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5 Stocks That Survived May's Market Mayhem

Swarup Gupta

Markets just suffered their worst May in nearly a decade. And last month’s losses can be singularly attributed to the U.S.-China trade war. Negotiations between the two countries remained inconclusive and hopes of a near-term deal have more or less evaporated at this point.

In fact, Trump stepped up his actions against China by raising tariffs last month, a move that disappointed market watchers. Indications that this protracted trade war is hurting the global economy are already evident.  

If this wasn’t enough, Trump ended the month with a surprise announcement, threatening to slap tariffs on all Mexican imports. This aggravated losses for equity markets, which closed the month on a sour note. However, some stocks did survive May’s carnage and could be valuable additions to your portfolio.

May’s Performance

In recent years, May has been a particularly strong month for stocks. But events unfolded quite differently this time around, with indexes snapping a four-month stretch of gains. The Dow, S&P 500 and Nasdaq lost 6.7%, 6.6% and 7.9%, respectively.

The blue-chip index also declined 3% last week, marking the sixth consecutive weekly loss for the benchmark. This comes as no surprise since the index largely consists of multinationals that stand to lose the most from a trade war.

Shares of General Motors GM and Ford F declined 4.3% and 2.3% last Friday. The losses occurred because both companies produce significant volumes of cars in Mexico, likely to face fresh tariffs.

Trump’s Protectionist Actions Hurt Stocks

Trade talks between the United States and China did take place last month. But a mutually acceptable agreement remained elusive. China’s state-owned media contended that the Trump administration’s demands would require its government to make major structural changes to its economy.

This is possibly an unviable proposition for the world’s second largest economy, which is powered largely by its cost effective exports. As the two sides failed to reach a deal, U.S. tariffs on Chinese goods worth $200 billion increased from 10% to 25% at 12:01 a.m. on May 10.

In response, China’s government promised to implement strong retaliatory measures. The situation worsened after the Trump administration effectively banned U.S. companies from exporting crucial inputs to Chinese tech behemoth Huawei. Subsequently, U.S. chipmakers declined as blue-chip tech stocks took a massive hit.

Trump has ended the month on a particularly sour note by threatening to impose tariffs on Mexico. These duties will be imposed if Mexican authorities fail to stop the flow of illegal immigrants through the U.S. border.

Significant concessions on border security could end the threat of duties soon. But Trump’s adversarial approach to trade issues will likely continue to weigh on investor sentiment. 

5 Star Performers for May

I ran a screen on Research Wizard for companies with the following parameters:

(Click here to sign up for a free trial to the Research Wizard today):

  1. Percentage price change over the last 4 weeks greater than or equal to 15%
  2. Forward price-to-earnings ratio (P/E) for the current financial year (F1) less than or equal to 20. This picks out stocks that are good value choices
  3. Expected earnings growth for the current financial year greater than or equal to 20%
  4. Zacks Rank less than or equal to 2: This ascertains stocks that have shown above-average returns over the last 26 years.

(See the performance of Zacks’ portfolios and strategies here: About Zacks Performance).

Here are the top five stocks that made it through this screen:

Flexible Solutions International Inc. FSI is an environmental technology company focusing on the research, development and manufacturing of products that save water and energy.

Price gain over the last 4 weeks = 37.4%

Flexible Solutions has a Zacks Rank #1 (Strong Buy). The stock has a P/E (F1) of 11.16x and its expected earnings growth for the current year is 100%.

Qiwi plc QIWI operates as a provider of next generation payment services primarily in Russia and the CIS.

Price gain over the last 4 weeks = 24%
Expected earnings growth for current year = 52.6%

Qiwi holds a Zacks Rank #1. The stock has a P/E (F1) of 11.48x.

Cumberland Pharmaceuticals Inc. CPIX is a specialty pharmaceutical company focused on acquiring, developing and commercializing branded prescription products for the acute care and gastroenterology markets.

Price gain over the last 4 weeks = 20.6%

Cumberland Pharmaceuticals has a P/E (F1) of 16.92x and its expected earnings growth for the current year is more than 100%. The stock holds a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

CECO Environmental Corp. CECE is a provider of industrial air quality and fluid handling systems.

Price gain over the last 4 weeks = 17.2%
Expected earnings growth for current year = 72.4%

CECO Environmental has a Zacks Rank #2 (Buy). The stock has a P/E (F1) of 17.70x.

Entravision Communications Corporation EVC is a diversified media company utilizing a combination of television, radio, outdoor and publishing operations to reach Hispanic consumers in the United States.

Price gain over the last 4 weeks = 15.9%
Expected earnings growth for current year = 92.3%

Entravision Communications holds a Zacks Rank #2. The stock has a P/E (F1) of 11.76x.

Can Markets Recover inJune?

At this point, an equity market recovery in June seems largely elusive. Trump seems to be in no mood to dial down his protectionist rhetoric. Economists now fear that an extended trade war could push the United States into a recession. But if the United States and China seal a near-term deal, markets could return to their winning ways.

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General Motors Company (GM) : Free Stock Analysis Report
 
Ford Motor Company (F) : Free Stock Analysis Report
 
Entravision Communications Corporation (EVC) : Free Stock Analysis Report
 
Flexible Solutions International Inc. (FSI) : Free Stock Analysis Report
 
Cumberland Pharmaceuticals Inc. (CPIX) : Free Stock Analysis Report
 
CECO Environmental Corp. (CECE) : Free Stock Analysis Report
 
QIWI PLC (QIWI) : Free Stock Analysis Report
 
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