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5 Must-Buy Stocks to Gain From the Ongoing Wall Street Rally
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Wall Street has been witnessing a solid rally since the beginning of 2023 after a highly disappointing 2022. Year to date, the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — are up 3.1%, 8.5% and 15.7%, respectively.
Favorable data for several measures of inflation, various soft economic data and a resilient labor market raised market participants’ hope for a soft landing of the U.S. economy. To tap the ongoing rally, several good stocks are available.
We have selected five stocks based on certain criteria to be discussed later. These companies are - United Rentals Inc. (URI - Free Report) , Energy Transfer LP (ET - Free Report) , Alliance Resource Partners L.P. (ARLP - Free Report) , RenaissanceRe Holdings Ltd. (RNR - Free Report) and AXIS Capital Holdings Ltd. (AXS - Free Report) .
Fed Reduces Magnitude of Interest Rate Hike
On Feb 1, in its February FOMC meeting, the Fed hiked the benchmark interest rate by 25 basis points to the range of 4.50% to 4.75%, marking its highest rate since late 2007. Fed Chair Jerome Powell said “We can now say I think for the first time that the disinflationary process has started. However, it would be very premature to declare victory or to think we really got this.”
Powell categorically denied any possibility of a rate cut in 2023. However, the market applauded Powell’s recognition that the disinflationary process has started. A lower interest rate and lighter monetary control will be good for the stock market as it will boost the margins of most companies.
Peak Inflation Seems Behind Us
Less-than-expected inflation rates in October, November and December with respect to several measures have clearly indicated this. The University of Michigan Surveys of Consumers released on Jan 27 showed that the one-year inflation outlook slipped to a final reading of 3.9% this month from 4.4% in December, the lowest reading since April 2021.
On Jan 31, the Department of Labor reported that the employment cost index for fourth-quarter 2022 rose 1% compared with the consensus estimate of a 1.2% rise. The metric for third-quarter 2022 was also 1.2%. Year over year, the employment cost index jumped 5.1% in 2022 compared with 5% in 2021. The recent data clearly indicates that wage rate, a major source of current inflation is declining as expected by the Fed.
Other Positives
The challenges of the pandemic are also behind us. China has been gradually reopening since the beginning of this year after strict lockdowns last year. This will help revive the completely devastated global-supply chain system. Global trade will also gain momentum.
The U.S. labor market remains resilient. So far, the results of fourth-quarter 2022 earnings are not as disappointing as expected. Therefore, the Fed may reach its goal of a soft landing of the economy.
Stock Selection Process
At this stage, several good stocks are available for investment. We have applied our VGM Style Score to narrow the search to select five companies that have strong growth potential for 2023. These stocks have seen positive earnings estimate revisions in the last 30 days. Finally, each of our picks carries a Zacks Rank #1 (Strong Buy) and a VGM Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks in the past month.
Image Source: Zacks Investment Research
United Rentals is benefiting from the U.S. administration’s increased focus on infrastructural improvement. URI has been gaining from better fleet productivity on broad-based rental demand in construction and industrial verticals. Better fleet productivity on broad-based rental demand in non-residential construction and industrial verticals, higher total and rental revenues and stronger pricing aided URI’s fiscal 2022 results.
United Rentals’ upbeat guidance exhibits broad-based growth across its verticals, with persistent growth opportunities for datacenters, distribution centers and renewables as well as the automotive and ship plants projects. URI has expected revenues and earnings growth rates of 20.7% and 26.9%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 8.8% over the last 30 days.
Energy Transfer owns and operates diversified portfolios of energy assets and provides energy-related services primarily in the United States. ET’s core operations include complementary natural gas midstream, intrastate and interstate transportation and storage assets, crude oil, natural gas liquids and refined product transportation and terminalling assets, NGL fractionation and various acquisition and marketing assets.
ET has expected revenues and earnings growth rates of 13.8% and 2.1%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 7.5% over the last 30 days.
Alliance Resource is a diversified natural resource company that produces and markets coal primarily to utilities and industrial users in the United States. ARLP operates through four segments: Illinois Basin Coal Operations, Appalachia Coal Operations, Oil & Gas Royalties, and Coal Royalties.
Alliance Resource produces a range of thermal and metallurgical coal with sulfur and heat contents. ARLP operates seven underground mining complexes in Illinois, Indiana, Kentucky, Maryland, Pennsylvania, and West Virginia. In addition, Alliance Resource leases land and operates a coal loading terminal on the Ohio River at Mt. Vernon, Indiana; and buys and resells coal.
ARLP has expected revenues and earnings growth rates of 20.2% and 38.7%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 8.4% over the last 30 days.
RenaissanceRe Holdings has been witnessing steady premium growth over the past few quarters. This upside is quite obvious from its seven-year CAGR (2014-2022) of 25%. RNR has been focusing on acquisitions and business expansions to sustain growth prospects.
RenaissanceRe Holdings has been undertaking divestitures to streamline its operations and get rid of low-return high-risk businesses. RNR’s balance sheet strength remains impressive. Its cash and cash equivalents are higher than its debt level. RNR is also engaged in the prudent deployment of capital.
RNR has expected revenues and earnings growth rates of 14.2% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 7.6% over the last 30 days.
AXIS Capital continues to build on its Specialty Insurance, Reinsurance and Accident and Health Insurance to pave the way for long-term growth. AXS’ focus on deploying resources prudently while enhancing efficiencies, improving its portfolio mix and underwriting profitability apart from fortifying the casualty and professional lines in the insurance segment bode well.
Repositioning of the portfolio carried on over the last three years will continue to drive results. AXIS Capital effectively deploys capital to boost shareholder value.
AXS has expected revenues and earnings growth rates of 11% and 29.4%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 4.2% over the last 30 days.
