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Rally Set to Resume: Buy These 5 Value Picks on the Dip
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These are tough times for U.S. markets for sure. Investors are smarting from two straight weeks of losses and the Trump administration’s recent actions have only added to their worries. From frequent departures at Trump’s core team to heightened tensions with North Korea, surely markets have had much to worry about.
But do political events actually have a major impact on the bourses over a longer period? Jim Cramer certainly doesn’t think so. In a recent edition of his iconic Mad Money show, he explained that upheavals in Washington hardly mattered to markets.
Morgan Stanley (MS - Free Report) seem to be in agreement and believes that conditions for a Bull Run remain in place. This is why it makes for a smart move to buy value stocks on the dip and lie in wait of the next wave.
Two Straight Weeks of Losses
By Aug 18, markets had endured two straight weeks of losses. The Dow, S&P 500 and the Nasdaq had lost 1.4%, 2% and 2.3%, respectively, over this period. In fact, the Nasdaq has now posted four straight weeks of losses, losing in excess of 3%. The first week of losses was largely attributable to a further deterioration in U.S.-North Korea relations.
Then, on Aug 17, the S&P 500 declined more than 1%, suffering its worst daily loss in more than three months. It was only the third occasion this year that it had gained or lost in excess of 1%. Market watchers believe the session’s losses were largely attributable to speculation over Gary Cohn’s resignation from the position of chief economic advisor to President Trump.
Factors Propelling Bully Run Still in Place
Stocks ultimately inched upward on Aug 21, but the Nasdaq continued to trend lower. However, Morgan Stanley’s chief U.S. equity Strategist Michael Wilson classifies the Aug 17 selloff as only a “re-test” of the correction which occurred during the preceding week. A “re-test” is market parlance for a second drop which follows an initial drop and recovery. Only, on this occasion, prices are only trying to “re-test” the fresh low.
Wilson contends that a successful “re-test” happens only when optimism about price increases exists, a signal which he thinks has been noticed. Morgan Stanley also believes that the factors that power stocks remain firmly in place. These include a resilient economy and earnings growth, easy interest rates and steadily increasing inflation. A responsive Federal Reserve and fair valuations are other positives, according to Wilson.
Cramer, Wilson Ignore Political Events
What is worth noting is that Wilson’s set of factors propelling stock gains does not include government policies or legislative action. Politics seem to be only a distraction for investors and investment themes geared to White House policy have been largely set aside. Using this logic, the impact of events such as those which occurred on Aug 17 is limited to the short term.
Jim Cramer had expressed similar sentiments while discussing the fallout of Trump’s response to the Charlottesville incident and his decision to disband manufacturing councils. Or lack thereof, as was apparent when all major benchmarks traded higher even after these events. Cramer had also discounted the impact of political events. Instead, he too, ascribed markets’ strength to strong earnings performances, soft interest rates and steady inflation growth.
Our Choices
Ignoring the downturn of recent weeks, Morgan Stanley believes that factors powering stock market gains remain in place. This means that recent losses are only a temporary lull and the market rally could resume soon. This is why the financial major is urging investors to buy on the dip.
Buying value stocks on this dip looks like a smart option. Our selection is also backed by a good Zacks Value Score and Zacks Rank.
We narrowed down our choices with the help of our new style score system.
Our research shows that stocks with a Value Style Score of A or B when combined with a Zacks Rank #1 (Strong Buy) offer the best investment opportunities in the value investing space. You can seethe complete list of today's Zacks #1 Rank stocks here.
The Chemours Company (CC - Free Report) is a provider of performance chemicals on a global basis
Chemours has a Value Style Score of A. The forward price-to-earnings ratio (P/E) for the current financial year (F1) is 12.71, lower than the industry average of 15.32. It has a PEG ratio of 0.82, lower than the industry average of 1.99.
Ultra Clean Holdings, Inc. (UCTT - Free Report) is a developer and supplier of critical subsystems for the semiconductor capital equipment, flat panel, solar and medical device industries.
Ultra Clean Holdings has a Value Style Score of A. The stock has a P/E (F1) of 10.46x, lower than the industry average of 17.70. It has a PEG ratio of 0.70, lower than the industry average of 1.00.
Vishay Intertechnology, Inc. (VSH - Free Report) is a leading international manufacturer and supplier of discrete passive electronic components and discrete active electronic components, particularly resistors, capacitors, inductors, diodes and transistors.
Vishay Intertechnology has a Value Style Score of A. The stock a P/E (F1) of 12.57x, lower than the industry average of 14.71. It has a PEG ratio of 0.69, lower than the industry average of 3.97.
Lam Research Corp. (LRCX - Free Report) supplies wafer fabrication equipment and services to the semiconductor industry.
Lam Research has a Value Style Score of B. The stock has a P/E (F1) of 12.72x, compared with the industry average of 13.90. It has a PEG ratio of 0.74, lower than the industry average of 0.79.
Jazz Pharmaceuticals Public Limited Company (JAZZ - Free Report) is a specialty biopharmaceutical company with a focus on developing and commercializing drugs specifically targeting unmet medical needs.
Jazz Pharmaceuticals has a Value Style Score of B. The stock has a P/E (F1) of 15.30x, compares favorably to the industry average of -3.09. It has a PEG ratio of 0.87, lower than the industry average of 1.03.
Zacks' 10-Minute Stock-Picking Secret
Since 1988, the Zacks system has more than doubled the S&P 500 with an average gain of +25% per year. With compounding, rebalancing, and exclusive of fees, it can turn thousands into millions of dollars.
But here's something even more remarkable: You can master this proven system without going to a single class or seminar. And then you can apply it to your portfolio in as little as 10 minutes a month.
