Back to top

Image: Bigstock

Time to Sweep Up Multibaggers as Trade Fears Abate: 5 Picks

Read MoreHide Full Article

As trade war fears ease, U.S. stocks recorded the largest one-day percentage gain since the summer of 2015. The United States and China are no doubt being rigid with their trade policy but Treasury Secretary Steven Mnuchin said that he has been talking to Chinese officials to prevent the situation from spiraling out of control.

After a week fraught with tariff threats from both the sides to address trade imbalances, negotiations have been stepped up to stave off a full-scale trade war. With markets cheering the move, investing in multibaggers seems like a wise choice. These stocks will make the most of the encouraging trend, courtesy of strong fundamentals and businesses that can multiply in a short span of time. After all, these stocks have seen their prices increase multiple times their initial investment values.

US Stocks See Biggest Gains Since Summer 2015

The Dow soared 669 points on Mar 26 — its third-highest gain in history. The blue-chip gauge also recorded its best one-day percentage gain in two and a half years. The S&P 500 and the Nasdaq also saw their biggest percentage gain since August 2015. The day’s gains followed talks between the United States and China regarding extinguishing chances of a trade war.

It led to a sharp reversal from the stock market’s worst week in two years. The Dow had tanked 425 points on Mar 23, sinking into correction territory, highlighting a decline of 10% from its all-time high notched in January. In fact, all three major bourses saw their steepest weekly losses since January 2016. Investors were undoubtedly worried that Trump’s crackdown on China will trigger a retaliation that will jeopardize the otherwise bright economic outlook.

US-China in Talks to Avert Trade War

The nations have initiated discreet negotiations to expand American companies’ access to Chinese markets. Steven Mnuchin wants China to do away with rules that require foreign companies to tie up with Chinese counterparts in industries such as automobiles. He also urged the Chinese not to force American business houses to hand over valuable intellectual property in order to operate in China. Lest we forget, intellectual property theft is one the primary reasons the Trump administration has planned to impose $50 billion in tariffs on China-made products.

The Trump administration has, in fact, set out other specific requests that include increasing outlays on U.S. semiconductors and providing greater access to China’s financial sector. Mnuchin is considering a trip to Beijing to pursue the negotiations.

Liu He, China’s economic czar in Beijing, reciprocated by saying that he “hopes to see both sides remain sensible and work together to preserve the overall stability of China-US trade relations.” Investors cheered the initial discussions.

US-China Far From an All-Out Trade War

Deep down, investors know that a full-blown trade war between the two powerful economies is not in the cards. A trade war might deal a heavy blow to the economies, resulting in widespread unemployment. China has, thus, so far avoided an aggressive approach. The country has threatened to impose tariffs on U.S. wine, fruit, pork, recycled aluminum and nuts, which account for $3 billion a year, a relatively nominal amount.

And when it comes to Trump, we all know that his actions are not as tough as his rhetoric. How can we forget that he was supposed to impose hefty tariffs on foreign steel and aluminum? But, he chose to give exemptions to countries like Mexico, Canada, the European Union, South Korea, Australia, Brazil and Argentina after his top allies threatened retaliation.

5 Top Multibaggers to Buy Now

U.S. stocks are expected to scale north as immediate fears of a global trade war wane. This calls for investing in multibaggers. These stocks will cash in on such positive developments and give returns that are several times their cost. The Republican tax-cut plan, signed into law by Trump, healthy labor market and consumer confidence hitting a 14-year high this month are also some of the positives that will help these stocks gain traction.

We have, thus, selected five multibaggers that carry a Zacks Rank #1 (Strong Buy) or 2 (Buy).

American Public Education, Inc. (APEI - Free Report) provides online and campus-based postsecondary education. The company has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings rose 40.4% in the last 60 days. The company is expected to return 18.6% this year, higher than the industry’s estimated return of 13.2%. The stock has outperformed the broader industry in the past year (+92.9% vs +30.9%).

Casa Systems, Inc. (CASA - Free Report) provides software-centric broadband products. The company has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings climbed 12.5% in the last 60 days. The company is expected to return 28.6% this year, higher than the industry’s projected return of 19.8%. The stock has outperformed the broader industry in the last one-year period (+120.5% vs -11.9%).

QuinStreet, Inc. (QNST - Free Report) provides customer acquisition services for its clients in the United States and internationally. The company has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings rose 20% in the last 60 days. The company is expected to return more than 100% this year, higher than the industry’s estimated return of 23.5%. The stock has outperformed the broader industry in the past year (+284.6% vs +53.2%). You can see the complete list of today’s Zacks #1 Rank stocks here.

Virtu Financial, Inc. (VIRT - Free Report) provides market making and liquidity services through its proprietary, multi-asset, and multi-currency technology platform to the financial markets. The company has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings moved up 43.2% in the last 60 days. The company is expected to return more than 100% this year, higher than the industry’s estimated return of 21.6%. The stock has outperformed the broader industry in the last one-year period (+91.8% vs +2.6%).

Shutterfly, Inc. manufactures and retails personalized products and services. The company has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings rose 37.5% in the last 60 days. The company is likely to return 99.1% this year, higher than the industry’s estimated return of 26.6%. The stock has outperformed the broader industry in the past year (+78.5% vs +54.4%).

Today's Stocks from Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.

See Them Free>>

Published in