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Once again global growth fears are weighing on the stock market sentiment, causing buying opportunities for investors. This is especially true as bouts of data showing weakness on the global economic front triggered heavy losses at the end of last week.
Additionally, investors continued to be jittery over the inversion of the yield curve, which historically signals an upcoming recession. Further, Brexit and a cloud of uncertainty still gripping the U.S.-China trade deal remained an overhang on the stocks (read: 4 Safe Haven ETFs to Escape Recession Warnings).
However, long-term fundamentals stay intact, given the growing economy, rising wages, a higher consumer confidence and the rebound in oil prices. Notably, consumers seem more optimistic than they did at the onset of the year as indicated by the latest University of Michigan data. The consumer sentiment index increased to 97.8 from 93.8 in February and 91.2 in January - the lowest level since October 2016. The U.S. housing market has also shown a strong turnaround since the start of this year. Record share buybacks and dividends are also adding to the strength.
Given the bullish fundamentals, the dips might charge up investors to snap up stocks and cheap ETFs for outsized gains in the coming weeks.
How to Find Bargain ETFs?
Using our database, we first selected ETFs with a Zacks Rank #1 (Strong Buy) or 2 (Buy). This is because these ranks suggest the strengthening fundamentals and the superior weighting methodologies that could allow them to lead higher than their counterparts in a booming market. Secondly, we tapered the list to funds with lower P/E ratio than 16.29 for the broad market fund (SPY - Free Report) .
Here are the five ETFs that are currently undervalued and could generate solid returns when the market regains strength.
With AUM of $23.2 billion, this is an ultra-popular ETF targeting the broad financial segment and follows the Financial Select Sector Index. It holds 68 stocks in its basket with a double-digit allocation to the top two firms, namely Berkshire Hathaway Inc. (BRK.B - Free Report) and JPMorgan Chase (JPM - Free Report) . The ETF charges 13 bps in annual fees and has a Zacks ETF Rank #2 (read: Fear an Inverted Yield Curve? Short Financial Stocks With ETFs).
iShares Edge MSCI USA Value Factor ETF (VLUE - Free Report) — P/E Ratio: 12.33
With AUM of $3.4 billion, this fund offers exposure to 147 large and mid-cap U.S. stocks with lower valuations based on fundamentals. Here, information technology takes the top spot at 22.4% while healthcare and financials round off the next positions with a double-digit exposure each. It charges 15 bps in annual fees and has a Zacks ETF Rank #1.
First Trust Materials AlphaDEX Fund (FXZ - Free Report) — P/E Ratio: 13.01
This product offers an exposure to the materials segment of the broad U.S. market index by tracking the StrataQuant Materials Index. It holds 51 stocks in its basket with none of these accounting for more than 3.61% share. The fund has accumulated $140.1 million in its asset base and charges 64 bps in annual fees. It has a Zacks ETF Rank #2.
U.S. Global Jets ETF (JETS - Free Report) — P/E Ratio: 13.16
This fund provides exposure to the global airline industry including the airline operators and manufacturers from all over the world by tracking the U.S. Global Jets Index. In total, the product holds 34 securities and charges 60 bps in annual fees. It has gathered $68 million in its asset base and is a Zacks #2 Ranked ETF (read: How to Invest Like Warren Buffet With ETFs).
SPDR S&P 400 Mid Cap Value ETF MDYV — P/E Ratio: 13.47
With AUM of $1.6 billion, this ETF offers pure exposure to the mid-cap value segment of the U.S. equity market by tracking the S&P Mid Cap 400 Value Index. Holding 294 stocks in its basket, the financial sector takes the largest share at 22.7% while industrials, consumer discretionary and information technology also receive a double-digit exposure each. The fund charges 15 bps in annual fees and is a #2 Ranked ETF.
How to Find Bargain Stocks?
For this, we have used our Zacks Stock Screener and selected stocks with a Zacks Rank #1 or 2 and a VGM Style Score of B or better. A top rank suggests rising earnings estimates, indicative of an optimistic view on earnings by analysts. Chances of an outperformance are therefore high. Then we looked for stocks having a low P/E than the S&P 500 index (20.91), a double-digit estimated earnings growth rate for this year, and which belongs to a top-ranked Zacks industry.
Finally, we arrive at the five stocks that are cheap and have the potential to deliver hefty returns with lower volatility.