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5 Must-Buy Stocks to Gain From the Ongoing Wall Street Rally
Wall Street has been witnessing a solid rally since the beginning of 2023 after a highly disappointing 2022. Year to date, the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — are up 3.1%, 8.5% and 15.7%, respectively.
Favorable data for several measures of inflation, various soft economic data and a resilient labor market raised market participants’ hope for a soft landing of the U.S. economy. To tap the ongoing rally, several good stocks are available.
We have selected five stocks based on certain criteria to be discussed later. These companies are - United Rentals Inc. (URI - Free Report) , Energy Transfer LP (ET - Free Report) , Alliance Resource Partners L.P. (ARLP - Free Report) , RenaissanceRe Holdings Ltd. (RNR - Free Report) and AXIS Capital Holdings Ltd. (AXS - Free Report) .
Fed Reduces Magnitude of Interest Rate Hike
On Feb 1, in its February FOMC meeting, the Fed hiked the benchmark interest rate by 25 basis points to the range of 4.50% to 4.75%, marking its highest rate since late 2007. Fed Chair Jerome Powell said “We can now say I think for the first time that the disinflationary process has started. However, it would be very premature to declare victory or to think we really got this.”
Powell categorically denied any possibility of a rate cut in 2023. However, the market applauded Powell’s recognition that the disinflationary process has started. A lower interest rate and lighter monetary control will be good for the stock market as it will boost the margins of most companies.
Peak Inflation Seems Behind Us
Less-than-expected inflation rates in October, November and December with respect to several measures have clearly indicated this. The University of Michigan Surveys of Consumers released on Jan 27 showed that the one-year inflation outlook slipped to a final reading of 3.9% this month from 4.4% in December, the lowest reading since April 2021.
On Jan 31, the Department of Labor reported that the employment cost index for fourth-quarter 2022 rose 1% compared with the consensus estimate of a 1.2% rise. The metric for third-quarter 2022 was also 1.2%. Year over year, the employment cost index jumped 5.1% in 2022 compared with 5% in 2021. The recent data clearly indicates that wage rate, a major source of current inflation is declining as expected by the Fed.
Other Positives
The challenges of the pandemic are also behind us. China has been gradually reopening since the beginning of this year after strict lockdowns last year. This will help revive the completely devastated global-supply chain system. Global trade will also gain momentum.
The U.S. labor market remains resilient. So far, the results of fourth-quarter 2022 earnings are not as disappointing as expected. Therefore, the Fed may reach its goal of a soft landing of the economy.
Stock Selection Process
At this stage, several good stocks are available for investment. We have applied our VGM Style Score to narrow the search to select five companies that have strong growth potential for 2023. These stocks have seen positive earnings estimate revisions in the last 30 days. Finally, each of our picks carries a Zacks Rank #1 (Strong Buy) and a VGM Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks in the past month.
Image Source: Zacks Investment Research
United Rentals is benefiting from the U.S. administration’s increased focus on infrastructural improvement. URI has been gaining from better fleet productivity on broad-based rental demand in construction and industrial verticals. Better fleet productivity on broad-based rental demand in non-residential construction and industrial verticals, higher total and rental revenues and stronger pricing aided URI’s fiscal 2022 results.
United Rentals’ upbeat guidance exhibits broad-based growth across its verticals, with persistent growth opportunities for datacenters, distribution centers and renewables as well as the automotive and ship plants projects.
URI has expected revenues and earnings growth rates of 20.7% and 26.9%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 8.8% over the last 30 days.
Energy Transfer owns and operates diversified portfolios of energy assets and provides energy-related services primarily in the United States. ET’s core operations include complementary natural gas midstream, intrastate and interstate transportation and storage assets, crude oil, natural gas liquids and refined product transportation and terminalling assets, NGL fractionation and various acquisition and marketing assets.
ET has expected revenues and earnings growth rates of 13.8% and 2.1%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 7.5% over the last 30 days.
Alliance Resource is a diversified natural resource company that produces and markets coal primarily to utilities and industrial users in the United States. ARLP operates through four segments: Illinois Basin Coal Operations, Appalachia Coal Operations, Oil & Gas Royalties, and Coal Royalties.
Alliance Resource produces a range of thermal and metallurgical coal with sulfur and heat contents. ARLP operates seven underground mining complexes in Illinois, Indiana, Kentucky, Maryland, Pennsylvania, and West Virginia. In addition, Alliance Resource leases land and operates a coal loading terminal on the Ohio River at Mt. Vernon, Indiana; and buys and resells coal.
ARLP has expected revenues and earnings growth rates of 20.2% and 38.7%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 8.4% over the last 30 days.
RenaissanceRe Holdings has been witnessing steady premium growth over the past few quarters. This upside is quite obvious from its seven-year CAGR (2014-2022) of 25%. RNR has been focusing on acquisitions and business expansions to sustain growth prospects.
RenaissanceRe Holdings has been undertaking divestitures to streamline its operations and get rid of low-return high-risk businesses. RNR’s balance sheet strength remains impressive. Its cash and cash equivalents are higher than its debt level. RNR is also engaged in the prudent deployment of capital.
RNR has expected revenues and earnings growth rates of 14.2% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 7.6% over the last 30 days.
AXIS Capital continues to build on its Specialty Insurance, Reinsurance and Accident and Health Insurance to pave the way for long-term growth. AXS’ focus on deploying resources prudently while enhancing efficiencies, improving its portfolio mix and underwriting profitability apart from fortifying the casualty and professional lines in the insurance segment bode well.
Repositioning of the portfolio carried on over the last three years will continue to drive results. AXIS Capital effectively deploys capital to boost shareholder value.
AXS has expected revenues and earnings growth rates of 11% and 29.4%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 4.2% over the last 30 days.