4 Blue-Chip Stocks To Buy In Q4 Earnings
Zacks Investment Research | Jan 15, 2018 08:41PM ET
The euphoria over the Republican-led tax overhaul policy helped the Dow persistently hit record highs and book back-to-back weekly gains. This epic Dow rally is likely to get a boost from a stellar Q4 earnings season. Strong guidance and an upbeat economic scenario are cited to be some of the primary reasons that will help earnings pick up steam.
Given the positives, investing in blue-chip stocks that are likely to make the most of the Q4 earnings season seems judicious. Such stocks, moreover, are positioned to report promising earnings results as they have strong balance sheets and solid cash flow.
Dow Jones to Hit Record High Post Holiday
Dow futures soared triple digits on Jan 15, when the U.S. stock market was closed for Martin Luther King Jr. Day. The Dow has already booked two straight weekly gains, as well as registered seven positive weeks in the last eight. The Dow jumped almost 4.4% and posted its best start to a year since the first nine trading sessions of 2003.
The 30-stock index demonstrated mostly nothing in the way of gyration or market pullbacks. In fact, the broader market shrugged off uncertainty over the past 12 months. The Cboe Volatility Index (VIX), quiet remarkably, registered 47 lowest closings last year, out of a total of 56 since its inception in 1990.
Tax Package: A Boon for Blue Chips
The enthusiasm over tax cuts fueled a strong rally in blue-chip stocks. The corporate tax rate will be lowered from 35% to 21% and will be implemented this year, instead of being delayed till 2019. At the same time, any income brought back from overseas will be taxed 8-15.5%, instead of the current 35%.
A one-time low tax rate on foreign profits will help blue chips bring funds held overseas back to the United States. This will help such companies carry out a combination of share buybacks, dividend payments and M&A activities. They also face a high tax burden, which makes them big gainers when tax rates go down (read more: Zacks Investment Research
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