Based in Evansville, United States, OneMain Holdings is a consumer financial services holding company. The stock has an expected earnings growth rate of 11.7% for this year and belongs to a top-ranked Zacks industry (top 28%). It currently has a Zacks Rank #2 and a top VGM Score of A.
Located in Shangrao, the People's Republic of China, JinkoSolar is a solar product manufacturer with operations in Jiangxi Province and Zhejiang Province in China. It has an expected earnings growth rate of 80.49% for the ongoing year and belongs to the top-ranked Zacks Industry (top 5%). The stock sports a Zacks Rank #1 and has an impressive VGM Score of B. You can see the complete list of today’s Zacks #1 Rank stocks here.
Headquartered in Rio de Janeiro, Brazil, Vale SA is a mining company engaged in the mining of iron ore and pellets, nickel, manganese and ferro-alloys, gold, nickel, copper, kaolin, bauxite, alumina, aluminum and potash. Its earnings are projected to grow 42.76% in 2019. The stock has a Zacks Rank #1 and a VGM Score of A. It falls under the top-ranked Zacks Industry (top 1%).
Based in Stamford, CT, Synchrony Financial is a consumer financial services company that offers private label credit cards, dual cards and small and medium-sized business credit products; promotional financing for consumer purchases including installment loans and promotional financing to consumers. The stock has an estimated earnings growth of 16.84% for this year. It has a Zacks Rank #2 and a VGM Score of A. It is categorized under the top-ranked Zacks Industry (top 17%) (read: Fear an Inverted Yield Curve? Short Financial Stocks With ETFs).
Domiciled in Westport, CT, Terex Corporation is a global manufacturer of lifting and material processing products and services that deliver lifecycle solutions to maximize customer returns on investment. The company’s earnings are expected to surge 39.48% this year. The stock has a Zacks Rank #1 and a VGM Score of A. It falls under the top-ranked Zacks Industry (top 9%).
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Looking to Buy the Dips? 5 ETF & Stock Picks
Once again global growth fears are weighing on the stock market sentiment, causing buying opportunities for investors. This is especially true as bouts of data showing weakness on the global economic front triggered heavy losses at the end of last week.
Additionally, investors continued to be jittery over the inversion of the yield curve, which historically signals an upcoming recession. Further, Brexit and a cloud of uncertainty still gripping the U.S.-China trade deal remained an overhang on the stocks (read: 4 Safe Haven ETFs to Escape Recession Warnings).
However, long-term fundamentals stay intact, given the growing economy, rising wages, a higher consumer confidence and the rebound in oil prices. Notably, consumers seem more optimistic than they did at the onset of the year as indicated by the latest University of Michigan data. The consumer sentiment index increased to 97.8 from 93.8 in February and 91.2 in January - the lowest level since October 2016. The U.S. housing market has also shown a strong turnaround since the start of this year. Record share buybacks and dividends are also adding to the strength.
Given the bullish fundamentals, the dips might charge up investors to snap up stocks and cheap ETFs for outsized gains in the coming weeks.
How to Find Bargain ETFs?
Using our database, we first selected ETFs with a Zacks Rank #1 (Strong Buy) or 2 (Buy). This is because these ranks suggest the strengthening fundamentals and the superior weighting methodologies that could allow them to lead higher than their counterparts in a booming market. Secondly, we tapered the list to funds with lower P/E ratio than 16.29 for the broad market fund (SPY - Free Report) .
Here are the five ETFs that are currently undervalued and could generate solid returns when the market regains strength.
Financial Select Sector SPDR (XLF - Free Report) — P/E Ratio: 11.6
With AUM of $23.2 billion, this is an ultra-popular ETF targeting the broad financial segment and follows the Financial Select Sector Index. It holds 68 stocks in its basket with a double-digit allocation to the top two firms, namely Berkshire Hathaway Inc. (BRK.B - Free Report) and JPMorgan Chase (JPM - Free Report) . The ETF charges 13 bps in annual fees and has a Zacks ETF Rank #2 (read: Fear an Inverted Yield Curve? Short Financial Stocks With ETFs).
iShares Edge MSCI USA Value Factor ETF (VLUE - Free Report) — P/E Ratio: 12.33
With AUM of $3.4 billion, this fund offers exposure to 147 large and mid-cap U.S. stocks with lower valuations based on fundamentals. Here, information technology takes the top spot at 22.4% while healthcare and financials round off the next positions with a double-digit exposure each. It charges 15 bps in annual fees and has a Zacks ETF Rank #1.
