Since the pandemic's start, one lesson investors have learned is to buy the dips. Every minor stock market fall that has occurred since then has turned out to be an opportunity to acquire stocks that were bound to rebound. The most unlikely of the lot may be this latest market recovery.
A week ago, concerns about the Omicron variant's spread caused a sharp reversal in the S&P 500. Fast forward to first week of December, when quelled Omicron and Fed taper worries sent equity markets into a frenzy.
The S&P 500 has gained more than 200 points, or 4.3%, since Tuesday's low, as the market staged a stunning turnaround in fortunes.
The rally has been widespread, with economically sensitive terms and resuming equities leading the way. With Friday's inflation figure expected, it's uncertain whether investors will keep the holiday spirit. These are the three strongest stocks in a possible bid to reach yet another all-time high.
The winner - the best performing stock this week
Norwegian Cruise Lines' (NCLH) stock rose 10% in the first two trading days of the week, besting the performance of other S&P 500 companies. The cruise line operator has faced persistent fears about the pandemic's impact since reaching a high of $34.49 in March 2021—and Omicron didn't help.
Norwegian is a popular way to play the reopening theme this week, with seemingly more to gain than lose when compared to most equities. Even news that 10 Norwegian crew members and visitors had tested positive for Omicron, which causes less severe health consequences but is nonetheless transmissible, did not deter investors from buying.
If Norwegian is to regain its pre-pandemic heights of around $60, it will have to make more progress. Not only must travel restrictions be lifted, but the firm's financials must improve dramatically to attract major institutional money. Expect Norwegian to remain a volatile reopening trade primarily taken by retail traders in the near term as pending epidemic developments
Runner-up: MarketAxess stock
The second-best performing stock so far in the still-nascent Omicron recovery is MarketAxess (MKTX), which has risen 9% since Friday. Aside from being a trading platform provider, the company's connection to increasing capital markets has helped boost the stock.
One analyst reaffirmed a buy rating and established a $505 target, implying a 45 percent rise from Friday's close. On back-to-back days, MarketAxess shares rose 4% and 5%.
The stock received a further boost from the announcement that European liquidity provider Flow Traders will be bringing its services to MarketAxess for a number of fixed-income asset classes, including US high-yield bonds.
The agreement will raise Market Axess' global network of institutional investors' liquidity and transparency. More than $2 trillion of worldwide bond securities have been traded on MarketAxess through the end of the third quarter.
Undervalued play: Diamondback Energy stock
The price of WTI crude oil has risen by 9% this week, following a strong start to the year for Diamondback Energy (FANG). That's because subsiding worries over Omicron have prompted a large rally in the price of WTI crude oil, which has climbed from $66.26 on Friday to around $72.
On Monday, favorable sell-side research from Truist Financial added to Diamondback's 139% year-to-date gain. The analyst raised his price target by $2 to $150. He also reaffirmed his buy rating, touting Diamondback's slowing spending levels and low-cost manufacturing.
The company's net cash operating costs were $9.97 per barrel of oil equivalent in the fourth quarter, showing it to be one of the most profitable oil producers in the Permian Basin.
Diamondback stock is a popular way to bet on the energy market rebound this year, thanks to its above average financial health. It had a $457 million cash position and a reasonable 36% debt-to-capital ratio at the end of the third quarter, making it an appealing choice for investors.
Diamondback Buckle's commitment to consistently growing cash flow and its plans to distribute half of the cash flow to shareholders in the form of dividends and buybacks have impressed investors. Despite its rapid growth in 2021, Diamondback stock is still one of the most value-packed large-cap energy companies.