The global economy is currently struggling with headwinds related to increasing geopolitical tensions, Brexit and the heightening trade war between the United States and other foreign nations, especially China. In the wake of such downsides and others issues, the global growth projections were revised downward by the International Monetary Fund in July 2019.
For the U.S. economy, trade tiffs with foreign nations are a concern. The problem started with the U.S. imposition of tariffs on imports of a wide array of products. Retaliatory actions by the adversely impacted nations, mainly China, followed this enforcement. We believe, trade disputes have left many domestic corporates grappling with high costs of sales and depressed margins. The situation might worsen for some players as the U.S. government announced higher tariffs on various product categories recently.
Further adding to the woes are commodity inflation, scarcity of skilled workforce, rising freight charges and unfavorable movements in foreign currencies. Also, costs related to tackling competitions pose challenges.
Given this scenario, investors seeking exposure in the U.S. equity market need to be cautious in selecting their investment options. At this juncture, our classifications of the country’s stocks under 16 broad sectors and ranking of each of those can be of help.
Over the last 10 years, using a one-week rebalance, the top half (including sectors with ranks from 1 to 8) beat the bottom half (sector with ranks from 9 to 16) by a factor of more than two. (To learn more visit: About Zacks Sector Rank)
Conglomerates Sector on the Pinnacle
Conglomerates currently occupy the first position on the Zacks sectors’ list. Also, it remains at the top position of the Zacks Sector heatmap for seven consecutive weeks. Moreover, the sector has yielded 10.7% return since the beginning of 2019.
The sector’s earnings are predicted to dip 1% in 2019 while grow roughly 11.2% in 2020. We believe that the sector is poised to gain from improving operations in the oil and gas industry, demand from the defense and governmental arenas, higher global demand for air travel plus technological upgrade in manufacturing processes and infrastructure development.
Additionally, changes in the country’s tax policies, governmental development plans and growth in the manufacturing activities are a boon to conglomerates.
Investing in the stocks of the sector can be a wise choice for investors.
5 Suitable Investment Picks in the Sector
Using the Zacks Stock Screener, we have zeroed in on five lucrative investment options from the Conglomerates sector that boast solid growth opportunities despite all the near-term uncertainties.
Griffon Corporation (GFF - Free Report) : Shares of this New York-based company have soared 63.5% year to date. The stock currently sports a Zacks Rank #1 (Strong Buy). Its investment appeal is further accentuated by a favorable VGM Score of A.
You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, the Zacks Consensus Estimate for the company’s current-year and next-year earnings has been revised 19.1% and 18.3% upward, respectively.
Hitachi Ltd. (HTHIY - Free Report) : Shares of this Tokyo, Japan-based company have rallied 27.3% year to date. The stock currently sports a Zacks Rank of 1 and its investment appeal is further highlighted by a solid VGM Score of A.
In the past 60 days, the Zacks Consensus Estimate for the company’s current-year and next-year earnings has moved 1.8% and 7.5% north, respectively.
Federal Signal Corporation (FSS - Free Report) : Based in Oak Brook, IL, shares of this company have surged 45.6% so far this year. The stock currently is Zacks #1 Ranked and has a top VGM Score of B.
In the past 60 days, the Zacks Consensus Estimate for the company’s current-year and next-year earnings has been raised 9.6% and 10.9% respectively.
Carlisle Companies Incorporated (CSL - Free Report) : Shares of this Scottsdale, AZ-based company have jumped 36.6% year to date. The stock has a Zacks Rank #2 (Buy) and an impressive VGM Score of B.
In the past 60 days, the Zacks Consensus Estimate for the company’s current-year and next-year earnings has been revised upward 4% and 3.5% upward, respectively.
United Technologies Corporation (UTX - Free Report) : Headquartered in Farmington, CT, shares of this company have gained 17% year to date. The stock currently has a Zacks Rank of 2 and a favorable VGM Score of B.
In the past 60 days, the Zacks Consensus Estimate for the company’s current-year and next-year earnings has been inched 0.8% and 1% up, respectively.
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