First Trust Materials AlphaDEX Fund (FXZ - Free Report) — P/E Ratio: 13.01
This product offers an exposure to the materials segment of the broad U.S. market index by tracking the StrataQuant Materials Index. It holds 51 stocks in its basket with none of these accounting for more than 3.61% share. The fund has accumulated $140.1 million in its asset base and charges 64 bps in annual fees. It has a Zacks ETF Rank #2.
U.S. Global Jets ETF (JETS - Free Report) — P/E Ratio: 13.16
This fund provides exposure to the global airline industry including the airline operators and manufacturers from all over the world by tracking the U.S. Global Jets Index. In total, the product holds 34 securities and charges 60 bps in annual fees. It has gathered $68 million in its asset base and is a Zacks #2 Ranked ETF (read: How to Invest Like Warren Buffet With ETFs).
SPDR S&P 400 Mid Cap Value ETF MDYV — P/E Ratio: 13.47
With AUM of $1.6 billion, this ETF offers pure exposure to the mid-cap value segment of the U.S. equity market by tracking the S&P Mid Cap 400 Value Index. Holding 294 stocks in its basket, the financial sector takes the largest share at 22.7% while industrials, consumer discretionary and information technology also receive a double-digit exposure each. The fund charges 15 bps in annual fees and is a #2 Ranked ETF.
How to Find Bargain Stocks?
For this, we have used our Zacks Stock Screener and selected stocks with a Zacks Rank #1 or 2 and a VGM Style Score of B or better. A top rank suggests rising earnings estimates, indicative of an optimistic view on earnings by analysts. Chances of an outperformance are therefore high. Then we looked for stocks having a low P/E than the S&P 500 index (20.91), a double-digit estimated earnings growth rate for this year, and which belongs to a top-ranked Zacks industry.
Finally, we arrive at the five stocks that are cheap and have the potential to deliver hefty returns with lower volatility.
OneMain Holdings Inc. (OMF - Free Report) — P/E Ratio: 5.63
Based in Evansville, United States, OneMain Holdings is a consumer financial services holding company. The stock has an expected earnings growth rate of 11.7% for this year and belongs to a top-ranked Zacks industry (top 28%). It currently has a Zacks Rank #2 and a top VGM Score of A.
JinkoSolar Holding Company Limited (JKS - Free Report) — P/E Ratio: 5.79
Located in Shangrao, the People's Republic of China, JinkoSolar is a solar product manufacturer with operations in Jiangxi Province and Zhejiang Province in China. It has an expected earnings growth rate of 80.49% for the ongoing year and belongs to the top-ranked Zacks Industry (top 5%). The stock sports a Zacks Rank #1 and has an impressive VGM Score of B. You can see the complete list of today’s Zacks #1 Rank stocks here.
VALE S.A. (VALE - Free Report) — P/E Ratio: 6.21
Headquartered in Rio de Janeiro, Brazil, Vale SA is a mining company engaged in the mining of iron ore and pellets, nickel, manganese and ferro-alloys, gold, nickel, copper, kaolin, bauxite, alumina, aluminum and potash. Its earnings are projected to grow 42.76% in 2019. The stock has a Zacks Rank #1 and a VGM Score of A. It falls under the top-ranked Zacks Industry (top 1%).
Synchrony Financial (SYF - Free Report) — P/E Ratio: 7.29
Based in Stamford, CT, Synchrony Financial is a consumer financial services company that offers private label credit cards, dual cards and small and medium-sized business credit products; promotional financing for consumer purchases including installment loans and promotional financing to consumers. The stock has an estimated earnings growth of 16.84% for this year. It has a Zacks Rank #2 and a VGM Score of A. It is categorized under the top-ranked Zacks Industry (top 17%) (read: Fear an Inverted Yield Curve? Short Financial Stocks With ETFs).
Terex Corporation (TEX - Free Report) — P/E Ratio: 8.40
Domiciled in Westport, CT, Terex Corporation is a global manufacturer of lifting and material processing products and services that deliver lifecycle solutions to maximize customer returns on investment. The company’s earnings are expected to surge 39.48% this year. The stock has a Zacks Rank #1 and a VGM Score of A. It falls under the top-ranked Zacks Industry (top 9%).
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>