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4 Top Stocks That Are Attractive Bargains for 2019

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The U.S. stock market has been going through a rough patch this year, with things worsening in the past month. The Trump administration has quite aggressively attributed the discouraging performance of the U.S. stock market to the latest increase in federal funds rates. After all, a rising interest rate environment reduces borrowing and eventually spending. And if spending drops too much, then there are chances that the U.S. economy may face a recession.

International trade disputes are doing no good either. The United States has for quite some time complained that China has not opened its economy as much as it has and also charged China of intellectual-property theft. To say the least, China’s heavy debt burden and Italy’s already mediocre growth rate are adding to the woes.

But, let’s admit that a near-term recession not in the cards. And why so? During the Great Recession of 2007-09, debt payments were way more than household budgets. Now, household debt payments account for a modest share of household income. By the way, the same can be said about business houses.

And how can we forget that an uptick in oil and gas prices initiated two recessions in the 1970s. A lot of revenues for oil and gas have flowed outside the country since the United States was a big importer of oil at that time. Today, it is one of the major producers and exporters of oil. So, if oil and gas prices move north, the money will flow into the U.S. economy and not out of it.

With current trends in household debt, business debt and oil prices not suggesting a recession in the near future, let us focus on a few favorite sectors that are ready to bounce back next year following the beating they received this year. Stocks from such sectors are thus perceived to be “bargains” or are undervalued and will help investors make money by buying before the impending rally.

What Retail Apocalypse? New Year Rally Could be Ahead

Retail stocks have tumbled in recent months, with the XRT retail ETF down 17% so far in December. Thus, the sector is on track for its worst December since 2006. Major retailers including Target Corporation (TGT - Free Report) and Kohl’s Corporation (KSS - Free Report) have already tanked more than 10% so far this month.

However, earnings growth for retailers is twice that of the S&P 500 per Erin Gibbs, portfolio manager at S&P Global Market Intelligence. In fact, XRT ETF’s earnings are expected to rise 17% next year, while the S&P 500’s profit is projected to jump 8% per FactSet estimates. And this forecasted rise in earnings growth certainly presents a buying opportunity.

Moreover, retailers have already received the much-needed push after holiday sales grew at the fastest pace in six years to top $850 billion, according to Mastercard SpendingPulse data (read more: Holiday Retail Sales Hit Six-Year High: 5 Stocks to Buy).

Tech Stocks Unfairly Hammered

During the market pullback this year, tech stocks took a beating. From user data privacy to NAND price crash to tariffs on semiconductors, tech stocks faced a slew of challenges. Geopolitical issues including escalating trade tensions between the United States and China have time and again made tech stocks bleed.

In fact, several tech stocks have been unfairly hammered especially chip stocks. These stocks have not only weathered the Bitcoin bubble well but are also likely to take advantage from the upcoming requirement of chips needed to boost artificial intelligence (AI) and the like.

The broader tech sector, in itself, is likely to gain from escalating demand for sensors and software for autonomous vehicles, advanced driver assisted systems (ADAS), Augmented/Virtual reality devices (AR/VR) and Internet of Things (IoT) (read more: 5 Battered Technology Stocks That Could Bounce Back in 2019). 

Lest we forget, several tech IPOs are on the horizon. From Uber Technologies Inc and Lyft battling for the transit space to the thrilling dating app Bumble Trading Inc eyeing an IPO, there are a lot of chances for investors to make big moolah in the upcoming year.

4 Great Bargains for 2019

Investors thus should see a “buy the dip” opportunity in the retail and tech space. We have, thus, selected four stocks from these sectors that are great bargains. These stocks carry a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

G-III Apparel Group, Ltd. (GIII - Free Report) designs, manufactures, and markets women's and men's apparel in the United States and internationally. The stock, currently, has a Zacks Rank #2. G-III Apparel has a price-to-earnings ratio (P/E) of 9.42, compared with 18.80 for the industry. The company’s shares have tanked 30.6% in the past month but are forecast to gain a steady 9.1% and 11.3% in the next quarter and year, respectively.

Ralph Lauren Corporation (RL - Free Report) designs, markets, and distributes lifestyle products. It offers apparel, including a range of men's, women's, and children's clothing accessories. The stock, currently, has a Zacks Rank #2. Ralph Lauren has a price-to-earnings ratio (P/E) of 14.17, compared with 18.80 for the industry. The company’s shares have declined 9.3% in the past month. However, it is forecast to gain a steady 7.4% in the next year.

DHI Group, Inc. (DHX - Free Report) provides data, insights, and connections services to professional communities in the United States and internationally. The stock, currently, has a Zacks Rank #2. DHI Group has a price-to-earnings ratio (P/E) of 6.18, compared with 14.90 for the industry. The company’s shares have slipped 19.9% in the past month but are forecast to gain a whopping 700% in the next quarter and a steady 9.1% next year.

KEMET Corporation (KEM - Free Report) manufactures and sells passive electronic components under the KEMET brand worldwide. The stock, currently, has a Zacks Rank #1. KEMET has a price-to-earnings ratio (P/E) of 4.77, compared with 14.50 for the industry. The company’s shares have dropped 17.3% in the past month but are projected to gain a solid 120% in the next quarter and a steady 14.1% in the next year.

In addition to the stocks discussed above, would you like to know about our 10 top tickers to buy and hold for the entirety of 2019?

These 10 are painstakingly handpicked from over 4,000 companies covered by the Zacks Rank. They are our primary picks poised to outperform in the year ahead. Be among the first to see the new Zacks Top 10 Stocks >>

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