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4 Growth Stocks at Low Prices to Counter the Market Slump
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The last trading session has been a massacre, with all 30 blue-chip companies closing in the red and all 10 sectors of the S&P 500 cohort ending in the negative territory. Fresh signs that the Fed could back away from an easy-money policy along with the slump in oil prices led to the sell-off.
However, San Francisco Fed President John Williams believes that the economy is doing just fine. Consumer outlays and sentiments remain bright spots, which may strengthen the economy in the near term. Hence, it will be prudent to invest in low-cost growth stocks which should get a boost once the broader market recognizes their full potential. Moreover, low priced stocks have greater potential for price appreciation and returns, in contrast to expensive stocks.
Stocks Post Steepest Decline Since Brexit
U.S. stocks suffered their worst decline on Sep 9 since the U.K.’s decision to exit the European Union. The Dow Jones Industrial Average tanked nearly 400 points, or 2.1%, to 18085.45. The S&P 500 declined 53.49 points, or 2.5%, to 2,127.81, its biggest one-day drop since late June.
Rout in equities pushed both the Dow and the S&P 500 below their 50-day moving averages. Also, the CBOE Volatility Index (VIX) surged 39% to 17.50 on Sep 9, its highest one-day jump since Jun 24. Even though a reading above 20 is considered alarming, Friday’s climb is significant, considering that the index was near 12 for a sustained period.
Fed Rate Hike Fears Loom
Possibility of a rate hike in the near term, thanks to hawkish comments from Boston Fed President Eric Rosengren, led to such massive losses. Friday’s slide indicated that the market isn’t completely prepared for a rate hike, which could further lead to increased gyrations.
Rosengren backs a gradual rate hikes as he believes that waiting too long might affect some asset markets like commercial real estate. He believes that “a reasonable case can be made for continuing to pursue a gradual normalization of monetary policy”.
Defensive plays such as utilities led the losses on Friday, declining more than 3%. Higher interest rates aren’t good for such stocks as it will increase cost of capital and decrease profitability (read more: 5 Utility Stocks to Beat the September Blues).
Oil Tanks on Fears of Oversupply
Energy shares plunged close to 3% amid sharp drop in crude-oil futures. Oil prices fell as investors remain skeptic about a large drop in stockpiles on Sep 8.
According to the U.S. Energy Information Administration, domestic crude inventories dropped 14.5 million barrel for the week ended Sep 2, the steepest fall since 1999. But, traders and money managers view such a plunge as a result of inclement weather conditions that curtailed production and prevented imports into the U.S. Gulf Coast (read more: 5 Energy Stocks to Buy with Incredible Momentum).
Consumer Spending Boosts Growth
Amid such widespread pessimism, the service sector expanded at the slowest pace in August since 2010, manufacturing activity contracted and pace of hiring slowed down. Such developments have led many to question if the economy’s recovery is wavering. But, comments from Williams have dismissed such concerns. He said that unemployment is likely to fall from the current level of 4.9% to 4.5% next year.
The Fed’s Beige Book has already showed that most of the districts signaled “that national economic activity continued to expand at a modest pace” during the July-August period despite the Brexit selloff. Meanwhile, consumer spending rose for the fourth straight month in July, a sign that domestic consumption could continue to drive U.S. economic growth in the second half of the year.
Consumer confidence also surged during August, indicating that the economy is on the recovery path after a dismal show during the first half of the year. In August, the consumer confidence index increased 4.4 points to 101.1, the highest in 11 months.
4 Low-Priced Growth Picks
Robust household spending coupled with upbeat consumer sentiment make us believe that the U.S. economy is resilient and will strengthen in the near term. Since the long term bodes well for stocks after the initial dip, it will be wise to invest in low-priced growth stocks. Such stocks will amplify returns, since a small rise in their price may mean a greater percentage gain. Moreover, by purchasing stocks right after a dip, investors are essentially buying shares at a discounted price.
We have chosen four low-priced growth stocks that flaunt a Zacks Rank #1 (Strong Buy) and have a Growth Style Score of ‘A.’ Our research shows that stocks with Growth Style Scores of ‘A’ when combined with a Zacks Rank #1 offer the best investment opportunities in the growth investing space. For a more in-depth understanding, check out our Style Score System.
Such stocks are priced below $20. In this case, even a $1 increase in the stock price may mean a 5% appreciation to the portfolio.
Oclaro, Inc. manufactures and markets lasers and optical components. The company’s stock is priced at $8.20. The company’s estimated earnings growth rate for the current and next year are 372.9% and 25.6%, respectively (read more: 5 Liquid Stocks Poised to Provide Encouraging Returns).
Corcept Therapeutics Incorporated (CORT - Free Report) is a pharmaceutical company with shares priced at $5.48. The company’s estimated earnings growth rate for the current and next year are 266.7% and 440%, respectively (read more: Bet on These 5 Profitable Stocks for Big Returns).
Francesca's Holdings Corporation operates a chain of retail boutiques. The stock price stands at $15.27. The company’s estimated earnings growth rate for the current and next year are 8.9% and 11.6%, respectively.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Lifeway Foods Inc. (LWAY - Free Report) manufactures and sells probiotic, cultured and functional dairy health food products. The company’s shares are priced at $13.50. Lifeway Foods’ estimated earnings growth rate for the current and next year are 216.7% and 17.1%, respectively (read more: Surging Earnings Estimates Signal Good News for Lifeway Foods).
Now See Our Private Investment Ideas
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4 Growth Stocks at Low Prices to Counter the Market Slump
The last trading session has been a massacre, with all 30 blue-chip companies closing in the red and all 10 sectors of the S&P 500 cohort ending in the negative territory. Fresh signs that the Fed could back away from an easy-money policy along with the slump in oil prices led to the sell-off.
