Major U.S. bourses witnessed increased volatility last month as investors grappled with the coronavirus scare. The broader S&P 500 ended slightly lower in January, snapping a four-month winning streak. The Dow also posted its first monthly loss since August. Meanwhile, the Cboe Volatility Index (VIX) — markets’ best fear gauge index — jumped to almost 19 in January from 13.78 in December, highlighting a gain of more than 37%.
Investors are concerned about the potential economic impact of the fast-spreading deadly virus in China. The disease has now claimed more than 360 lives and infected 9,692. Chinese National Health Commission added that 30,453 people in China are now under medical observation for the virus. And almost 30 municipalities have reported confirmed cases of coronavirus to the Chinese government.
The virus affects the respiratory organs and is quite similar to SARS (severe acute respiratory syndrome). Lest we forget, SARS, which erupted in 2002, resulted in the death of 800 and triggered a severe economic slump that fettered global stocks.
The United States has declared the coronavirus to be a public health emergency while the WHO recognized the impact of the virus to be wide spread, affecting countries with weaker health systems. No doubt, the outbreak is a near-term headwind for stocks. After all, with so many people affected, travel-related stocks were hit hard. In fact, Delta, American and United suspended flights between the United States and China. Needless to say, market pundits fear possible contagion, as hundreds of millions of passengers traveled during the holiday season. By the way, manufacturers of luxury items also felt the heat. After all, such companies rely heavily on outlays by Chinese tourists.
But even though the U.S. stock market went through a choppy phase in January, there are certain stocks that defied the downward trend and ended in the green. And it’s mostly because such stocks have established business models, and are fundamentally strong enough to provide hedge against any downfall. Let us, thus, look at a few compelling choices —
Apple Inc. (AAPL - Free Report) designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories worldwide. It also sells various related services. The stock gained last month on increased sales of smartwatches, AirPods wireless earbuds and services like mobile payments and streaming-music subscriptions. Growth in such segments helped Apple offset last year’s almost 14% decline in iPhone business, which accounts for the bulk of its sales.
Apple’s Wearables segment, which includes products such as Apple Watch, Air Pods, and Beats earphones, have done pretty well in recent times. At the same time, we can’t ignore the Services segment. Services has become Apple’s second most important division. After all, more than 450 million customers are buying Apple’s streaming contents, news and warranties. Apple earned a staggering $46 billion from the segment last year, which accounted for 18% of overall sales.
Apple currently has a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for its current-year earnings has moved up 5.1% over the past 60 days. The company’s shares gained 3.1% in the month of January. Moreover, its expected earnings growth rate for the current year is 15.6% compared with the Computer - Mini computers industry’s projected increase of 11.3%.
Microsoft Corporation (MSFT - Free Report) develops, licenses, and supports software, services, devices, and solutions worldwide. When it comes to Microsoft, its new subscription model, Azure, and promising new products generated sizeable cash flows in recent times.
To top it, Microsoft’s gaming segment, including Xbox Live, Game Pass subscriptions and Mixer, also helped the trillion-dollar-plus company gain traction. Notably, acquisitions like PlayFab and GitHub helped Microsoft expand its total addressable market.
Microsoft currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has risen 5% over the past 60 days. The company’s shares gained almost 6% last month. Moreover, its expected earnings growth rate for the current year is 18.3% compared with the Computer - Software industry’s estimated increase of 6.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Alphabet Inc. (GOOGL - Free Report) provides online advertising services. The company operates through Google and Other Bets segments.
Google-parent Alphabet’s search market share is a big positive, which along with its focus on innovation, strategic acquisitions and Android OS should continue to generate strong cash flow.
Alphabet currently has a Zacks Rank #2. The Zacks Consensus Estimate for its next-year earnings has moved 0.5% north over the past 60 days. The company’s shares gained 4.7% in January. Moreover, its expected earnings growth rate for the current year is 6.6% compared with the Internet - Services industry’s expected increase of 4.2%.
Netflix, Inc. (NFLX - Free Report) provides Internet entertainment services. The company operates through three segments: Domestic streaming, International streaming, and Domestic DVD.
Netflix’s growing subscriber base, driven by content strength, focus on originals across various genres and languages, rapid international expansion and partnerships with telcos are key drivers.
Netflix currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has risen 10.2% over the past 60 days. The company’s shares gained 4.6% last month. Moreover, its expected earnings growth rate for the current year is 46.3%, in contrast to the Broadcast Radio and Television industry’s projected decline of 6%.
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