After witnessing severe volatility since February, U.S. stock markets have finally exhibited signs of growth in May. The three major indexes — Dow 30, S&P 500 and Nasdaq Composite — are currently in positive territory year to date. Moreover, the CBOE VIX — the stock market’s fear gauge — is currently below its five-year historical average.
Strong first-quarter 2018 earnings and strong fundamentals of the U.S. economy suggest that the recent volatility may be transitory and the markets will continue their uptrend. Consequently, it will be a prudent decision to pick good growth stocks at the moment to enrich your portfolio.
Benchmarks are in the Green Zone
Year to date, the Dow 30, S&P 500 and Nasdaq Composites are up 0.5%, 2% and 7.2%, respectively. The Dow 30 is in green for seventh straight positive sessions, marking the blue-chip index’s longest winning streak since Nov. 8, 2017. Both Dow 30 and S&P 500 are trading above their 200-day and 50-day moving average. These are important psychological barriers, indicating long and short-term support levels.
Business Confidence Remains Healthy
On May 3, the Commerce Department reported that the U.S. factory orders for the month of March grew at 1.6%. The increase in March marked the seventh rise in the past eight months.
This indicates that the U.S. manufacturing sector, which constitutes around 12% of its GDP, is increasing capital spending on the back of massive tax overhaul, deregulatory measures and strong domestic & global economy. (Read more: U.S. Factory Orders Remain Strong in March: 5 Top Picks)
Robust Earnings Momentum
First-quarter earnings results have been exhibiting strong momentum so far. Considering first-quarter as a whole, total earnings are expected to be up 23.6% from the same period last year on 8.8% higher revenues.
This is the highest quarterly earnings growth pace in seven years. For full-year 2018, total earnings for the S&P 500 index are expected to be up 19.2% on 5.7% higher revenues. (Read more: A Critical Look at the Q1 Earnings Season)
Our Top Picks
Solid macro-economic fundamentals, government’s tax reform and deregulation proposals along with sustained strong earnings performance are major tailwinds for the U.S. stock markets. These factors are unlikely to disappear in the near term.
At this stage, investment in stocks with strong growth potential will be lucrative. Our selection is backed by a good Zacks Growth Score and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Our research shows that stocks with a Growth Style Score of A or B when combined with a Zacks Rank #1 or 2 (Buy) offer the best opportunities in the Growth-investing space. We have handpicked five such stocks with Zacks Rank #1 and Growth Style Score of A.
Chart below shows price performance of our five picks year to date.
Twitter Inc. (TWTR - Free Report) is a public, real-time, global microblogging platform where any user can create a Tweet which are limited to 140 characters of text. Further, all users can follow anyone they choose to. The platform is unique in its simplicity.
Twitter has expected earnings growth of 68.2% for current year. The Zacks Consensus Estimate for the current year has improved by 25.4% over the last 30 days.
Mellanox Technologies Ltd. (MLNX - Free Report) is a leading supplier of semiconductor-based interconnect products to world-class server, storage, and infrastructure OEMs
Mellanox has expected earnings growth of 78.5% for current year. The Zacks Consensus Estimate for the current year has improved by 10.3% over the last 30 days.
Lam Research Corp. (LRCX - Free Report) provides market-leading equipment and services for semiconductor wafer processing. Its products are used in several steps that are repeated multiple times throughout the chip-making process.
Lam Research has expected earnings growth of 75.8% for current year. The Zacks Consensus Estimate for the current year has improved by 4.7% over the last 30 days.
Western Digital Corp. (WDC - Free Report) provides full portfolio of compelling, high-quality storage solutions with customer-focused innovation, high efficiency, flexibility and speed.
Western Digital has expected earnings growth of 59.3% for current year. The Zacks Consensus Estimate for the current year has improved by 4.7% over the last 30 days.
Axon Enterprise Inc. (AAXN - Free Report) engages in the development, manufacture and sale of conducted electrical weapons for the law enforcement, federal, military, corrections, private security and personal defense markets.
Axon has expected earnings growth of 28.9% for current year. The Zacks Consensus Estimate for the current year has improved by 48.7% over the last 30 days.
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 >>