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5 Stocks to Buy as U.S. Dollar Surges to Three-Month High

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On Tuesday, the U.S. dollar hit a new three-month high versus a basket of currencies. The rise of the greenback was primarily attributable to a surge in the 10-year Treasury yield which hit a more than four year high on Monday. This, in turn, was due to multiple factors, primarily the specter of rising inflation levels.

Meanwhile, a number of indicators show that the U.S. economy remains on a firm footing. The dollar’s surge and a strong U.S. economy would make domestically focused stocks better options than their multinational peers. Adding such stocks to your portfolio makes good sense at this time.

Bond Yield Spike Powers Dollar’s Ascent

On Monday, the 10-year yield touched 2.998%, its highest level in more than four years. This spike was a product of concerns emanating from mounting government debt, rising inflation and an increase in oil and commodity prices. The U.S. 10-year bond yield moderated marginally on Tuesday, falling to 2.964% in Asian trade.

The jump in 10-year bond yield increased the attractiveness of the U.S. dollar versus other currencies such as the Euro and Yen. The easing of trade-related concerns has also boosted the dollar. On Saturday, U.S. Treasury Secretary Steven Mnuchin stated that he was likely to visit China, a move which could go a long way toward reducing tensions with the United States.

U.S. Economic Growth Likely to Remain Strong

Meanwhile, analysts at Nomura (NMR) think the U.S. economy could expand substantially over 2018 and 2019. Recently instituted tax cuts and a rise in government expenditure are likely to fuel growth during this period. And evidence of such growth has become available even before the release of the first reading on first-quarter GDP on Friday.

Coming to recently released economic data, the leading indicators index increased by 0.3% in March. Also, the flash IHS Markit U.S. manufacturing PMI increased to 56.5 in April, marking a three-and-a-half-year high. Retail sales also rebounded in March, ending a losing streak of three back-to-back declines. Meanwhile, unemployment is static at a 17-year low even as wage increases inch higher.

Our Choices

With trade-related worries easing and bond yields on the rise, the dollar is likely to creep higher in the days ahead. In such an event, companies which conduct all their business within the United States are likely to be in an advantageous position compared to those with substantial overseas operations.

Domestically focused companies are likely to gain further with an uptick in GDP. This is why it may be a good idea to pick such stocks. At the same time, selecting winning stocks is a difficult task.

This is where our VGM Score comes in. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM Score. 

We have narrowed down our search to the following stocks based on a good Zacks Rank and VGM score.

American Public Education, Inc. (APEI - Free Report) is an online and campus-based provider of higher education focused primarily on serving the military and public service communities.

American Public Education has a Zacks Rank #1 (Strong Buy) and a VGM Score of B. The company has expected earnings growth of 18.4% for the current year. The Zacks Consensus Estimate for the current year has improved by 40.4% over the last 60 days.

BancFirst Corporation (BANF - Free Report) is a bank holding company for BancFirst which operates primarily in Oklahoma.

BancFirst has a VGM Score of B. The company has expected earnings growth of 24.1% for the current year. The Zacks Consensus Estimate for the current year has improved by 1.8% over the last 60 days. The stock has a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

J. Alexander's Holdings, Inc. owns and operates full-service dining restaurants in the United States.

J. Alexander's Holdings has a Zacks Rank #2 (Buy) and a VGM Score of A. The company’s expected earnings growth for the current year is 5.7%.  The Zacks Consensus Estimate for the current year has improved by 12% over the last 60 days.

Monro, Inc. (MNRO - Free Report) is a provider of tire sales and services and automotive undercar repair in the United States.

Monro has a Zacks Rank #2 and a VGM Score of B. The company’s expected earnings growth for the current year is 27.8%. The Zacks Consensus Estimate for the current year has improved by 1.5% over the last 30 days.

Vistra Energy Corp. (VST - Free Report) is an energy company which offers electricity and power generation, distribution and transmission solutions in Texas.

Vistra Energy has a Zacks Rank #2 and a VGM Score of B. The company’s expected earnings growth for the current year is 64.1%. The Zacks Consensus Estimate for the current year has improved by 77% over the last 30 days.

Will You Make a Fortune on the Shift to Electric Cars?

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

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