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Fretting About Wall Street Losses? 4 Safe Value Bets

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The recent slump in stock markets that pushed Wall Street indexes to post the biggest weekly losses of 2019 last week, is a result of a wide range of disappointing economic data coupled with investor fears over a global economic slowdown. However, an encouraging fourth-quarter GDP, consumer confidence and a likely U.S.-China trade agreement could turn the financial markets around.

It is in the hope of this rebound that one could consider investing in value stocks at present.

What Dragged Markets Down Recently?

According to the Bureau of Labor Statistics, job additions nearly stalled in February, with the economy adding 20,000 new jobs — well below the consensus expectation of 186,000. Needless to say, the labor market was primarily responsible for lifting market sentiment through steady job additions for months despite a slowing global economy and trade tensions.

Prior to the Labor department data, U.S. retail sales’ unexpected drop of 1.2% in December had sparked investor concern. After all, a drop in retail sales indicated a sharp slowdown in economic activity at the end of last year. December’s retail sales’ slump was also the largest since September 2009, a couple of months after the Great Recession ended.

Moreover, the country’s construction spending dropped unexpectedly in December, falling 0.6% against a 0.8% rise in November. This is further proof of the economy cooling toward the end of last year.

In addition, the United States’ trade deficit hit a 10-year-high of $59.8 billion in December, the Commerce Department cited last week. Slowing demand for American goods can be attributed to declining global growth and a stronger dollar.

The global economic scenario isn’t encouraging either. China’s year-over-year exports in February dropped 20.7%, marking its largest decline in three years. The European Central Bank, in the meantime, lowered its 2019 forecasts for Eurozone growth as well, stagnating interest rate hikes till the end of this year and bringing in fresh stimulus measures.

However, it’s widely believed that these are temporary setbacks. The stock market will surely bounce back on an impending trade deal between the United States and China.

Financial Markets to Gain Soon

According to a CNBC reportpublished last week, President Donald Trump is vigorously pursuing a trade deal with the Asian nation in a bid to boost the financial markets ahead of the presidential election next year.

A Bloomberg reportlast week also echoed this, claiming that the President is pushing U.S. negotiators to seal a trade deal with China soon because he is aware of the market rallies that have followed every sign of progress in the trade deal these past few weeks.

Therefore, the emergence of a U.S.-China trade agreement by the end of March is a likely affair. Trump has even expressed his interest in hosting China’s president Xi Jinping in Florida for a signing ceremony this month.

In addition, not every aspect of the U.S. economy is in bad shape. In fact, the GDP witnessed an annualized growth of 2.6% in the last quarter against a 2.2% rise in the fourth quarter of 2017, according to the Bureau of Economic Analysis. The surge in last quarter’s GDP was more than analysts’ expectation of 1.9%.

The uptick in year-over-year fourth-quarter GDP was predominantly due to a rise in consumer spending levels and business investments. This indicates the U.S. economy’s overall healthy pulse.

To add to the positive factors, consumer confidence increased in February due to an end to the U.S. government’s longest partial government shutdown.

Why Invest in Value Stocks Now?

With the markets expected to regain momentum after the initial pullback, it’s worth investing in value stocks now. And why not? These could be ideal for investment as they are common stocks of companies that are currently trading below their intrinsic value. This means that a company’s stock price is trading at a value that doesn’t reflect its long-term fundamentals.

Therefore, when the temporary downward movement of the financial market subsides, these undervalued stocks could gain and post better price performances.

Our Choices

We have hand-picked four stocks that have good fundamentals coupled with a Zacks Rank #1(Strong Buy) and Value Score of A.

Anthem, Inc. (ANTM - Free Report) is a health benefits company in the United States. The company offers a wide range of network-based health benefit plans to Medicare, Medicaid markets and individuals and groups. The company also offers a spectrum of managed care services, insurance products and services that cover areas such as dental, disability, vision and life etc.

Anthem’s expected earnings growth rate for the current year is 20.4% compared with the Zacks Medical - HMOs industry’s projected rise of 14.6%. Its Zacks Consensus Estimate for current-year earnings has risen 8.8% in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

Huaneng Power International, Inc. (HNP - Free Report) generates and markets electricity and heat to the provincial or regional grid companies in China and Singapore. The company invests, develops, operates, constructs and manages power plants and related instruments.

Huaneng Power International’s expected earnings growth rate for the current year is 102.5% compared with the Zacks Utility – Electric Powerindustry’s projected decline of 3.1%. Its Zacks Consensus Estimate for current-year earnings has risen 24.6% in the past 60 days.

Ares Management Corporation (ARES - Free Report) is an alternative asset manager in the United States, Asia and Europe. Ares Management’s Tradable Credit Group is responsible for managing several types of investment funds and publicly traded vehicles and sub-advised funds that are meant for retail investors in the tradable and non-investment grade corporate credit markets.

Ares Management’s expected earnings growth rate for the current year is 9.2% compared with the Zacks Financial – Investment Managementindustry’s projected decline of 1.7%. Its Zacks Consensus Estimate for current-year earnings has risen 6.2% in the past 60 days.

Meritor, Inc. (MTOR - Free Report) designs, manufactures and sells integrated systems, components and modules to original equipment manufacturers and to the aftermarket for commercial vehicles, industrial and transportation sectors.

Meritor’s expected earnings growth rate for the current year is 10.9% compared with the Zacks Automotive – Original Equipmentindustry’s projected decline of 0.4%. Its Zacks Consensus Estimate for current-year earnings has risen 5.7% in the past 60 days.

Zacks' Top 10 Stocks for 2019

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?

Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.

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