Image: Bigstock
Rally Set to Resume: Buy These 5 Value Picks on the Dip
These are tough times for U.S. markets for sure. Investors are smarting from two straight weeks of losses and the Trump administration’s recent actions have only added to their worries. From frequent departures at Trump’s core team to heightened tensions with North Korea, surely markets have had much to worry about.
But do political events actually have a major impact on the bourses over a longer period? Jim Cramer certainly doesn’t think so. In a recent edition of his iconic Mad Money show, he explained that upheavals in Washington hardly mattered to markets.
Morgan Stanley (MS - Free Report) seem to be in agreement and believes that conditions for a Bull Run remain in place. This is why it makes for a smart move to buy value stocks on the dip and lie in wait of the next wave.
Two Straight Weeks of Losses
By Aug 18, markets had endured two straight weeks of losses. The Dow, S&P 500 and the Nasdaq had lost 1.4%, 2% and 2.3%, respectively, over this period. In fact, the Nasdaq has now posted four straight weeks of losses, losing in excess of 3%. The first week of losses was largely attributable to a further deterioration in U.S.-North Korea relations.
Then, on Aug 17, the S&P 500 declined more than 1%, suffering its worst daily loss in more than three months. It was only the third occasion this year that it had gained or lost in excess of 1%. Market watchers believe the session’s losses were largely attributable to speculation over Gary Cohn’s resignation from the position of chief economic advisor to President Trump.
Factors Propelling Bully Run Still in Place
Stocks ultimately inched upward on Aug 21, but the Nasdaq continued to trend lower. However, Morgan Stanley’s chief U.S. equity Strategist Michael Wilson classifies the Aug 17 selloff as only a “re-test” of the correction which occurred during the preceding week. A “re-test” is market parlance for a second drop which follows an initial drop and recovery. Only, on this occasion, prices are only trying to “re-test” the fresh low.
Wilson contends that a successful “re-test” happens only when optimism about price increases exists, a signal which he thinks has been noticed. Morgan Stanley also believes that the factors that power stocks remain firmly in place. These include a resilient economy and earnings growth, easy interest rates and steadily increasing inflation. A responsive Federal Reserve and fair valuations are other positives, according to Wilson.
Cramer, Wilson Ignore Political Events
What is worth noting is that Wilson’s set of factors propelling stock gains does not include government policies or legislative action. Politics seem to be only a distraction for investors and investment themes geared to White House policy have been largely set aside. Using this logic, the impact of events such as those which occurred on Aug 17 is limited to the short term.
Jim Cramer had expressed similar sentiments while discussing the fallout of Trump’s response to the Charlottesville incident and his decision to disband manufacturing councils. Or lack thereof, as was apparent when all major benchmarks traded higher even after these events. Cramer had also discounted the impact of political events. Instead, he too, ascribed markets’ strength to strong earnings performances, soft interest rates and steady inflation growth.
Our Choices
Ignoring the downturn of recent weeks, Morgan Stanley believes that factors powering stock market gains remain in place. This means that recent losses are only a temporary lull and the market rally could resume soon. This is why the financial major is urging investors to buy on the dip.
Buying value stocks on this dip looks like a smart option. Our selection is also backed by a good Zacks Value Score and Zacks Rank.
We narrowed down our choices with the help of our new style score system.
Our research shows that stocks with a Value Style Score of A or B when combined with a Zacks Rank #1 (Strong Buy) offer the best investment opportunities in the value investing space. You can see the complete list of today's Zacks #1 Rank stocks here.
The Chemours Company (CC - Free Report) is a provider of performance chemicals on a global basis
Chemours has a Value Style Score of A. The forward price-to-earnings ratio (P/E) for the current financial year (F1) is 12.71, lower than the industry average of 15.32. It has a PEG ratio of 0.82, lower than the industry average of 1.99.
Ultra Clean Holdings, Inc. (UCTT - Free Report) is a developer and supplier of critical subsystems for the semiconductor capital equipment, flat panel, solar and medical device industries.
Ultra Clean Holdings has a Value Style Score of A. The stock has a P/E (F1) of 10.46x, lower than the industry average of 17.70. It has a PEG ratio of 0.70, lower than the industry average of 1.00.
Vishay Intertechnology, Inc. (VSH - Free Report) is a leading international manufacturer and supplier of discrete passive electronic components and discrete active electronic components, particularly resistors, capacitors, inductors, diodes and transistors.
Vishay Intertechnology has a Value Style Score of A. The stock a P/E (F1) of 12.57x, lower than the industry average of 14.71. It has a PEG ratio of 0.69, lower than the industry average of 3.97.
Lam Research Corp. (LRCX - Free Report) supplies wafer fabrication equipment and services to the semiconductor industry.
Lam Research has a Value Style Score of B. The stock has a P/E (F1) of 12.72x, compared with the industry average of 13.90. It has a PEG ratio of 0.74, lower than the industry average of 0.79.
Jazz Pharmaceuticals Public Limited Company (JAZZ - Free Report) is a specialty biopharmaceutical company with a focus on developing and commercializing drugs specifically targeting unmet medical needs.
Jazz Pharmaceuticals has a Value Style Score of B. The stock has a P/E (F1) of 15.30x, compares favorably to the industry average of -3.09. It has a PEG ratio of 0.87, lower than the industry average of 1.03.
Zacks' 10-Minute Stock-Picking Secret
Since 1988, the Zacks system has more than doubled the S&P 500 with an average gain of +25% per year. With compounding, rebalancing, and exclusive of fees, it can turn thousands into millions of dollars.
But here's something even more remarkable: You can master this proven system without going to a single class or seminar. And then you can apply it to your portfolio in as little as 10 minutes a month.
Learn the secret >>