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A Nasty Drop of 3%+ Spells Good Times Ahead: 5 Solid Picks

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Escalating concerns that the coronavirus outbreak will impede global economic growth dragged benchmarks down on Feb 24. Investors around the world were spooked after the COVID-19 outbreak spread in countries beyond China, including Italy and Iran. Italy reported 219 infected people and the government has locked down 11 towns. At the same time, the virus has reached the Iranian shrine city of Qom. In mainland China, 2,663 people have died with 77,658 infected.

Yesterday’s sell-off marked the first time that the three major benchmarks — the Dow, the S&P 500 and the Nasdaq — each declined at least 3% after Dec 4, 2018, per Dow Jones Market Data. The S&P 500, in particular, breached its 50-day moving average for the first time since last October.

What’s more, all sectors of the broader S&P 500 index ended in the red, mostly because of a 4.74% drop in the energy sector, which incidentally suffered its worst daily percentage loss since Aug 24, 2015. And when it comes to the blue-chip index, the Dow saw its third-biggest one-day drop in its 124-year history. All 30 Dow components finished in the negative territory. In fact, yesterday’s downturn wiped out the Dow and S&P 500’s gains in 2020.

However, stocks have a tendency to bounce back after a drop of at least 3%, show Dow Jones Marker Data. In the past 10 times that both the Dow and the S&P 500 fell by a minimum 3%, their performances improved considerably in the following week, month and year. Take a look —

Bespoke Investment Group further said that whenever the S&P 500 has declined more than 2% in one trading session over the past 11 years, particularly on a Monday, the index has made stellar comebacks. One of the research firm’s analysts wrote, “since March 2009, there have been 18 prior 2%+ drops on Mondays, and the S&P 500 has seen an average gain of 1.02% on the next day (Turnaround Tuesday).”

In fact, investment guru Warren Buffett himself believes that no matter how spooky the outbreak is, it’s not the time to dump stocks. He believes one should not get caught up in daily headlines and that the outbreak is a temporary issue.

Moreover, the domestic economy is doing pretty well, which should eventually help the stock market scale north. Both domestic manufacturing and service activities picked up recently, and the labor market continues to be strong, a tell-tale sign that the economy is doing well despite the virus onslaught. To top it, the current low interest environment should make the cost of borrowing manageable, helping companies invest and grow.

5 Best Stocks to Buy for the Rest of the Year

With the stock market expected to bounce back in the rest of the year, investing in fundamentally-sound stocks that are poised to gain in the near term seems judicious. We have selected five such stocks that flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a Growth Score of A or B. You can see the complete list of today’s Zacks #1 Rank stocks here.

Retailer of branded apparel products, Burlington Stores, Inc. (BURL - Free Report) has a Zacks Rank #2 and a Growth Score of A. The Zacks Consensus Estimate for its current-year earnings has climbed 0.7% over the past 60 days. The company’s expected earnings growth rate for the current quarter and year is 13.8% and 14.8%, respectively.

Chipotle Mexican Grill, Inc. (CMG - Free Report) has a Zacks Rank #2 and a Growth Score of A. The Zacks Consensus Estimate for its current-year earnings has moved 3.4% north over the past 60 days. The company’s expected earnings growth rate for the current quarter and year is 11.5% and 30.9%, respectively.

Apple Inc. (AAPL - Free Report) has a Zacks Rank #2 and a Growth Score of B. The Zacks Consensus Estimate for its current-year earnings has moved up 4.4% over the past 60 days. The company’s expected earnings growth rate for the current quarter and year is 11.8% and 14.8%, respectively.

Chevron Corporation (CVX - Free Report) has a Zacks Rank #2 and a Growth Score of B. The Zacks Consensus Estimate for its current-year earnings has risen 8.3% over the past 60 days. The company’s expected earnings growth rate for the current quarter and year is 28.1% and 12.8%, respectively.

Deckers Outdoor Corporation (DECK - Free Report) , known for designing and distributing footwear, apparel, and accessories for casual lifestyle use, has a Zacks Rank #1 and a Growth Score of A. The Zacks Consensus Estimate for its current-year earnings has moved up 5.2% over the past 60 days. The company’s expected earnings growth rate for the current and next five years is 7.9% and 12.4%, respectively.

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