President Donald Trump’s failure to gather Congressional support to pass his healthcare reform bill resulted in the longest losing streak for the Dow Jones on Mar 27 since Aug 2011. The broader markets, in fact, remained under tremendous pressure as investors raised doubts over the new commander-in-chief’s ability to get other pro-growth polices across the finish line.
Equities, however, pared losses as investors went bargain hunting after a rough start to the session that had pushed the blue-chip index down almost 200 points. So if you are on the hunt for great stocks trading at a discount, we have selected some that deserve special attention.
Dow Suffers the Most Since 2011
The Dow Jones Industrial Average posted its eighth consecutive decline on Mar 27. The blue-chip index lost around 1.9% over the sessions, with stocks falling from record highs. This dealt a severe blow to the post election bets on higher growth and inflation that had sent stocks northward.
The S&P 500, in the meantime, has declined in seven of the last eight trading sessions. The CBOE Volatility Index (VIX), a gauge of investor anxiety on Wall Street, traded at elevated levels on Mar 27 compared to the months post Trump’s election.
“Trump Trade” Loses Fizz
Markets began the week spooked by Republican-controlled Washington’s failure to repeal and replace Obamacare. The Republican bill would have offered refundable tax credits to Americans to acquire health insurance, while it would have eliminated Obamacare’s penalty for those who don’t have coverage. The bill was also supposed be a big tax cut to the tune of almost $1 trillion over the next decade.
Trump’s first major legislative test as a President didn’t turn out well, with financial markets getting increasingly skeptical on whether he will be able to deliver on the other economic policies such as tax reforms and infrastructure spending that had drove the S&P 500 to a peak of 2,400 in early March. If such policies don’t materialize, especially with stock valuations at lofty levels, economic growth will be hampered.
Analysts Cynical on Trump Trade
Analysts are having their own “Trump tantrum” as they seriously doubt whether his abrasive style will work in Washington. Here are some of their reactions after the political setback for Trump and House Speaker Paul Ryan:
“The Trump ‘disappointment trade’ is now in full swing, while a spat with Congress is likely to keep the markets on edge, weigh on stock markets and push up volatility” – City Index’s Brooks
“We often hear the term ‘the good, the bad, and the ugly.’ However, the markets are only receiving two of those choices today, and neither one is good, as investors swallow the bad pill that is Trump’s failed health-care plan.” – Naeem Aslam, Chief Market Analyst at Think Markets
“The failure of Donald Trump and the Republicans to get through their health-care legislation has put risk appetite under increasing pressure once more. Traders are wondering whether Trump will be able to achieve his plans and are looking to unwind a degree of the Trump trade” – Richard Perry, analyst at Hantec Markets
Investors Seek Bargains: 5 Solid Choices
Wall Street has turned overly pessimistic after the Republicans failed to secure enough votes for the much talked about healthcare bill. Thanks to such sentiment, bargains have emerged as investors started to looking for solid companies trading at a discount.
We have, thus, selected five stocks that have a price to book value ratio of less than 1, which means the market value of equity is typically lower than the book value of a company. Due to the sudden drop in market valuations, such stocks are also currently trading for under $10 per share and won’t burn a hole in your pocket.
To top it, these stocks boast a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a VGM scoreof ‘A’ or ‘B’. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners.
AU Optronics Corp. AUO develops, produces, and sells thin film transistor liquid crystal displays and other flat panel displays. The company has a price to book value of 0.61 and its prior closing price is $3.91. AU Optronics has a Zacks Rank #1 and a VGM score of ‘A’. The company’s expected growth rate for the current year is 360%, way higher than the Electronics - Miscellaneous Components industry’s estimated rise of 16.8%.
Papa Murphy's Holdings, Inc. FRSH, together with its subsidiaries, owns, operates, and franchises Take N?? Bake pizza stores. The company has a price to book value of 0.71 and its prior closing price is $4.28. Papa Murphy's has a Zacks Rank #1 and a VGM score of ‘B’. The company’s expected growth rate for the current year is 31.3%, above the Retail - Restaurants industry’s estimated increase of 5.8%.
Hudbay Minerals Inc. HBM, an integrated mining company, together with its subsidiaries, focuses on the discovery, production, and marketing of base and precious metals. The company has a price to book value of 0.89 and its prior closing price is $6.65. Hudbay Minerals has a Zacks Rank #2 and a VGM score of ‘A’. The company’s expected growth rate for the current year is 375%, way higher than the Mining - Miscellaneous industry’s estimated increase of 12.10%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Westell Technologies, Inc. WSTL designs and distributes telecommunications products to telephone companies in the U.S. The company has a price to book value of 0.69 and its prior closing price is $0.59. Westell Technologies has a Zacks Rank #2 and a VGM score of ‘B’. The company’s expected growth rate for the current year is 56.3%, significantly higher than the Communication - Components industry’s estimated rise of 14.70%.
Salem Media Group, Inc. SALM operates as a multi-media company in the U.S. The company has a price to book value of 0.83 and its prior closing price is $6.95. Salem Media has a Zacks Rank #2 and a VGM score of ‘A’. The company’s expected growth rate for the current year is 6.7%, in contrast to the Broadcast Radio and Television industry’s projected decrease of 5.10%.
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