5 Top High-Yielding Stocks To Buy As Coronavirus Cases Rise
Zacks Investment Research | Feb 12, 2020 08:14PM ET
The coronavirus outbreak is turning out to be major threat to U.S. and global economic growth. After an impressive 2019, investors anticipated the strong momentum of Wall Street to continue fueled by the signing of an interim trade deal between the United States and China.
However, volatility resulting from the coronavirus outbreak played a spoilsport and Wall Street has been gradually losing momentum since mid-January. On Feb 12, China confirmed 15,152 new cases of coronavirus with 254 deaths recorded in a single day.
Possible Impact of Coronavirus
At present, economists are uncertain regarding as to how the coronavirus outbreak will impact the global economy. However, majority of them are of the view that coronavirus will be a much larger pandemic than the outbreak of SARS in 2002-2003, which was estimated to have reduced roughly 0.8% of the Chinese economy.
Several economists are of the opinion that the impact of coronavirus may be much larger. During 2002-2003, China commanded around 4% of the global economy. However, the Asian economic powerhouse now commands more than 16% of the global economy.
In fact, China has become the backbone of global supply-chain system. Its low-cost intermediary products are used as inputs to several high-tech corporate behemoths. Similarly, the cheap Chinese electrical and electronics final goods are immensely popular worldwide.
The Chinese authorities have already confirmed that as many as 1,367 people have died due to coronavirus and the total number of confirmed cases in the country has risen to nearly 60,000. The government of China has been forced to lockdown 10 cities with a total population of over 33 million. This measure will certainly jeopardize normal economic activities of a large number of people.
China is already under considerable strain from a nearly two-year long tariff war with the United States. The recently signed interim trade deal was viewed as an opportunity to revive the sagging economy of the Asian giant. Notably, deterioration of the Chinese economy will significantly affect global export demand and consequently delay global economic recovery.
It is to be noted, several U.S. industries like airlines, shipping, travel and tourism, hotel and casino, restaurants, luxury consumer products and high-tech products are suffering due lack of Chinese demand and supply or inputs. In fact, various corporate giants have already reduced their first-quarter 2020 financial guidance thanks to the coronavirus outbreak.
U.S. Economy Remains Strong
Despite the outbreak of coronavirus, several financial reports released in January reaffirmed the strength of the U.S. economy. This is evident from robust labor market with historically low-level of unemployment and growing wage rate, continuous growth of service-centric industries and likely rebound of manufacturing industries. Further, soaring consumer confidence, indicating strong consumer spending, which constitutes 70% of the U.S. GDP, only reinforces the claim.
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Additionally, Fed Chairman Jerome Powell stated in his recent congressional testimony that the central bank is closely monitoring the impact of coronavirus and will do whatever necessary to sustain U.S. economic expansion, including pursuing government bond purchase — popularly known as quantitative easing program.
How to Select Right Stocks
At present, no one is certain about the potential impact of the coronavirus on the United States, China and global economy. Investors should be prepared for both northbound movement of the market as well as the return of severe volatility. At this stage, it will be prudent to invest in growth stocks which also provide lucrative dividends. In case of downturn, dividends will cushion the portfolio.
We have narrowed down our search to five stocks that popped in the past year and still have momentum left with strong EPS estimate revisions. Each of our picks carry a Zacks Rank #1 (Strong Buy) and a Zacks Investment Research
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