Volatility returned to Wall Street last week, disrupting what had been an almost unprecedented climb to record highs for major U.S. bourses in recent times.
After a topsy-turvy trading session, stocks closed lower for the second day on Sep 4. The Dow, the S&P 500 and the Nasdaq were down 0.6%, 0.8% and 1.3%, respectively. In fact, the tech-laden Nasdaq slipped more than 6% in the last two trading sessions, mostly led by a decline in Apple’s shares. After reaching a market cap of $2 trillion, Apple tanked 8% on Sep 3, shedding $180 billion in a historic slide.
Wild swings in the shares of Alphabet, Amazon, Facebook and Microsoft also contributed to the broader market’s roller-coaster ride heading into the Labor Day weekend.
Few market pundits could have imagined such volatility among tech shares, especially after their recent rally that had helped the Nasdaq notch its 43rd record closing high of the year, on Sep 2. On the same day, the S&P 500 also registered its 22nd closing record of the year.
Bearish investors believe that tech valuations are stretched, given the stellar run witnessed since the Mar 23 lows, which eventually led to a sharp selloff in the last two trading sessions. Moreover, for such investors, the outlook for stocks looks more uncertain in the near future. After all, September traditionally has been a notoriously weak month for stocks, and October may also be rough with the Presidential election knocking at the door.
But there are bullish investors who continue to maintain their voracious appetite for tech stocks, as more customers continue to work and learn remotely amid the persistent rise in coronavirus cases. Further, bullish investors argue that Fed’s promise to keep interest rates low for a pretty long time and further inject money into various parts of the financial system along with perhaps another round of fiscal stimulus from the government will surely help the stock market scale northward. Notably, U.S. lawmakers are returning to work in September after a recess in August. They are widely expected to resume talks to end a gridlock on a new coronavirus stimulus package, which will eventually benefit both consumers and businesses.
Last but not the least, it’s quite natural to see several pullbacks over the first nine months of a new bull market. So, investors shouldn’t panic! Needless to say, since the current bull market started in March, there have only been two pullbacks of more than 5%. Thus, the market may see pullbacks in the near term as well, but investors should focus on the primary market trend, which is a steady upward movement.
SunTrust Advisory chief market strategist Keith Lerner further added the broader S&P 500 rose for the fifth straight month in August. And this has happened 27 times since 1950. So, what does it mean for the stock market? It is a good sign as it tends to imply that there are further gains ahead. For instance, in the previous 26 occasions, 96% of the time, stocks moved higher 12 months later.
But since the broader market struggles for direction at least recently, smart investors should simply look for stocks that provide superb risk-adjusted returns. The best way to go about doing this is by creating a portfolio of low-beta stocks, which are inherently less volatile than the markets they trade in. In this case, a low beta ranges from 0 to 1.
But even though low-beta stocks pose less risk, they provide lower returns. So, in order to boost your returns, we have zeroed in on stocks that have seen positive earnings estimate revision, usually in the past two-month period. Rising earnings estimates generally indicate that the stock will outperform the market in the near future. After all, earnings estimates are one of the most powerful metrics that measures the fundamental strength of the company. To top it, these stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
American Public Education, Inc. (APEI - Free Report) is an online provider of higher education, focused primarily on serving the military and public service communities. The stock currently has a beta of 0.69. The Zacks Consensus Estimate for its current-year earnings has moved up 34.1% over the past 60 days. The company’s expected earnings growth rate for the next quarter and year is 21.6% and 20.2%, respectively.
Central Garden Pet Company (CENT - Free Report) is looking forward to strengthening its position as one of the leading companies in the U.S. pet supplies and lawn and garden supplies space. The stock currently has a beta of 0.61. The Zacks Consensus Estimate for its current-year earnings has risen 21.1% over the past 60 days. The company’s expected earnings growth rate for the current year is 21.9%.
Deere Company (DE - Free Report) is currently the world’s largest producer of agricultural equipment. The stock currently has a beta of 0.99. The Zacks Consensus Estimate for its current-year earnings has climbed 22% over the past 60 days. The company’s expected earnings growth rate for the next year is 35.9%.
BJs Wholesale Club Holdings, Inc. (BJ - Free Report) has emerged as one of the preferred destinations for shoppers when it comes to essentials and other items. The stock currently has a beta of 0.41. The Zacks Consensus Estimate for its current-year earnings has moved 17.3% north over the past 60 days. The company’s expected earnings growth rate for the current year is 80.8%.
The Hottest Tech Mega-Trend of All
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