However, San Francisco Fed President John Williams believes that the economy is doing just fine. Consumer outlays and sentiments remain bright spots, which may strengthen the economy in the near term. Hence, it will be prudent to invest in low-cost growth stocks which should get a boost once the broader market recognizes their full potential. Moreover, low priced stocks have greater potential for price appreciation and returns, in contrast to expensive stocks.
Stocks Post Steepest Decline Since Brexit
U.S. stocks suffered their worst decline on Sep 9 since the U.K.’s decision to exit the European Union. The Dow Jones Industrial Average tanked nearly 400 points, or 2.1%, to 18085.45. The S&P 500 declined 53.49 points, or 2.5%, to 2,127.81, its biggest one-day drop since late June.
Rout in equities pushed both the Dow and the S&P 500 below their 50-day moving averages. Also, the CBOE Volatility Index (VIX) surged 39% to 17.50 on Sep 9, its highest one-day jump since Jun 24. Even though a reading above 20 is considered alarming, Friday’s climb is significant, considering that the index was near 12 for a sustained period.
Fed Rate Hike Fears Loom
Possibility of a rate hike in the near term, thanks to hawkish comments from Boston Fed President Eric Rosengren, led to such massive losses. Friday’s slide indicated that the market isn’t completely prepared for a rate hike, which could further lead to increased gyrations.
Rosengren backs a gradual rate hikes as he believes that waiting too long might affect some asset markets like commercial real estate. He believes that “a reasonable case can be made for continuing to pursue a gradual normalization of monetary policy”.
Defensive plays such as utilities led the losses on Friday, declining more than 3%. Higher interest rates aren’t good for such stocks as it will increase cost of capital and decrease profitability (read more: 5 Utility Stocks to Beat the September Blues).
Oil Tanks on Fears of Oversupply
Energy shares plunged close to 3% amid sharp drop in crude-oil futures. Oil prices fell as investors remain skeptic about a large drop in stockpiles on Sep 8.
According to the U.S. Energy Information Administration, domestic crude inventories dropped 14.5 million barrel for the week ended Sep 2, the steepest fall since 1999. But, traders and money managers view such a plunge as a result of inclement weather conditions that curtailed production and prevented imports into the U.S. Gulf Coast (read more: 5 Energy Stocks to Buy with Incredible Momentum).
Consumer Spending Boosts Growth
Amid such widespread pessimism, the service sector expanded at the slowest pace in August since 2010, manufacturing activity contracted and pace of hiring slowed down. Such developments have led many to question if the economy’s recovery is wavering. But, comments from Williams have dismissed such concerns. He said that unemployment is likely to fall from the current level of 4.9% to 4.5% next year.
The Fed’s Beige Book has already showed that most of the districts signaled “that national economic activity continued to expand at a modest pace” during the July-August period despite the Brexit selloff. Meanwhile, consumer spending rose for the fourth straight month in July, a sign that domestic consumption could continue to drive U.S. economic growth in the second half of the year.
Consumer confidence also surged during August, indicating that the economy is on the recovery path after a dismal show during the first half of the year. In August, the consumer confidence index increased 4.4 points to 101.1, the highest in 11 months.
4 Low-Priced Growth Picks
Robust household spending coupled with upbeat consumer sentiment make us believe that the U.S. economy is resilient and will strengthen in the near term. Since the long term bodes well for stocks after the initial dip, it will be wise to invest in low-priced growth stocks. Such stocks will amplify returns, since a small rise in their price may mean a greater percentage gain. Moreover, by purchasing stocks right after a dip, investors are essentially buying shares at a discounted price.
We have chosen four low-priced growth stocks that flaunt a Zacks Rank #1 (Strong Buy) and have a Growth Style Score of ‘A.’ Our research shows that stocks with Growth Style Scores of ‘A’ when combined with a Zacks Rank #1 offer the best investment opportunities in the growth investing space. For a more in-depth understanding, check out our Style Score System.
Such stocks are priced below $20. In this case, even a $1 increase in the stock price may mean a 5% appreciation to the portfolio.
Oclaro, Inc. manufactures and markets lasers and optical components. The company’s stock is priced at $8.20. The company’s estimated earnings growth rate for the current and next year are 372.9% and 25.6%, respectively (read more: 5 Liquid Stocks Poised to Provide Encouraging Returns).
Corcept Therapeutics Incorporated (CORT - Free Report) is a pharmaceutical company with shares priced at $5.48. The company’s estimated earnings growth rate for the current and next year are 266.7% and 440%, respectively (read more: Bet on These 5 Profitable Stocks for Big Returns).
Francesca's Holdings Corporation operates a chain of retail boutiques. The stock price stands at $15.27. The company’s estimated earnings growth rate for the current and next year are 8.9% and 11.6%, respectively.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Lifeway Foods Inc. (LWAY - Free Report) manufactures and sells probiotic, cultured and functional dairy health food products. The company’s shares are priced at $13.50. Lifeway Foods’ estimated earnings growth rate for the current and next year are 216.7% and 17.1%, respectively (read more: Surging Earnings Estimates Signal Good News for Lifeway Foods).
Now See Our Private Investment Ideas
While the above ideas are being shared with the public, other trades are hidden from everyone but selected members. Would you like to peek behind the curtain and view them? Starting today, for the next month, you can follow all Zacks' private buys and sells in real time from value to momentum . . . from stocks under $10 to ETF and option moves . . . from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors. Click here for Zacks' secret trades >>