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Wall Street witnessed brutal trading last week, with the major indices suffering the worst weekly fall in more than two years. The Dow Jones Industrial Average and the S&P 500 tumbled 5.7% and 5.9%, respectively, while the Nasdaq Composite Index shed 6.5%. The Facebook -led tech selloff, Fed rates hike, and a trade war brewing between the United States and China were the major culprits.
However, the worries seem to be abating, thanks to the news that the Trump administration has agreed to exempt South Korea from steel tariffs and start negotiating with China to avert a global trade war, which has threatened economic growth and hammered financial markets around the world.
Last week, Trump signed an executive memorandum to impose tariffs of up to $60 billion on Chinese imports targeting the technology, telecommunications and apparel sectors. In response, China has proposed a list of 128 U.S. products worth $3 billion as potential retaliation targets. The list includes wine, fresh fruit, dried fruit and nuts, steel pipes, modified ethanol and ginseng, with a potential 15% duty, and pork and recycled aluminum goods with a possible 25% tariff.
Global trade tensions are likely to threaten the nine-year bull market in the weeks ahead, as talks between the two countries are yet to unfold and thus, keep volatility alive. As a result, most investors’ are still cautious as to how the negotiations will take place and what its impact on the financial world will be. Further, Washington turmoil and geopolitical tensions will continue to weigh on the stocks.
Bulls Remain Intact
Aside from trade war fears, long-term market fundamentals remained bullish. Encouraging domestic and international fundamentals, strong corporate earnings and the new tax legislation are the biggest catalysts for the stock market this year. Additionally, growth in the U.S. economy has been solid, buoyed by an impressive labor market, higher wages, increasing consumer spending and record consumer confidence.
In particular, the massive $1.5-trillion tax cut is expected to provide a huge boost to stocks. This is because it will create an economic surge, boosting job growth in manufacturing and other sectors, increasing inflation and interest rates. Additionally, it would lead to higher earnings, increased buyback activities and fat dividends.
Earnings estimates for Q1 and the following quarters have gone up, with tax law changes being the most notable reason for the positive revisions. These revisions are broad-based, with estimates for 13 of the 16 Zacks sectors going up. Total earnings for the S&P 500 index are expected to be up 18% on 5.6% higher revenues for 2018. For 2019, earnings and revenues for the index are expected to be up 9.5% and 4.1%, respectively.
Given the bullish trends, we have highlighted some stock-picking ideas from the top-ranked cohort for investors that could prove extremely beneficial in the current market environment, reducing the risk of a downside:
Low-Beta Stocks
Low-beta stocks exhibit greater levels of stability and usually lose less when the market is crumbling. Though these have lesser risks and lower returns, the stocks are considered safe and resilient.
Tyson Foods Inc. (TSN - Free Report) having beta of 0.20 seems a good bet in this category. Based in Springdale, AR, it is one of the world’s largest producers of chicken, beef, pork and prepared foods, offering a wide range of protein-based and prepared foods products. It has an expected earnings growth of 25.24% for the year (ending September 2018). The stock carries a Zacks Rank #1 (Strong Buy) and has a VGM Score of B. You can see the complete list of today’s Zacks #1 Rank stocks here.
Value Stocks
Value stocks have proven to be outperformers over the long term and are less susceptible to trending markets. These stocks have strong fundamentals — earnings, dividends, book value and cash flow — that trade below their intrinsic value and are undervalued. These have the potential to deliver higher returns and exhibit lower volatility compared with their growth and blend counterparts.
The Missouri-based Centene Corporation (CNC - Free Report) is a diversified, multi-national healthcare enterprise that provides a portfolio of services to government sponsored and commercial healthcare programs, focusing on under-insured and uninsured individuals. It has a Value Score of A and an estimated earnings growth of 40.95% for this year. The stock has a Zacks Rank #1.
Small-Cap Stocks
Even though small-cap stocks were victims of the broad-market selloff last week, they hold up much better than the larger ones. This is because small-cap stocks have less international exposure and generate most of their revenues from the domestic market. These pint-sized stocks are less vulnerable to a trade war or any other political issue and could better insulate investors from Trump’s protectionist stance.
