The markets have hit a purple patch with the S&P 500 scaling to an all-time high, buoyed by a rosy U.S. macroeconomic data backdrop. After the lows post Brexit, the S&P 500 index have bounced back with 0.3% returns for investors on a year to date (YTD) basis. Further, on Jul 12, the index rallied 0.7%, close on the heels of the release of encouraging domestic labor market data.
After reporting strong numbers on manufacturing, services, consumer confidence, and jobless claims for the month of June, investors are heartened by the positive growth outlook for the year. The Bureau of Labor Statistics reported that the U.S. economy has added 287,000 jobs, topping all expectations. However, the lower spread between short-term bills and 10-year bond is something to be wary of.
What Should You Do?
In the wake of such mayhem, an investor might be confused about whether to park his money at the moment. Also, the earnings estimates for the second quarter of 2016 fail to impress. As per the Zacks trend report, total earnings are expected to be down 6.2% on 0.6% lower revenues, which will mark the 5th successive quarter of negative earnings growth for the S&P 500 index. Nevertheless, this quarter will be an improvement over the preceding ones. Also, as per recent Thomson Reuters data, the ratio of this year’s earnings forecast that were raised to that being lowered is the highest since 2011. This can only mean one thing – the Earnings Recession could bottom out over the rest of the year, which is great news for investors. We believe that at current levels, the market has already factored in the second-quarter expectations with plenty of room for gain.
Stocks at All-Time Highs
A stock, at its all-time high, is an attractive deal at an escalated price. Thus, the dilemma for investors is to whether they should enter the market right then or wait for a better bargain. Either way, it isn’t the right approach as investors should opt for stocks that are fundamentally strong and have bright prospects, regardless of their current valuation. Remember, market can and does misprice a stock frequently. Thus, if you believe in shunning stocks that are near their peaks, your investing ideals need to be reconsidered.
Our proven Zacks Rank System can help you identify stocks that are fundamentally sound and are poised for handsome returns in the days ahead. A Zacks Rank #1 (Strong Buy) or 2 (Buy) are great indicators of when the prospects of the company are beginning to improve. Thus, regardless of their all-time highs, we focus on stocks with favorable ranks and compelling prospects.
Based on the criteria mentioned above, we have handpicked 5 stocks for you to consider.
Charter Communications, Inc. (CHTR - Free Report) is a leading broadband communications company and the fourth largest cable operator in the U.S. The acquisitions of Time Warner Cable and Bright House are likely to benefit the company in terms of geographic expansion and operating cost synergies, which in turn, will boost its bottom line and free cash flow. The stock carries a Zacks Rank #2.
Intuit Inc. (INTU - Free Report) provides business and financial management solutions to wide range of customers. Intuit’s shares have been on the rise ever since the company declared better-than-expected third-quarter fiscal 2016 results on May 24, 2016. Also, an encouraging fourth-quarter fiscal 2016 outlook, a strong cash position and share repurchase drove Intuit shares higher. Intuit currently carries a Zacks Rank #2.
Communications Sales & Leasing, Inc. is a real estate investment trust primarily engaged in the acquisition and leasing of communication distribution systems. The company recently acquired Tower Cloud, Inc. for $230 million which will help expand its fiber miles and boost its small cell and dark fiber businesses. Presently, Communications Sales & Leasing carries a Zacks Rank #2.
NVIDIA Corporation (NVDA - Free Report) offers digital media processors and related software for a wide range of visual computing platforms. The company’s focus on GRID platforms can drive GPU adoption in data centers, lending it an advantage over its competitors. NVIDIA’s recently launched products – Tesla P100 GPU Accelerator, Tesla M10 GPU and NVIDIA GRID – are likely to capture a large share of the market, thanks to their lower capital and operational costs advantages. This is expected to boost its data center business revenues significantly. The company sports a Zacks Rank #1.
Lowe's Companies, Inc. (LOW - Free Report) is a Zacks Rank #2 stock in which retails home improvement products throughout the world. Lowe’s omni-channel endeavor, merchandising initiatives and strategic acquisitions have been fortifying its position in the home improvement sector. The company expects sales growth (including the 53rd week) of nearly 6% for fiscal 2016, with the 53rd week expected to boost sales by 1.5%.
The Bottom Line
At present, the market is near its all-time high and hence the valuations are not cheap. However, on the back of strong U.S. economic data, the market may be poised for further gains. Although the list above is not exhaustive, you can give our Zacks Stock Screener a try to find other stocks that may be great additions to your portfolio.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>