- (1:00) - FANG Stocks Under Pressure: Diversifying Your Portfolio
- (7:35) - Stock Screener Criteria
- (11:00) - Tracey’s Top Stock Picks: CF, MOS, ETSY, LULU, BHC
- (20:50) - Episode Roundup: Podcast@Zacks.com
Welcome to Episode #155 of the Zacks Market Edge Podcast.
Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.
In this episode, she goes solo to take a look at the recent stock market volatility and what it’s doing to investor portfolios.
Let’s be honest, most investors probably own at least one, if not all, of the FAANG stocks (Facebook, Amazon, Apple, Netflix and Alphabet).
Tracey herself owns Facebook, Amazon and Alphabet.
For the last few years, they’ve been “sure things.” Outside of a few minor pullbacks, they seemed to only go up. Just two months ago, some of them were hitting new all-time highs.
But now, they’ve seen a big sell off which has pushed most of them down over 20%, which is what is considered a bearish signal. The pain, for investors, has been considerable.
Now’s Your Chance to Diversify
Investors can’t change the investment allocation they had going into this sell off, but they can take charge of their own investing destiny moving forward.
Diversity is important. When big cap technology ruled the roost for several years, it didn’t seem to matter, but now it does.
That means most investors should own ETFs and stocks that are outside of technology and social media.
Screening for Solid Fundamentals
How do you find stocks that aren’t FAANG but that also have great fundamentals?
You can combine the Zacks Rank with the Industry Rank, along with some performance metrics, to get companies that have solid fundamentals.
There were 23 stocks that came through the screen. None were FAANG stocks. All were Zacks Rank #1 (Strong Buy) stocks.
These are the best of the best.
5 Top Stocks That Aren’t FAANG
1. CF Industries (CF - Free Report) makes fertilizers. This industry has been in a cyclical downturn the last few years but now, both fertilizer prices and demand are rising, which has pushed up earnings estimates. Earnings are expected to jump 64% next year. Shares are down 10% over the last month, but that just means the shares are cheaper.
2. Mosaic (MOS - Free Report) is another big fertilizer manufacturer. The whole industry is seeing a big boost to earnings forecasts. Earnings are expected to rise 25% next year. Shares are up 5.9% over the last month even as the S&P 500 is down 2.4% during that time.
3. Etsy (ETSY - Free Report) operates a creative online marketplace. New management has turned around earnings. After making $0.38 in 2017, it is expected to make $0.60 in 2018, a gain of 57%. 2019 is also looking good, with earnings forecast to jump 39%. Shares soared after its recent earnings report but are down nearly 11% in the last 5 sessions. You’re not avoiding all of the volatility by buying this growth company.
4. Lululemon (LULU - Free Report) is back. The luxury athleisure retailer has been expanding its men’s business and its brand is stronger than ever heading into the holiday season. Earnings are expected to rise 38% in 2018 and another 18% in 2019. Shares are down 14% over the last 5 sessions. Is this a buying opportunity?
5. Bausch Health (BHC - Free Report) is a pharmaceutical company which is the old Valeant. While earnings are expected to remain flat, the shares are dirt cheap, trading with a forward P/E of just 6. Shares are down 16% in the last 5 sessions, making them as cheap as ever. Over the past month, though, the shares have fallen only 7%.
In big market sell offs, there’s nowhere to hide. But you can limit your risk by adding diversity to your portfolio.
What else should you know about investing outside of FAANG?
Tune into this week’s podcast to find out.
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