Texas-based Conns Inc. (CONN - Free Report) could be an intriguing choice given its projected earnings growth of 174.62% for the year (ending January 2019). This is a specialty retailer engaged in the selling of home appliances, including refrigerators, freezers, washers, dryers and ranges, and a variety of consumer electronics, including projection, plasma and LCD televisions, camcorders, VCRs, DVD players and home theater products. The stock has a Zacks Rank #1 and VGM Score of A.
Quality Stocks
Quality investing also seeks safety and protection against volatility. Quality stocks tend to outperform as these are rich in value characteristics with healthy balance sheets, high return on capital, low volatility, elevated margins and a track of stable or rising sales and earnings growth.
Tennessee-based Louisiana-Pacific Corporation (LPX - Free Report) manufactures building materials and engineered wood products in the United States, Canada, Chile and Brazil. It has a low debt/equity ratio of 0.22, 5-Year historical EPS growth of 10.34%, an estimated growth rate of 3% for sales and 12.45% for earnings this year, and a dividend yield of 1.86%. The stock further belongs to a top-ranked Zacks industry (top 6%), and sports a Zacks Rank #1 and VGM Score of A.
Dividend Stocks
The dividend-paying securities are the major sources of consistent income for investors when returns from the equity market are at risk. This is especially true as these stocks offer the best of both these world’s — safety in the form of payouts and stability in the form of mature companies that are less volatile to the large swings in stock prices. The companies that pay dividends generally act as a hedge against economic uncertainty and provide downside protection by offering outsized payouts or sizable yields on a regular basis.
While there are several top-ranked options available in the space, Virginia-based Huntington Ingalls Industries, Inc. (HII - Free Report) having a strong history of dividend growth seems to be a good pick. The company designs, builds and maintains nuclear and non-nuclear ships for the U.S. Navy and Coast Guard and provides after-market services for military ships around the globe. Though the yield is lower at 1.13%, the stock has 5-year historical dividend growth of 51.28% and estimated earnings growth of 43.16%. HII carries a Zacks Rank #1 and VGM Score of B.
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions. New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
Image: Bigstock
5 Stock-Picking Strategies to Beat the Market
Wall Street witnessed brutal trading last week, with the major indices suffering the worst weekly fall in more than two years. The Dow Jones Industrial Average and the S&P 500 tumbled 5.7% and 5.9%, respectively, while the Nasdaq Composite Index shed 6.5%. The Facebook -led tech selloff, Fed rates hike, and a trade war brewing between the United States and China were the major culprits.
However, the worries seem to be abating, thanks to the news that the Trump administration has agreed to exempt South Korea from steel tariffs and start negotiating with China to avert a global trade war, which has threatened economic growth and hammered financial markets around the world.
Last week, Trump signed an executive memorandum to impose tariffs of up to $60 billion on Chinese imports targeting the technology, telecommunications and apparel sectors. In response, China has proposed a list of 128 U.S. products worth $3 billion as potential retaliation targets. The list includes wine, fresh fruit, dried fruit and nuts, steel pipes, modified ethanol and ginseng, with a potential 15% duty, and pork and recycled aluminum goods with a possible 25% tariff.
Global trade tensions are likely to threaten the nine-year bull market in the weeks ahead, as talks between the two countries are yet to unfold and thus, keep volatility alive. As a result, most investors’ are still cautious as to how the negotiations will take place and what its impact on the financial world will be. Further, Washington turmoil and geopolitical tensions will continue to weigh on the stocks.
Bulls Remain Intact
Aside from trade war fears, long-term market fundamentals remained bullish. Encouraging domestic and international fundamentals, strong corporate earnings and the new tax legislation are the biggest catalysts for the stock market this year. Additionally, growth in the U.S. economy has been solid, buoyed by an impressive labor market, higher wages, increasing consumer spending and record consumer confidence.
In particular, the massive $1.5-trillion tax cut is expected to provide a huge boost to stocks. This is because it will create an economic surge, boosting job growth in manufacturing and other sectors, increasing inflation and interest rates. Additionally, it would lead to higher earnings, increased buyback activities and fat dividends.
