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As North Korean fears have abated, the Wall Street has resumed its uptrend on the back of strengthening fundamentals. Strong corporate earnings, still lower interest rates, and improving health of economies around the world have acted as tailwind to the stock market this year and will likely to continue to do so (read: 4 Hot ETF Charts of Q2 Earnings Season).
Additionally, the economy has been on a solid growth path buoyed by an impressive labor market, increase in wages, and higher consumer spending. U.S. GDP growth expanded 2.6% annually in the second quarter, which is double the first-quarter growth of 1.2% and represents the fastest growth since the third quarter of last year when the economy grew 2.8%. Notably, this 96-month growth confirms the eight-year expansion since mid-2009 — the third-longest economic winning streak in American history behind March 1991 to March 2001 (120 months) and February 1961 to December 1969 (106 months).
Consumers also appear to be more optimistic as we enter into the second half of the year. The Consumer Confidence Index, as indicated by the Conference Board, surged to a 16-year high of 121.1 in July from the revised 117.3 in June and is much above the expected 116.5. Further, retail sales recorded the biggest increase in seven months in July. Moreover, a weaker dollar and a rebound in oil price are adding to the strength (read: Retail Sales Off to a Great Start to Q3: ETFs to Buy).
However, an uncertain Fed policy and fears over the implementation of President Donald Trump’s pro-growth agenda continue to weigh on the stocks. The minutes from the Fed’s July meeting reveal that policymakers are on track to unwind its $4.5 trillion balance sheet but are extremely cautious on weak inflation that might put the third interest rates hike for this year off the table.
Given the bullish trend amid bouts of volatility, investors should continue to bet on the equity world with ETFs and stocks that have been selling at a bargain price. Investors could definitely look at these products for outperformance in the coming months. For them, we have highlighted six ETFs and six stocks that are cheap at the current levels.
How to Find Bargain ETFs?
Using our database, first we selected the ETFs with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). This is because these ranks suggest strengthening fundamentals and superior weighting methodologies that could allow them to trade above than their cousins in a booming market. Then we narrowed down the list to funds having lower P/E ratio than the broad market fund (SPY), expense ratio of less than 0.50% and dividend yield of at least 2%. Notably, SPY is currently selling at P/E of 18.67 (as per etfdb.com).
Here are the five ETFs that are currently undervalued and could generate solid returns in a market trending upward.
This fund seeks to track the Russell 1000 Yield Focused Factor Index, which measures the performance of a large cap securities demonstrating a combination of core factors (high value, high quality, and low size characteristics), with a focus factor comprising high yield characteristics.
For this, we have used our Zacks stock screener and have selected stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy). This is because a top rank suggests rising earnings estimates, which indicate an optimistic view on earnings by analysts and hence higher chances of outperformance. Then we looked for stocks having a low P/E than the S&P 500 index (24.61), double-digit estimated earnings growth rate for this year and dividend yield of at least 2%.
Finally, we arrive at the five stocks that are cheap and have the potential to deliver higher returns with lower volatility.
This Switzerland-based company is engaged in providing financial services to private, corporate and institutional clients. It offers retail banking, corporate and institutional banking, wealth management, asset management and investment banking.
This Israel-based company provides proprietary application development, business process integration, and vertical software solutions and related professional services in Israel and internationally.
Image: Bigstock
5 ETFs & Stocks on Sale
As North Korean fears have abated, the Wall Street has resumed its uptrend on the back of strengthening fundamentals. Strong corporate earnings, still lower interest rates, and improving health of economies around the world have acted as tailwind to the stock market this year and will likely to continue to do so (read: 4 Hot ETF Charts of Q2 Earnings Season).
Additionally, the economy has been on a solid growth path buoyed by an impressive labor market, increase in wages, and higher consumer spending. U.S. GDP growth expanded 2.6% annually in the second quarter, which is double the first-quarter growth of 1.2% and represents the fastest growth since the third quarter of last year when the economy grew 2.8%. Notably, this 96-month growth confirms the eight-year expansion since mid-2009 — the third-longest economic winning streak in American history behind March 1991 to March 2001 (120 months) and February 1961 to December 1969 (106 months).
Consumers also appear to be more optimistic as we enter into the second half of the year. The Consumer Confidence Index, as indicated by the Conference Board, surged to a 16-year high of 121.1 in July from the revised 117.3 in June and is much above the expected 116.5. Further, retail sales recorded the biggest increase in seven months in July. Moreover, a weaker dollar and a rebound in oil price are adding to the strength (read: Retail Sales Off to a Great Start to Q3: ETFs to Buy).
However, an uncertain Fed policy and fears over the implementation of President Donald Trump’s pro-growth agenda continue to weigh on the stocks. The minutes from the Fed’s July meeting reveal that policymakers are on track to unwind its $4.5 trillion balance sheet but are extremely cautious on weak inflation that might put the third interest rates hike for this year off the table.
