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Wall Street Flying High to End 2019 on a Solid Note: 5 Picks

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Wall Street is set to end 2019 on a strong note. All three major indexes ---- the Dow, the S&P 500 and the Nasdaq Composite --- are at a striking distance to surpass their highest yearly gains recorded in 2013, which was the best year for the Wall Street after the Great Recession. Notably, the last month of 2019 is looking even more spectacular buoyed by the possibility of the signing of the phase-one trade deal in early January and strong economic data.

Wall Street Likely to Maintain Momentum

So far in December, the Dow, the S&P 500 and the Nasdaq Composite have gained 1.4%, 2.6% and 3%, respectively. Year to date, these indexes have rallied 22%, 28.6% and 34.5%, respectively. In 2013, these indexes returned a respective 26.5%, 29.6% and 38.3%.  This is in sharp contrast to 2018, when the three major indexes plunged 5.6%, 6.2% and 3.9%, respectively.

The current momentum is likely to continue at least in the near term, supported by an expected Santa Rally, which is a typical Wall Street phenomenon associated with unusually strong stock-market gains during the last five trading days of the year and the first two trading days of the New Year. Other major drivers are the phase-one trade deal and strong economic data.

Positive News on Trade War Front

On Dec 13, both the United States and China declared that they have reached a phase-one trade deal likely to be signed by the two presidents in the first half of January. U.S. Trade Representative Robert Lighthizer said the deal will address intellectual-property disputes along with strong enforcement provisions and financial services and currency issues in addition to tariff rollback and higher agricultural purchase.

The U.S. House or Representative recently approved the USMCA trade deal which will replace the previous NAFTA deal between the United States, Mexico and Canada. Moreover, the possibility of Brexit after British prime minister Boris Johnson’s victory in election is likely to open the path for a new trade deal with the U.K.

Strong Economic Data

On Dec 20, the Department of Commerce reaffirmed that the U.S. economy grew 2.1% in the third quarter of 2019. Notably, consumer spending, which constitutes 70% of the country’s GDP grew 3.2% in the third quarter, revised upward from 2.9% reported earlier.

More importantly, business investment decreased 2.3% in the third quarter, instead of a drop of 2.7% as previously reported. Investment in structures fell 2.3% as against the prior estimate of 2.7%. Spending on equipment declined 9.9% from against 12% reported earlier.

U.S. manufacturing output jumped 1.1% in November. Core durable goods order (which excludes defense aircraft) jumped 1.2% in October, indicating bottoming out of the weakness in business spending. IHS Markit reported that U.S. consumer sentiment in December increased to 99.3 from 96.8 in November.

Our Top Picks

At this stage, it will be prudent to invest in momentum stocks with a favorable Zacks Rank. We have narrowed down our search to five momentum stocks that have skyrocketed in 2019. Each of our picks carries a Zacks Rank #1 (Strong Buy) and has a Momentum Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.

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

 

TopBuild Corp. (BLD - Free Report) is engaged in the installation and distribution of insulation and other building products to the United States construction industry. It operates in two segments, Installation and Distribution. The company has an expected earnings growth rate of 14.3% for the next year. The Zacks Consensus Estimate for the next year has improved 2% over the past 30 days. The stock has rallied 129% year to date.

Lithia Motors Inc. (LAD - Free Report) is one of the leading automotive retailers of new and used vehicles and related services in the United States. The company has an expected earnings growth rate of 14.3% for the next year. The Zacks Consensus Estimate for the next year has improved 0.8% over the past 60 days. The stock has advanced 107.4% year to date.

Allegiant Travel Co. (ALGT - Free Report) is a leisure travel company, provides travel services and products to residents of under-served cities in the United States. The company has an expected earnings growth rate of 18.4% for next year. The Zacks Consensus Estimate for the next year has improved 1.4% over the past 30 days. The stock has soared 79.1% year to date.

HEICO Corp. (HEI - Free Report) designs, manufactures, and sells aerospace, defense, and electronic related products and services in the United States and internationally. The company has an expected earnings growth rate of 15.2% for the next year. The Zacks Consensus Estimate for the next year has improved 3.9% over the past 30 days. The stock has surged 50.7% year to date.

Synopsys Inc. (SNPS - Free Report) is a vendor of electronic design automation software to the semiconductor and electronics industries. The company has an expected earnings growth rate of 14.5% for the next year. The Zacks Consensus Estimate for the next year has improved 4.6% over the past 30 days. The stock has climbed 66.1% year to date.

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