The United States and its allies have launched target missiles on Syria, dragging the benchmarks down in the final hours of trading on Apr 13. Such escalating tensions, however, shouldn’t dampen investors’ spirits for long.
After all, mounting military tensions, historically, has had no effect on markets but on humans. In fact, markets in crisis have usually recovered quickly. Keeping this in mind, investing in solid growth stocks doesn’t seem to be a bad proposition.
Syria Air Strikes
Western powers had carried out missile attacks at the heart of Syria’s chemical weapons facilities. The United States, France and Britain launched 105 cruise missiles on three chemical weapon facilities, including a development center in Damascus’ Barzeh region and two installations near Homs. The strike was carried out after Syrian President Bashar al-Assad had sanctioned a chemical weapon attack on civilians in Damascus.
This retaliation was the biggest by any Western force against Assad and his superpower ally Russia. However, the Western countries did mention that the strikes were limited to Syria’s chemical weapon facilities and not aimed at Assad. Nevertheless, such targeted military strikes against the Syrian government have dented investors’ sentiment of late.
Investors Shouldn’t Panic
Investors should not fear a missile strike on Syria as such attacks have limited impact on the stock market, especially over the long run. Jeffrey Kleintop, the chief global investment strategist at Charles Schwab & Co, said that immediately after a military strike, markets tend to lose around 0.3%, but there is nothing earth-shattering about it. Such movements happen during every normal trading session almost.
In fact, post-crisis lows open up good buying opportunities, per an analysis conducted by Ned Davis Research. After major geopolitical crisis in the past century, they have found that the market rebound has been so solid that within six months it stands higher than where it was before the catastrophe.
Ned Davis Research analyzed that the Dow Jones Industrial Average on average fell 3.2% after any crisis, yet by six months, the blue-chip index manages to recover from the lows. In fact, it scales higher in 12 months’ time. If the Sep 11, 2011 attack is to be considered, the index tanked 17.5% five trading sessions later. But, it bounced back in less than two months and was higher than where it had been on Sep 10.
Trump has tweeted that attacks on Syria were “mission accomplished.” This also suggests that the President won’t be carrying out attacks that may raise risks of a broader conflict, involving Russia.
Time for Traders to Cheer Up
The American Association of Individual Investors (AAII), in the meantime, showed that bearish sentiments in the market jumped 6.1 percentage points to 42.8%. The Syrian crisis and China’s trade surplus with the U.S. improving, thereby, adding fuel to the ongoing trade conflict added to the bearish sentiments.
However, the AAII survey is always used as a contrarian indicator, boosting traders’ confidence when the readings get scary. And why not? As investor sentiments are now decidedly bearish, the market has neared a bottom, which means it has only one way to go, that’s upward.
5 Top Winners
With the markets expected to scale north after a crisis, investing in sound growth stocks seems judicious. We have, thus, selected five such stocks that flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a Growth Style Score of A or B. This combination offers the best investment opportunities in the growth investing space.
Kohl's Corporation (KSS - Free Report) operates as an omni-channel retailer in the United States. Its stores and website offer apparel, footwear, accessories, beauty, and home products. The company has a Zacks Rank #1 and a Growth Score of A.
The company’s expected earnings growth for the current and next quarter is 25.6% and 33.1%, respectively. The stock’s expected earnings growth rate for the current year is 25.1%, better than the industry’s estimated growth of 1.8%. Kohl's shares dropped 2.7% on Apr 13.
FARO Technologies, Inc. (FARO - Free Report) designs, develops, manufactures, markets, and supports software driven, three-dimensional (3D) measurement, imaging, and realization systems. The company has a Zacks Rank #1 and a Growth Score of B.
The company’s expected earnings growth for the current and next quarter is 200% and 168.2%, respectively. The stock’s expected earnings growth rate for the current year is 255.2%, way more than the industry’s estimated growth of 3.3%. FARO Technologies shares declined 0.5% on Apr 13.
Copart, Inc. (CPRT - Free Report) provides online auctions and vehicle remarketing services. The company has a Zacks Rank #1 and a Growth Score of B.
The company’s expected earnings growth for the current and next quarter is 29.7% and 25.7%, respectively. The stock’s expected earnings growth rate for the current year is 34.9% versus the industry’s estimated growth of 32.6%. Copart’s shares declined 0.9% on Apr 13. You can see the complete list of today’s Zacks #1 Rank stocks here.
Burlington Stores, Inc. (BURL - Free Report) operates as a retailer of branded apparel products in the United States. The company has a Zacks Rank #2 and a Growth Score of A.
The company’s expected earnings growth for the current and next quarter is 47.9% and 27.8%, respectively. The stock’s expected earnings growth rate for the current year is 31.8%, compared with the industry’s estimated growth of 19.5%. Burlington Stores’ shares fell 1.3% on Apr 13.
Applied Materials, Inc. (AMAT - Free Report) provides manufacturing equipment, services, and software to the semiconductor, display, and related industries. The company has a Zacks Rank #1 and a Growth Score of A.
The company’s expected earnings growth for the current and next quarter is 43% and 32.6%, respectively. The stock’s expected earnings growth rate for the current year is 35.7%, slightly higher than the industry’s estimated growth of 35.6%. Applied Materials’ shares slipped 0.6% on Apr 13.
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