Given the bullish trend amid bouts of volatility, investors should continue to bet on the equity world with ETFs and stocks that have been selling at a bargain price. Investors could definitely look at these products for outperformance in the coming months. For them, we have highlighted six ETFs and six stocks that are cheap at the current levels.
How to Find Bargain ETFs?
Using our database, first we selected the ETFs with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). This is because these ranks suggest strengthening fundamentals and superior weighting methodologies that could allow them to trade above than their cousins in a booming market. Then we narrowed down the list to funds having lower P/E ratio than the broad market fund (SPY), expense ratio of less than 0.50% and dividend yield of at least 2%. Notably, SPY is currently selling at P/E of 18.67 (as per etfdb.com).
Here are the five ETFs that are currently undervalued and could generate solid returns in a market trending upward.
iShares Edge MSCI USA Value Factor ETF (VLUE - Free Report)
This fund provides exposure to large and mid-cap stocks with lower valuations based on fundamentals. It follows the MSCI USA Enhanced Value Index.
Zacks ETF Rank: #3
P/E Ratio: 14.21
Expense Ratio: 0.15%
Dividend Yield: 2.1%
Global X SuperDividend U.S. ETF (DIV - Free Report)
This fund provides exposure to the highest dividend yielding U.S. securities by tracking the INDXX SuperDividend U.S. Low Volatility Index.
Zacks ETF Rank: #3
P/E Ratio: 14.95
Expense Ratio: 0.45%
Dividend Yield: 6.24%
PowerShares Russell Top 200 Pure Value Portfolio
This ETF offers pure exposure to the large cap value segment of the U.S. equity market by tracking the Russell Top 200 Pure Value Index (read: 5 Ultra-Cheap Value ETFs to Beat the Choppy Market).
Zacks ETF Rank: #3
P/E Ratio: 15.38
Expense Ratio: 0.39%
Dividend Yield: 2.36%
SPDR Russell 1000 Yield Focus ETF (ONEY - Free Report)
This fund seeks to track the Russell 1000 Yield Focused Factor Index, which measures the performance of a large cap securities demonstrating a combination of core factors (high value, high quality, and low size characteristics), with a focus factor comprising high yield characteristics.
Zacks ETF Rank: #3
P/E Ratio: 16.10
Expense Ratio: 0.20%
Dividend Yield: 3.13%
SPDR S&P 500 Value ETF (SPYV - Free Report)
This ETF offers pure exposure to the large cap value segment of the U.S. equity market by tracking the S&P 500 Pure Value Index.
Zacks ETF Rank: #3
P/E Ratio: 16.14
Expense Ratio: 0.15%
Dividend Yield: 2.30%
How to Find Bargain Stocks?
For this, we have used our Zacks stock screener and have selected stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy). This is because a top rank suggests rising earnings estimates, which indicate an optimistic view on earnings by analysts and hence higher chances of outperformance. Then we looked for stocks having a low P/E than the S&P 500 index (24.61), double-digit estimated earnings growth rate for this year and dividend yield of at least 2%.
Finally, we arrive at the five stocks that are cheap and have the potential to deliver higher returns with lower volatility.
SK Telecom Co. Ltd. (SKM - Free Report)
This South Korea-based company is the world's first commercial CDMA digital cellular service (read: What Lies Ahead for Telecom ETFs?).
Zacks Stock Rank: #1
P/E Ratio: 8.62
Fiscal 2017 Earnings Growth Rate: 31.06%
Dividend Yield: 2.50%
UBS AG (UBS - Free Report)
This Switzerland-based company is engaged in providing financial services to private, corporate and institutional clients. It offers retail banking, corporate and institutional banking, wealth management, asset management and investment banking.
Zacks Stock Rank: #2
P/E Ratio: 11.48
Fiscal 2017 Earnings Growth Rate: 71.26%
Dividend Yield: 3.51%
Triton International Limited
This Bermuda-based company offers acquisition, leasing, re-leasing, and sale of intermodal containers.
Zacks Stock Rank: #1
P/E Ratio: 13.47
Fiscal 2017 Earnings Growth Rate: 197.41%
Dividend Yield: 5.16%
Kronos Worldwide Inc. (KRO - Free Report)
This Texas-based company is a global producer and marketer of value-added titanium dioxide pigments (read: Earnings or Revenue-Weighted ETFs: Finding the Q2 Winner).
Zacks Stock Rank: #1
P/E Ratio: 13.40
Fiscal 2017 Earnings Growth Rate: 354.84%
Dividend Yield: 3.17%
Magic Software Enterprises Ltd. (MGIC - Free Report)
This Israel-based company provides proprietary application development, business process integration, and vertical software solutions and related professional services in Israel and internationally.
Zacks Stock Rank: #2
P/E Ratio: 14.12
Fiscal 2017 Earnings Growth Rate: 29.55%
Dividend Yield: 2.11%
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