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Indexes Northbound Despite Volatility: 5 Top Growth Picks

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Wall Street is in the green despite being plagued by stock market mayhem in October and November. A sharp recovery in the last week of November has positioned all three major indexes – the Dow, S&P 500 and Nasdaq Composite – northbound.

An initial truce between the United States and China regarding eight month old trade conflicts, robust U.S. economy and controlled level of inflation will pave the way for U.S. stocks to move higher. Consequently, it will be a prudent move to invest in stocks with a favorable Zacks Rank and strong growth potential.

Broader Market Northbound

Despite severe volatility in October and November, all the major stock indexes – the Dow, S&P 500 and Nasdaq Composite – provided year to date return of 3.3%, 3.2% and 6.2%, respectively.

All three indexes closed in the red for three months namely – March and April (inflationary concerns and trade conflicts) and October (trade conflicts and expectations of higher interest rate). Except a small loss of the Dow in June, indexes have been providing positive returns to investors.

For the week (Nov 26-30), the Dow gained 5.2%, its highest weekly gain since November 2016. The S&P 500 and Nasdaq Composite gained 4.9% and 5.6%, respectively. Both indexes recorded strongest weekly performance since December 2011.

Trade Truce Between US-China

On Dec 1, the U.S. President Donald Trump and his Chinese counterpart Xi Jinping reached an initial agreement to permanently solve the eight month old trade-related conflicts between the two countries.

In a dinner meeting at G-20 summit in Argentina, both presidents agreed on certain mutually acceptable terms. Per the agreed terms, the United States will stay its decision to raise tariff rate from 10% to 25% on $200 billion Chinese goods. Meanwhile, China will substantially increase imports of agricultural, energy, industrial and other product from the United States to reduce current trade imbalance.

The truce will be valid for next 90 days during which the two countries will try to solve bilateral trade conflicts regarding technology transfer, intellectual property and agriculture. Moreover, neither side will levy any further tariff on the other during this period.

Robust U.S. Economy

In its second estimate, the Department of Commerce confirmed on Nov 28 that the U.S. GDP for the third quarter of 2018 expanded by 3.5%. This implies that the U.S. economy increased 3.3% in the first nine months of 2018, surpassing the target of 3% set by President Trump.

On Nov 29, the Department of Commerce reported that personal consumption expenditures increased $86.9 billion or 0.6% in October, highest in seven months. October data exhibited growing momentum for consumer spending which constitutes over 70% of U.S. GDP. This could be a signal for robust fourth-quarter GDP data.

Our Top Picks

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 a Zacks Rank #1 and Growth Style Score of A.

The chart  below shows price performance of our five picks year to date.



Heidrick & Struggles International Inc. (HSII - Free Report) provides executive search, culture shaping, and leadership consulting services on a retained basis to businesses and business leaders in the Americas, Europe, Asia Pacific, and internationally. The company has expected earnings growth of 118.4% for current year. The Zacks Consensus Estimate for the current year has improved by 6.3% over the last 30 days.

ArcBest Corp. (ARCB - Free Report) provides freight transportation services and integrated logistics solutions worldwide. The company has expected earnings growth of 186.5% for current year. The Zacks Consensus Estimate for the current year has improved by 14.8% over the last 30 days.

On Deck Capital Inc. (ONDK - Free Report) operates an online platform for small business lending in the United States, Canada, and Australia. The company has expected earnings growth of 5,200% for current year. The Zacks Consensus Estimate for the current year has improved by 20.5% over the last 30 days.

Fossil Group Inc. (FOSL - Free Report) is involved in designing, marketing and distribution of consumer fashion accessories. The company has expected earnings growth of 1,960% for current year. The Zacks Consensus Estimate for the current year has improved by 32.1% over the last 30 days.

The Mosaic Co. (MOS - Free Report) produces and markets concentrated phosphate and potash crop nutrients worldwide. The company has expected earnings growth of 71.6% for current year. The Zacks Consensus Estimate for the current year has improved by 7.5% over the last 30 days.

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