Even as Donald Trump completes a year in office, it is increasingly difficult to believe that his ascension on election night was initially greeted with severe trepidation. At first, Trump’s advance was followed by a 900-point slump in the Dow. But on the first day of the Trump era, the Dow gained 257 points, hitting a new all-time high, a feat which it has bettered on several occasions since then.
Over the first year of Trump’s presidency, the Dow has gained more than 25% moving from 18,000 to break the 23,000 level. The S&P 500 has gained nearly 21% over the same period. Economic growth has remained strong for most of this time while unemployment has fallen steadily.
Quarterly earnings results have also shown steady improvement with third-quarter numbers largely coming in well above estimates. Meanwhile, prospects of tax cuts continue to offer catalysts for stock gains. In such a scenario, investing in top ranked stocks which have notched up strong gains over the last one year makes for a prudent option.
Booming Economy, Bullish Earnings
During Trump’s first year in office, nearly 1.8 million jobs have been added to the U.S. economy while unemployment has dipped to a paltry 4.1%, per the latest jobs report. In the second quarter, GDP increased at a 3.1% annual rate, a pace which is likely to continue for the rest of the year. According to the Commerce Department’s first estimate, the U.S. economy expanded at a 3% pace in the third quarter, which represents only a marginal decline from the preceding quarter.
Following two successful quarters of earnings numbers, U.S. companies posted all-time record earnings in the third quarter. As of Nov 3, we had received Q3 results from 406 S&P 500 members that combined account for 85.4% of the index’s total market capitalization. Total earnings for these companies are up 7.5% from the same period last year on 6.3% higher revenues, with 73.9% beating EPS estimates and 66.7% beating revenue estimates. (Read: The Tech Sector's Impressive Earnings Power on Display)
Will the Good Times Last?
Given these two factors powering the economy, some market watchers have gone on to comment that the current market rally may well have been characterized as a Hillary trade had she won. But Trump has time and again claimed credit for the markets’ success during his tenure. In fact the S&P 500’s surge is the third best for any U.S. president’s first year since the Second World War. The index has hit 60 all-time highs during his first year, the highest for any U.S. president.
For sure, Trump’s deregulation and tax proposal measures have enthused investors to a great extent. Additionally, his failure to repeal Obamacare and push through immigration reform has been largely ignored by investors.
This can only mean that the market’s rally has more to do with strong earnings performances and a resilient economy than Trump’s actions as president. And this is why it is likely to last longer than many naysayers project.
Stocks have posted record gains during Trump’s first year as president, powered primarily by a strong economy and bullish earnings. If Trump does manage to push through his tax cuts, markets could receive yet another fillip.
This is why it makes good sense to invest in stocks with strong fundamentals which have racked up gains during his first year in office. However, picking winning stocks may be difficult.
This is where our VGM Score comes in. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM score.
We have narrowed down our search to the following stocks, each of which has a Zacks Rank #1 (Strong Buy) and a good VGM score. You can see the complete list of today’s Zacks #1 Rank stocks here.
CAI International, Inc. CAI is one of the world's leading intermodal freight container leasing and management companies.
CAI International has a VGM Score of B. The company has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved by 11.7% over the last 30 days. The stock has gained 385.5% over the last one year.
ZAGG Inc. ZAGG designs, manufactures and distributes protective clear coverings and accessories for consumer electronic and hand-held devices, worldwide.
ZAGG has a VGM Score of A. The company has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved by 15.7% over the last 30 days. The stock has gained 218.3% over the last one year.
MDC Partners Inc. MDCA is a marketing communications firm providing marketing communication and consulting services throughout the United States, Canada, and the United Kingdom.
MDC Partners a VGM Score of A. The company has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved by 39.6% over the last 30 days. The stock has gained 197.2% over the last one year.
AdvanSix Inc. ASIX is a producer and supplier of polymer resins within the United States.
AdvanSix has a VGM Score of A. The company has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved by 6.1% over the last 30 days. The stock has gained 184.4% over the last one year.
Axcelis Technologies, Inc. ACLS is a leading producer of ion implantation equipment used in the fabrication of semiconductors.
Axcelis Technologies has a VGM Score of B. The company has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved by 5.5% over the last 30 days. The stock has gained 168.2% over the last one year.
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