Ride on the Solid Growth Potential of These 5 Stocks

If the first two and a half months is any indication to go by, the equity markets in 2016 will continue to be plagued by headwinds similar to those that hurt stock performance last year. These include oil price volatility, the bearish Chinese stock market, Fed’s tug-of-war with interest rates and the strengthening of the U.S. dollar.

What’s With the Economy?

The first two weeks of 2016 was practically scary for investors, sparking fears that the seven-month old bull market was nearing an end. However, modest economic growth and impressive employment statistics annulled such speculations, injecting some confidence into the otherwise bleak economic scenario. The market correction in the last week of January was more or less followed by an uptrend in stock prices, primarily fuelled by factors like a rise in oil prices and rebound of manufacturing data to some extent.

It is too early to comment on the fate of the market as the present wave of optimism can die a premature death, in the event of any unfavorable macroeconomic headwind. Presently, it appears that Fed’s determination to hike interest rates will be largely thwarted by factors like muted inflation, lackluster economic growth outside the U.S. and low global-bond yield environment. Amid such market volatility, European Central Bank’s (ECB) latest decision to cut its lending rate to a range of 0-0.05% has largely left investors flustered. Naturally, European markets were largely down after the news.

Moreover, pessimists remain unsettled by the stunted growth of China that can eventually lead to negative credit cycles and recessionary fears in the emerging economies. Countries with close trade linkages with China are expected to be worst-hit. Also, a slowdown in the global industrial markets and commodity price fluctuation can pose a major threat.

Where Does That Leave You?

If the worsening pressure abroad is testing your patience, then it is just the right time to overcome the fears by betting on the right mix of stocks. Even the most paranoid investors, filled with deep skepticism, will be unable to overlook the fact that 90% of a portfolio’s return is determined by the perfect stock mix. Although 2016 may not have proved to be the most prospective year so far, greener pastures are not impossible to locate.

Taking lessons from last year, when market conditions were largely the same, four of the ten major sectors in the S&P 500 finished in the green, allowing investors to siphon a great deal of profit from their investments. As the bull market progresses, occasional fears of a slump are bound to appear; nevertheless, one needs to build a portfolio to smoothen the bumps.

With the ECB’s directive in motion, it is not completely unreasonable to expect a GDP rebound in the Eurozone. Most importantly, the relative resiliency of the U.S. equity markets lately, in the face of turbulent times abroad, is another positive that should keep you from hitting the panic bottom – well, at least not just yet.

Find the Winning Formula

Here at Zacks, we help you to find the stocks that are best suited to reap huge returns for your portfolio. We have singled out the stocks that have already gained 10% in 2016 even under the tough market conditions and proved their mettle. Also, we have resorted to our Zacks Style Score, which helps select stocks that have a strong upside potential. Our Growth Style Score combines conventional growth metrics with a thorough analysis of the company’s income statement, balance sheet and statements of cash flows to evaluate its financial health and the sustainability of its growth trajectory.

Our research shows that stocks with Style Scores of ‘A’ or ‘B,’ when combined with our proven investment arsenal – Zacks Rank of #1 (Strong Buy) or 2 (Buy) – offer the best investment opportunities. This implies that these companies are still seeing strong momentum and their growth trajectory is unlikely to falter anytime soon.

Listed below are five stocks that might help you find the right needles in the haystack to maximize the returns on your portfolio.

5 Stocks to Consider

J. C. Penney Company, Inc. JCP - Founded in 1902 and based in Plano, TX, J. C. Penney through its wholly owned subsidiary J. C. Penney Corporation, Inc. offers merchandise and services to customers through its department stores, catalogs and website. The company operates stores at both mall and off-mall locations. The company sells family apparel, footwear, accessories, fine and fashion jewelry, and home furnishings. It also offers beauty products through Sephora shops, which are located inside the J. C. Penney stores.

Zacks Rank: #2
Price Change (YTD): 68.47%
Growth Secure: A

Tyson Foods Inc. TSN - Headquartered in Arkansas, Tyson produces and markets chicken, beef, pork, prepared foods and allied products. Founded in 1935, Tyson’s products are marketed and sold to grocery retailers, wholesalers, meat distributors, military commissaries, industrial food processing companies, chain restaurants, international export companies and domestic distributors.

Zacks Rank: #1
Price Change (YTD): 26.93%
Growth Secure: A

II-VI Incorporated IIVI - Founded in 1971 and headquartered in Saxonburg, PA, the company is engaged in refining, manufacturing and marketing engineered materials and opto-electronic components and products worldwide. It offers a wide range of products including precision infrared opto-electronic components, semiconductor laser diode products, passive optical components and modules, cooled and uncooled pumps; amplifiers; optics and optical sub-assemblies for ultra-violet and infrared systems, to name a few.

Zacks Rank: #1
Price Change (YTD): 14.33%
Growth Secure: B

Central Garden & Pet Company CENT - It is a leading producer and marketer of premium and value-oriented products focused on the lawn & garden and pet supplies markets in the U.S. The company offers its products to mass merchants, home improvement centers, lawn and garden nurseries, grocery stores, specialty pet stores, veterinarians’ municipalities, and other individual animal buyers. Central Garden & Pet has emerged as one of the largest suppliers of pet and garden products to Wal-Mart, Home Depot, Lowe’s and PetSmart through a combination of strategic acquisitions and organic growth.

Zacks Rank: #1
Price Change (YTD): 13.76%
Growth Secure: B

Target Corporation TGT - Founded in 1902, and headquartered in Minneapolis, MN, Target operates as a general merchandise retailer in the U.S. The company provides an array of goods ranging from household essentials and electronics to toys and apparel for men, women and kids. It also houses food and pet supplies. As of Jan 30, 2016, Target operated 1,792 stores.

Zacks Rank: #2
Price Change (YTD): 12.75%
Growth Secure: A

To Conclude

A bleak macroeconomic outlook and desperate measures taken by the central banks leave much to speculation. Our time-tested parameters at Zacks signal these five stocks have bright growth prospects and that investors can bet their money on them safely to reap benefits as the year progresses.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
TYSON FOODS A (TSN): Free Stock Analysis Report
 
II-VI INCORP (IIVI): Free Stock Analysis Report
 
CENTRAL GARDEN (CENT): Free Stock Analysis Report
 
TARGET CORP (TGT): Free Stock Analysis Report
 
PENNEY (JC) INC (JCP): Free Stock Analysis Report
 
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