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Bull Run to Continue in Rest of 2018: 5 Terrific Growth Picks

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The U.S. stock markets’ bullish-run entered its longest ever expansionary phase on Aug 22. In fact, the stock markets sustained their long-term winning streak despite global trade war concerns, series of geopolitical conflicts and impending fear of rising inflation.

Strong economic fundamentals of the United States suggest that the recent volatility may be transitory and that markets will continue their uptrend. Robust consumer and business confidences together with business-friendly policies and solid earnings should pave the way for a bull run in the rest of 2018. Consequently, it makes sense to invest in good growth stocks with favorable Zacks Rank to maximize returns.

Strong U.S. Economic Fundamentals

U.S. GDP grew at 4.1% in the second quarter of 2018, marking its highest gain since the third quarter of 2014 and the third-best growth rate since the Great Recession of 2008-2009. In the second quarter, consumer spending increased 4%, business investment grew 7.3% and government spending rose 3.5%. Moreover, unemployment rate in July fell 0.1% from June to 3.9%, its lowest level in nearly 50 years.

Robust Consumer Confidence

On Aug 28, the Conference Board has reported that its U.S. consumer confidence index for the month of August has jumped to 133.4, marking its highest reading since October 2000. So far, the highest reading for consumer confidence in 2018 was 130.0 recorded in the month of February.

The report also stated that percentage of consumers expecting business conditions will get better over the next six months has increased to 24.3% from 22.9% in July. This indicates that most of the U.S. people are expecting the economy to grow faster in the rest of 2018. Notably, consumer spending accounts for about 70% of U.S. economic activity.  

Solid Manufacturing Data

U.S. manufacturing sector has been witnessing resurgence under the Trump administration. On Aug 1, the Institute for Supply Management reported that the U.S. manufacturing index for the month of July was 58.1. Notably, any reading above 50 indicates overall growth of the manufacturing sector. Notably, manufacturing sector accounts for more than 12% of U.S. economic activity.  

Per Federal Reserve report, while the U.S. industrial output increased 0.1% in July, the manufacturing sector witnessed a growth of 0.3%. According to the Department of Labor, manufacturing added 37,000 jobs in July which improved 12-month job addition to 327,000.

Per the Commerce Department report, core durable goods orders (orders for long-lasting U.S. factory goods excluding aircraft and non-military goods) rose 1.4% in July. For most of 2018, manufacturing sector formed the bulk of the U.S. durable goods productions with a growth rate of 8.6% year to date.

Vigorous Earnings Momentum

As of Aug 17, 467 S&P 500 members have reported their second-quarter results. Total earnings of these companies are up 25.5% on 9.9% higher revenues. For the S&P 500 index as a whole, total second-quarter earnings are expected to be up 24.9% from the same period last year on 9.7% higher revenues.

If the current second-quarter earnings expectation for the S&P 500 index as a whole materializes, it will be the highest quarterly growth pace in almost eight years. (Read More: Strong Retail Sector Earnings Performance)

Our Top Picks

Rising core durable goods orders are normally associated with stronger economic activity. Moreover, strong earnings, massive tax cuts and solid job data are likely to boost consumer spending in the months to come. Consequently, the economy is likely to witness strong growth.

At this stage, investment in stocks with strong growth potential will be lucrative. We have selected five stocks with Growth Score of A 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.

The chart below depicts price performance of our five picks in the last three months.

Verso Corp. (VRS - Free Report) produces coated freesheet, coated ground wood and uncoated super calendered papers and pulp. The company has expected earnings growth of 368% for the current year. The Zacks Consensus Estimate for the current year has improved 105.1% over the last 30 days.

BioLife Solutions Inc. (BLFS - Free Report) has pioneered the next generation of preservation solutions designed to maintain viability and health of cellular matter and tissues during freezing, transportation and storage. The company has expected earnings growth of 171.4% for the current year. The Zacks Consensus Estimate for the current year has improved 114.3% over the last 30 days.

Armstrong Flooring Inc. (AFI - Free Report) is engaged in the design and manufacture of flooring solutions primarily in North America. The company has expected earnings growth of 104.8% for the current year. The Zacks Consensus Estimate for the current year has improved 79.2% over the last 30 days.

Universal Logistics Holdings Inc. (ULH - Free Report) is a primarily non-asset based provider of transportation services to shippers in the United States and Canada. The company has expected earnings growth of 157.5% for the current year. The Zacks Consensus Estimate for the current year has improved 37.2% over the last 30 days.

Hanger Inc. (HNGR - Free Report) delivers orthotic and prosthetic patient care, and distributes O&P products and rehabilitative solutions. The company has expected earnings growth of 148.5% for the current year. The Zacks Consensus Estimate for the current year has improved 3.8% over the last 30 days.

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