Willdan’s Strategic Growth in Municipal Services

The Bellflower contract aligns with Willdan’s strategic focus. The company emphasized its commitment to expanding recurring revenue streams through long-term municipal partnerships. The contract supports Willdan’s strategy to deepen its regional presence while leveraging its reputation for efficient and personalized municipal services. During the recent earnings call, CEO Mike Bieber emphasized that municipal projects continue to be a standout segment, with double-digit organic growth and a robust outlook across state and local government clients.

Notably, third-quarter 2024 results were favorably impacted by growth in municipal engineering, project management revenues and expanded utility program management revenues. During the first nine-month period of 2024, higher activity from WLDN’s construction management projects, expanded utility programs and higher municipal engineering services resulted in a 38% increase in adjusted EBITDA to $39.1 million from a year ago. The increased adjusted EBITDA, reduced net interest expense and the lower effective tax rate enabled adjusted earnings per share (EPS) to grow 79% to $1.70 per share.

The Business Services group has plenty of great stocks, but investors should always be looking for companies that are outperforming their peers. Is Futu Holdings Limited Sponsored ADR (FUTU) one of those stocks right now? Let's take a closer look at the stock's year-to-date performance to find out.

Futu Holdings Limited Sponsored ADR is a member of our Business Services group, which includes 304 different companies and currently sits at #4 in the Zacks Sector Rank. The Zacks Sector Rank gauges the strength of our 16 individual sector groups by measuring the average Zacks Rank of the individual stocks within the groups.

The Zacks Rank is a successful stock-picking model that emphasizes earnings estimates and estimate revisions. The system highlights a number of different stocks that could be poised to outperform the broader market over the next one to three months. Futu Holdings Limited Sponsored ADR is currently sporting a Zacks Rank of #1 (Strong Buy).

Over the past three months, the Zacks Consensus Estimate for FUTU's full-year earnings has moved 252.2% higher. This shows that analyst sentiment has improved and the company's earnings outlook is stronger.

Based on the latest available data, FUTU has gained about 55% so far this year. Meanwhile, stocks in the Business Services group have gained about 23.2% on average. This means that Futu Holdings Limited Sponsored ADR is performing better than its sector in terms of year-to-date returns.

Another stock in the Business Services sector, Willdan Group (WLDN), has outperformed the sector so far this year. The stock's year-to-date return is 94.3%.

In Willdan Group's case, the consensus EPS estimate for the current year increased 11.7% over the past three months. The stock currently has a Zacks Rank #2 (Buy).

To break things down more, Futu Holdings Limited Sponsored ADR belongs to the Technology Services industry, a group that includes 162 individual companies and currently sits at #67 in the Zacks Industry Rank. This group has gained an average of 32.1% so far this year, so FUTU is performing better in this area.

On the other hand, Willdan Group belongs to the Business - Services industry. This 24-stock industry is currently ranked #82. The industry has moved -4.7% year to date.

Going forward, investors interested in Business Services stocks should continue to pay close attention to Futu Holdings Limited Sponsored ADR and Willdan Group as they could maintain their solid performance.

Zacks Investment Research