The Zacks Analyst Blog Highlights: RCI Hospitality, Echo Global, Covenant Transportation, Turning Point And MYR
Zacks Investment Research | May 21, 2018 08:00AM ET
For Immediate Release
Chicago, IL – May 21, 2018 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include RCI Hospitality Holdings, Inc. (NASDAQ:RICK) , Echo Global Logistics, Inc. (NASDAQ:ECHO) , Covenant Transportation Group, Inc. (NASDAQ:CVTI) , Turning Point Brands, Inc. (NYSE:TPB) and MYR Group Inc. (NASDAQ:MYRG) .
Here are highlights from Friday’s Analyst Blog:
Wall Street’s Biggest Gains Come from the Smallest Names
Smart money continues to pour into small-cap stocks. A popular index of small caps has been scaling record highs of late as this niche segment doesn’t face currency issues and is undeterred by trade war concerns. In contrast, such factors act as bottlenecks for bigger names.
Small-caps, being more U.S.-centric, are poised to benefit from the latest tax overhaul policy. The tax cut will drive earnings and cash flow for the stocks. Banking on these positives, investing in stocks with high domestic exposure in terms of revenue generation seems sensible.
US Equity Benchmarks Flop, Small Caps Top
The broader equity market has been struggling to break out from a tight trading range for quite some time now. Investors’ interest in equities seems to be dissipating, with only 32.7% expecting a higher rally in stocks in 12 months from now, per the Conference Board. In the last trading session, all the major bourses, including the Dow, the S&P 500 and the Nasdaq, closed in the red.
However, small-capitalization stocks, popularly measured by the Russell 2000 Index, have more room to run. The group scored its second straight closing record on May 17, while large-cap stocks remained in correction territory for the longest stretch in a decade. Ironically, the issues that are dealing a blow to large caps are helping small caps outperform.
Small Caps Dismiss Trade War Fears
Last weekend, Trump’s comments that he is working with President Xi Jinping to help Chinese telecom group ZTE (HK:0763) Group get back into business ebbed fears of a full-blown global trade war. But, his comments in the second round of US-China trade talks this week casted doubt on the outcome for the pair of superpowers. He said that Beijing is becoming too “spoiled” and that his expectations from the negotiation are low. After all, he himself said that “will the negotiation be successful? I tend to doubt it.”
Geopolitical tensions are, mostly, headwinds for large-cap companies as they erode overseas profits. Small caps, on the other hand, remain unperturbed by international disputes due to limited exposure to foreign markets.
A Stronger Dollar Isn’t a Deterrent
The current strength in the U.S. dollar is weighing on multinational stocks. These stocks derive a big portion of their earnings from international sales. As a result, rise in dollar has a negative impact on their foreign sales. Meanwhile, small-cap stocks have little or no exposure to overseas market when it comes to revenue generation. So, they tend to gain with a stronger dollar.
The ICE Dollar Index recently topped the 93 mark for the first time since last December. The dollar’s upward journey was supported by an uptick in Treasury yields that reflected higher interest rate expectations. Fed officials, by the way, have said that the economy is ready to brace higher rates.
The yield on the 10-year Treasury note continues to stay at a 7-year high of 3.1%. Rising inflation expectations led to a selloff of Treasuries. After all, higher commodity prices diminish the value of a bond’s fixed interest payments. The 10-year yield increased as treasuries came under pressure (read more: Zacks Investment Research
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