Earnings estimates for Q1 and the following quarters have gone up, with tax law changes being the most notable reason for the positive revisions. These revisions are broad-based, with estimates for 13 of the 16 Zacks sectors going up. Total earnings for the S&P 500 index are expected to be up 18% on 5.6% higher revenues for 2018. For 2019, earnings and revenues for the index are expected to be up 9.5% and 4.1%, respectively.
Given the bullish trends, we have highlighted some stock-picking ideas from the top-ranked cohort for investors that could prove extremely beneficial in the current market environment, reducing the risk of a downside:
Low-Beta Stocks
Low-beta stocks exhibit greater levels of stability and usually lose less when the market is crumbling. Though these have lesser risks and lower returns, the stocks are considered safe and resilient.
Tyson Foods Inc. (TSN - Free Report) having beta of 0.20 seems a good bet in this category. Based in Springdale, AR, it is one of the world’s largest producers of chicken, beef, pork and prepared foods, offering a wide range of protein-based and prepared foods products. It has an expected earnings growth of 25.24% for the year (ending September 2018). The stock carries a Zacks Rank #1 (Strong Buy) and has a VGM Score of B. You can see the complete list of today’s Zacks #1 Rank stocks here.
Value Stocks
Value stocks have proven to be outperformers over the long term and are less susceptible to trending markets. These stocks have strong fundamentals — earnings, dividends, book value and cash flow — that trade below their intrinsic value and are undervalued. These have the potential to deliver higher returns and exhibit lower volatility compared with their growth and blend counterparts.
The Missouri-based Centene Corporation (CNC - Free Report) is a diversified, multi-national healthcare enterprise that provides a portfolio of services to government sponsored and commercial healthcare programs, focusing on under-insured and uninsured individuals. It has a Value Score of A and an estimated earnings growth of 40.95% for this year. The stock has a Zacks Rank #1.
Small-Cap Stocks
Even though small-cap stocks were victims of the broad-market selloff last week, they hold up much better than the larger ones. This is because small-cap stocks have less international exposure and generate most of their revenues from the domestic market. These pint-sized stocks are less vulnerable to a trade war or any other political issue and could better insulate investors from Trump’s protectionist stance.
Texas-based Conns Inc. (CONN - Free Report) could be an intriguing choice given its projected earnings growth of 174.62% for the year (ending January 2019). This is a specialty retailer engaged in the selling of home appliances, including refrigerators, freezers, washers, dryers and ranges, and a variety of consumer electronics, including projection, plasma and LCD televisions, camcorders, VCRs, DVD players and home theater products. The stock has a Zacks Rank #1 and VGM Score of A.
Quality Stocks
Quality investing also seeks safety and protection against volatility. Quality stocks tend to outperform as these are rich in value characteristics with healthy balance sheets, high return on capital, low volatility, elevated margins and a track of stable or rising sales and earnings growth.
Tennessee-based Louisiana-Pacific Corporation (LPX - Free Report) manufactures building materials and engineered wood products in the United States, Canada, Chile and Brazil. It has a low debt/equity ratio of 0.22, 5-Year historical EPS growth of 10.34%, an estimated growth rate of 3% for sales and 12.45% for earnings this year, and a dividend yield of 1.86%. The stock further belongs to a top-ranked Zacks industry (top 6%), and sports a Zacks Rank #1 and VGM Score of A.
Dividend Stocks
The dividend-paying securities are the major sources of consistent income for investors when returns from the equity market are at risk. This is especially true as these stocks offer the best of both these world’s — safety in the form of payouts and stability in the form of mature companies that are less volatile to the large swings in stock prices. The companies that pay dividends generally act as a hedge against economic uncertainty and provide downside protection by offering outsized payouts or sizable yields on a regular basis.
While there are several top-ranked options available in the space, Virginia-based Huntington Ingalls Industries, Inc. (HII - Free Report) having a strong history of dividend growth seems to be a good pick. The company designs, builds and maintains nuclear and non-nuclear ships for the U.S. Navy and Coast Guard and provides after-market services for military ships around the globe. Though the yield is lower at 1.13%, the stock has 5-year historical dividend growth of 51.28% and estimated earnings growth of 43.16%. HII carries a Zacks Rank #1 and VGM Score of B.
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions. New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
Click here to see the 5 stocks >>