With the commencement of the final quarter of 2016, a year of surprises and uncertainty is nearing its end. So far, while continuing to exhibit a bullish streak, the markets faced volatility due to economic as well as political reasons.
However, the uncertainty still persists due to the upcoming November elections as well as the expected Fed rate hike in December. Moreover, formalization of the Brexit procedures is scheduled to start from next year.
Before finding stocks that are likely to perform well in the still uncertain market, let’s take a look at the major factors that impacted the year.
Fed Rate Hike
Just before the year began, in Dec 2015, the FOMC raised the interest rate by 0.25% after seven years of keeping it stable at zero. Moreover, the committee stated that further hikes would take place gradually, as the domestic economic scenario improves. Several times in 2016, analysts and investors expected the rate to be increased further, but so far no hikes have taken place.
A rate hike was particularly expected in the September meeting, post relatively good economic data and hawkish comments by some Fed officials. However, the committee did not raise rates, pushing expectations of a hike to Dec 2016. No hike is expected in the November meeting considering its proximity to the general elections as well as the lack of news conference with Fed Chair, Janet Yellen, scheduled after the meeting.
Another surprise this year was the vote results favoring Brexit on Jun 23. While the call was close, the results were highly unexpected, increasing market volatility. The U.K.’s then Prime Minister stepped down and Theresa May took charge to guide the country through this uncertainty. The country is expected to begin its two-year exit procedure in Mar 2017 and until then expectations regarding the economy remain relatively mixed. While most projected the economy to turn sluggish, some economic indicators point otherwise, leaving it relatively unstable.
The year began with a free fall in oil prices, which remained volatile for a long time. The prices hit new lows in over a decade as supply remained high. Expectations of an output freeze at the Doha meeting of the OPEC nations was also proved wrong as the nations continued to increase production. Moreover, the extra output available globally from Iran, after the sanctions were removed increased supply further. Oil prices continue to be volatile, creating significant impact on domestic companies.
5 Prominent Picks
In such an uncertain environment, it is difficult for investors to bet on stocks that may perform well. To increase the probability of a good return, we have banked on certain criteria that indicate favorable movement of the stock price. We have chosen large-cap companies, with a market capitalization of $5 billion or higher. Large-cap companies tend to be more resilient and stable even in a volatile environment.
Additionally, the selected stocks carry a VGM score of “A.” The VGM score is a weighted combination of Value, Growth and Momentum in a stock. It highlights the determining elements in a stock that can push the stock price higher. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM score.
Moreover, the stocks we have selected fall under industries carrying a good Zacks Rank. This is important as often a rising tide will lift all boats in an industry. As a reference point, the outlook for industries with a Zacks Industry Rank of #88 and lower is 'Positive,’ between #89 and #176 is 'Neutral.' and #177 and higher is 'Negative.’
These five stocks have delivered good year-to-date returns, which raise expectations for the remainder of the year. Moreover, these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Berry Plastics Group, Inc. (BERY - Snapshot Report) – headquartered in Evansville, IN, is a manufacturer and marketer of value-added plastic consumer packaging and engineered materials. The company operates in theContainers-Paper/Plastic industry, which carries a Zacks Industry Rank of #37. So far, the stock has delivered a return of 21.2% this year.
Tyson Foods, Inc. (TSN - Analyst Report) – headquartered in Springdale, AR, is the world's largest fully-integrated producer, processor and marketer of chicken and poultry-based food products. The company operates in the Food-Meat Products industry, which carries a Zacks Industry Rank of #2. So far, the stock has delivered a return of 40% this year.
Nippon Telegraph and Telephone Corp. (NTT - Snapshot Report) is a Tokyo-based telecommunications services company. It operates in theDiversified Communication Services industry, which carries a Zacks Industry Rank of #47. So far, the stock has delivered a return of 15.3% this year.
WellCare Health Plans, Inc. (WCG - Snapshot Report) is a Tampa, FL−based managed care services provider. It operates in the Medical-Health Maintance Organization industry, which carries a Zacks Industry Rank of #86. So far, the stock has delivered a return of 49.7% this year.
NetApp, Inc. (NTAP - Analyst Report) , headquartered in Sunnyvale, CA, is a leading provider of innovative data management solutions. The company operates inthe Computer-Storage Devices industry, which carries a Zacks Industry Rank of #71. So far, the stock has delivered a return of 35% this year.
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