Though the flattening of the yield curve, uncertainty over tax reform plan and falling oil prices have been making investors jittery lately, the overall sentiment has been hugely positive. This is especially true given that the global economy has picked up momentum with every major economy witnessing growth in almost a decade (read: Value ETFs & Stocks to Buy on Tax Cut Delay Concerns).
According to the Organization for Economic Cooperation and Development, all 45 countries are on track to grow this year and expected to continue the momentum in 2018. Per International Monetary Fund (IMF), global growth is expected to be 3.6% this year and 3.7% in the next versus 3.2% last year. This would mark the fastest growth since 2010.
Another major catalyst to the bull run is strong corporate earnings. The S&P 500 companies recorded two consecutive quarters of double-digit earnings growth for the first time since 2011 and is on pace for 6.3% growth in the third quarter. Additionally, total Q3 earnings are on track to reach a new all-time quarterly record, surpassing the previous record reached in the preceding quarters (read: Q3 Earnings Effect: 5 Hottest ETF Charts).
Further, the small-cap index S&P 600 is on track to turn positive in Q3 with total earnings expected to be up 5% from the same period last year on 5.6% higher revenues. This would follow persistent earnings decline for the small-cap index. S&P 600 earnings growth was negative in three of the last four quarters.
Apart from these, the combination of other factors such as rounds of upbeat economic data and low interest rate policies from central banks around the world are adding to the strength. All these suggest that the second-largest bull market still has legs.
Against such a bullish backdrop, beaten down prices reflect a good entry point for investors. Below, we have highlighted five solid picks from both the ETF and the stock world that were in red over the past week but have a Zacks Rank #1(Strong Buy) or 2 (Buy). The top ranks suggest their outperformance in the coming months.
SPDR S&P Aerospace & Defense ETF (XAR - Free Report)
This product offers equal-weight exposure to the aerospace & defense sector of the broad U.S. market by tracking the S&P Aerospace & Defense Select Industry Index. It holds 35 stocks in its basket with equal-weight exposure. The product has been able to manage $997.6 million in its asset base and charges 35 bps in annual fees. It shed 2.7% in a week and has a Zacks ETF Rank #1 (read: Best Sector ETFs & Stocks from Trump's First-Year Win).
Fidelity MSCI Industrials Index ETF (FIDU - Free Report)
This fund targets the industrial sector and follows the MSCI USA IMI Industrials Index. It holds 337 stocks in its basket with none accounting for more than 6.03% share. The product has amassed $398.2 million in its asset base and charges 8 bps in annual fees. It lost 2.1% in the last five trading sessions and has a Zacks ETF Rank #2.
First Trust Health Care AlphaDEX Fund (FXH - Free Report)
With AUM of $977.6 million, this fund offers exposure to the broad healthcare space by tracking the StrataQuant Health Care Index, which follows an AlphaDEX methodology and ranks stocks in the space on various growth and value factors. This approach results in a basket of 76 stocks with none holding more than 3.1% of assets. The ETF charges 0.61% and lost 1.6% over the past week. It has a Zacks ETF Rank #2.
PowerShares Dynamic Semiconductors Fund (PSI - Free Report)
This fund tracks the Dynamic Semiconductor Intellidex Index, holding 30 securities in its basket with none accounting for more than 6.2% share. The product has AUM of $386.2 million and charges 63 bps in annual fees. It was down 1% and has a Zacks ETF Rank #1 (read: 5 Biggest ETF Winners of Trump Trade Resurgence).
Financial Select Sector SPDR Fund (XLF - Free Report)
This is the most popular financial ETF in the space with AUM of $28.7 billion. It follows the Financial Select Sector Index, holding 67 stocks in its basket with double-digit allocation to the top two firms. The fund charges 14 bps in annual fees and shed 1.1%. It has a Zacks ETF Rank #2.
The Greenbrier Companies Inc. (GBX - Free Report)
This Oregon-based company is a leading supplier of transportation equipment and services to the railroad and related industries. It saw rising earnings estimate of 31 cents for this fiscal year in a month with an expected growth rate of 3.72%. The stock declined 8.5% in the last five trading sessions. Greenbrier Companies has a Zacks Rank #1 and a VGM Style Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
KBR, Inc. (KBR - Free Report)
This is a Texas-based leading global engineering, construction and services company supporting the energy, hydrocarbon, government services, minerals, civil infrastructure, power and industrial markets. The stock was down 8.1% but saw positive earnings estimate revision of four cents for this year in the past month with an expected growth rate of a whopping 345.45%. It has a Zacks Rank #2 and a VGM Style Score of A.
American Axle & Manufacturing Holdings Inc. (AXL - Free Report)
This Michigan-based company manufactures, engineers, designs and validates driveline and drivetrain systems and related components and chassis modules for light trucks, sport utility vehicles, crossover vehicles, passenger cars and commercial vehicles. The stock saw solid earnings estimate revision of 20 cents in the past month for this year with an expected earnings growth rate of 6.15%. It shed 5% over the past week, and has a Zacks Rank #1 and a VGM Style Score of A.
Acushnet Holdings Corp. (GOLF - Free Report)
This Massachusetts-based company designs, develops, manufactures, and distributes golf products. It saw positive earnings estimate revision of four cents for this year over the past week with an expected growth rate of 73.77%. The stock has lost 3.6% in the same time frame. It has a Zacks Rank #1 and a VGM Style Score of A
MKS Instruments, Inc. (MKSI - Free Report)
This Massachusetts-based company is a leading worldwide developer, manufacturer and supplier of instruments, components and subsystems used to measure, control and analyze gases in semiconductor manufacturing and similar industrial manufacturing processes. The stock saw solid earnings estimate revision of 42 cents for this year in the last one month, with an expected earnings growth rate of 94.45%. It shed 3.1% over the past week. MKSI has a Zacks Rank #1 and a VGM Style Score of A (read: 7 Top-Ranked Tech ETFs on Unstoppable Rally).
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