How To Pick Winning Stocks Amid Rising Trade Worries
Zacks Investment Research | Jun 04, 2018 08:22AM ET
Growing trade dispute between the United States and countries around the world have reignited concerns over commerce, economic growth and political stability, unnerving investors. Trump’s anti-trade policies characterized by tariff threats have not only disturbed the nine-year bull run but could also lead to a slowdown in global economic growth. According to the International Monetary Fund, the trade spat has clouded a benign outlook for the global economy, which is on track to grow at its fastest pace since 2011 this year and the next.
Amid trade tensions, domestic fundamentals appear sound, compelling investors to remain invested. The U.S. economy has entered its second-longest expansion phase since 1785, thanks to higher consumer spending, rising consumer confidence, still-low borrowing cost, growing wages, and a solid job market.
In particular, the United States added a robust 223,000 new jobs in May, pushing the unemployment rate to an 18-year low of 3.8%. Consumer spending rose the most in five months in April while consumer confidence rebounded near an 18-year high in May. Meanwhile, manufacturing expanded at a faster pace in May and order backlogs grew the most in 14 years. With this, American manufacturing is enjoying a 21-month long winning streak. So clearly, all the latest data point signal good times for the domestic economy.
Further, stronger earnings and the new tax legislation are adding to the bullishness in the market. The massive $1.5-trillion tax cut will perk up the economy and save billions for corporations, boosting job growth and earnings.
Given the domestic bullish trends and heightened fears of a trade war, we have highlighted some stock-picking strategies from the top-ranked cohort for investors that could prove extremely beneficial, reducing the risk of a downside:
Low-Beta Stocks
Low-beta stocks exhibit greater levels of stability and usually lose less when the market is crumbling. Though these have lesser risks and lower returns, the stocks are considered safe and resilient in a choppy market.
Pilgrim's Pride Corporation (NASDAQ:PPC) having beta of 0.12 seems a good bet in this category. Based in Greeley, CO, it is one of the largest chicken companies in the United States, Mexico and Puerto Rico. It has expected earnings growth of 5.19% for this year. The stock carries a Zacks Rank #2 (Buy) and has a VGM Score of B.
Value Stocks
Value stocks have proven to be outperformers over the long term and are less susceptible to trending markets. These stocks have strong fundamentals — earnings, dividends, book value and cash flow — that trade below their intrinsic value and are undervalued. These have the potential to deliver higher returns and exhibit lower volatility than their growth and blend counterparts.
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The Idaho-based Micron Technology Inc (NASDAQ:MU) is one of the leading worldwide providers of semiconductor memory solutions. It has a Value Score of A and an estimated earnings growth of 132.46% for the fiscal year (ending August 2018). The stock has a Zacks Rank #1 (Strong Buy). You can see Zacks Investment Research
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