For Immediate Release
Chicago, IL – November 10, 2017 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Micron Technology Inc. (MU - Free Report) , Meritor Inc. (MTOR - Free Report) , RH (RH - Free Report) , Ultra Clean Holdings Inc. (UCTT - Free Report) and Corcept Therapeutics Inc. (CORT - Free Report) .
Here are highlights from Thursday’s Analyst Blog:
5 Stocks that Doubled in 2017 and Can Keep Soaring Higher
U.S. stock markets are now hitting all-time highs on a daily basis. Stocks have mostly rallied since last year’s election, with a booming U.S. economy, supportive monetary policy and robust corporate earnings being the key triggers. Expectations that the Trump administration’s proposed tax and regulatory reforms will help companies’ and consumers, have given investors further reasons to put their money in stocks.
Continuing their seemingly unstoppable march, all three major indexes crept further into record territories Wednesday. The Dow Jones industrial average inched up more than 6 points heading into the close, to 23,563.36, while the tech-heavy Nasdaq composite eked out a gain of 0.3%, to 6,789.12. Not to be left behind, the S&P 500 advanced 0.1%, to an all-time closing high of 2,594.38.
As a matter of fact, yesterday’s settlements marked Dow's 59th closing record this year, the Nasdaq's 64th, and the S&P 500's 53rd. The session also marked the 27th time in 2017 all three benchmarks hit closing records on the same day.
What's Sending Indexes to a String of Records?
It’s fairly simple -- investors have driven up equities on evidence of economic growth.
As per the Commerce Department’s first estimate, the U.S. economy expanded at a 3% pace in the third quarter. This represents a marginal decline from the annualized growth rate of 3.1% in the April to June period, the strongest performance since the first quarter of 2015. Moreover, the latest figure represents the best back-to-back quarters of at least 3% growth since 2014.
Further, the October payroll report showed that the domestic labor market bounced back from the effects of hurricanes, while jobless rate ticked down to a 17-year low of 4.1%. A positive read on orders for U.S. durable goods also point to a strengthening economy. Investors should also know that the Consumer Confidence Index rose to 125.9 in October – the most since December 2000.
The Federal Reserve’s quantitative easing programs, initiated in December 2008, has also played a major role in stimulating the U.S. economy. Apart from rescuing it from the ravages of the 2007-09 financial crisis that was marked with stock market downturns, foreclosures and prolonged unemployment, the boost in cheap liquidity from the rather unconventional monetary policy drove up stock and property markets, while bringing down bond yields.
Meanwhile, President Trump’s proposals to overhaul the tax law and make it business friendly, added to the positive sentiment and powered stocks higher.
Finally, strong earnings reports from corporate biggies, which has helped support high valuations, boosted sentiments. Following two successful quarters of earnings numbers, U.S. companies posted all-time record earnings in the third quarter. As of Nov 8, we had received Q3 results from 436 S&P 500 members that combined account for 90.3% of the index’s total market capitalization. Total earnings for these companies are up 6.8% from the same period last year on 6.2% higher revenues, with 73.4% beating EPS estimates and 67% beating revenue estimates.
Has the Market Depleted Its Strength?
Even as Fed prepares to end its stimulus campaign, it will likely take quite some time to impact the economy. This means that the U.S. economy still has some time to benefit from cheap liquidity and low rates, which will continue to catalyze and extend the eight-year bull run.
Fed officials have also made clear that they plan to decline balance sheet rates slowly and predictably enough to avoid hurting the expansion or killing the bull market. Thus, one can rule out the detrimental impact of a rapid unwinding on the financial markets.
And finally, withdrawing the quantitative easing stimulus is actually a by-product of rising economic growth and optimism. The expected 'policy normalization' simply indicates that the economy is ready for the tap to be turned off. Though higher interest rates raise the cost of debt capital, an expanding economy supersedes low-borrowing costs in the grand scheme of things.
And fortunately, economic strength would also buoy the overall stock market.
Even in terms of ‘valuation,’ the S&P 500 stock index is currently trading at around 20 times its projected earnings over the next one year, considerably lower than the price-to-earnings ratio of almost 30 at the end of the tech-induced 13-year bull run back in 2000.
Therefore, while it is understandable for investors to worry about going after a market where all the major indexes are regularly notching up new milestones, we believe the world's largest economy may have more leg to run.
The strong stock rally does not necessarily indicate that all scrips would be wise picks. While there have been some remarkable stock performers so far, this year, such stocks may tumble after their growth trajectory hits the highest point. Thus, it is imperative to select companies that are still seeing strong momentum and are likely to grow faster than what has been predicted by the market, in the rest of 2017.
With the help of the Zacks Stock Screener, we have zeroed-in on five stocks that have witnessed a year-to-date price change of more than 100%, and have a Zacks Rank #1 (Strong Buy) or #2 (Buy). A favorable Zacks Rank indicates that these stocks have been witnessing positive estimate revisions, which generally translate into rapid price appreciation. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Finally, the chosen ones have VGM Score less than or equal to B. 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.
Our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 or #2 offer the best upside potential.
Micron Technology Inc., a #1 Ranked stock, is our first pick. A leading worldwide provider of semiconductor memory solutions, Boise, ID-based Micron Technology has a VGM Score of A. Also, shares of the company have gained 101.1% since the start of the year.
Our second choice is Meritor Inc., a global automotive parts manufacturer and supplier. This Troy, MI-based Zacks Rank #1 stock, sporting a VGM Score of B, boasts of +108.7% year-to-date price change.
Then we have RH . Headquartered in Corte Madera, CA, RH (formerly Restoration Hardware) is a leading luxury retailer in the home furnishing space. This Zacks Rank #2 stock, sporting a VGM Score of A, is up 179.6% year to date.
Ultra Clean Holdings Inc. is another company we recommend. Headquartered in Hayward, CA, Ultra Clean Holdings offers critical subsystems targeting the semiconductor capital equipment market. The company carries a Zacks Rank of 1 with a VGM Score of A. Also, shares of the company have gained 148% since the start of the year.
Finally, there is Corcept Therapeutics Inc. Headquartered in Menlo Park, CA, Corcept Therapeutics is focused on the discovery, development and commercialization of drugs for the treatment of severe metabolic, psychiatric and oncology disorders associated with the stress hormone. The Zacks #2 Ranked stock, which has gained 146.7% so far in 2017, has a VGM Score of B.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performancefor information about the performance numbers displayed in this press release.