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5 Top Shutdown-Proof Stocks to Buy in 2019

Tirthankar Chakraborty
Technology funds could gain big from resumed business with Huawei and a pause in further US-China tariffs.

Republicans and Democrats are in no mood to settle their divide over funding a wall along the U.S.-Mexico border. Thus, the government closure has now become the longest in U.S. history and such a shutdown is expected to impede growth.

But, there are certain stocks that are likely to do well amid the funding lapse and political squabbling. Investing in them, for now, doesn’t seem like a bad proposition.

Longest Ever US Government Shutdown Explained

The partial U.S. government shutdown stretched for the 25th day on Jan 15. Conversations between the Trump administration and congressional Democrats remained inconclusive even though Trump’s colleagues urged him to strike a deal. Trump, however, was unyielding and criticized House Speaker Nancy Pelosi and Senate Democratic Leader Chuck Schumerfor not being willing to negotiate with him over funding a border wall with neighboring state Mexico.

Trump had tweeted “I’ve been waiting all weekend. Democrats must get to work now. Border must be secured!” He added that “Nancy and Cryin’ Chuck can end the Shutdown in 15 minutes. At this point it has become their, and the Democrats, fault!”

Democrats have, rather unfortunately, overruled Trump’s demand for $5.7 billion for the border wall. This has resulted in about one-quarter of the U.S. government to shut down last month. Trump now has to win approvals from the Democrats after they won the U.S. House of Representatives recently following November’s election. The President also needs to win over much of the Senate Democrats to secure nearly 60 votes to pass the funding legislation.

Investors are now feeling the pinch of the government shutdown. Around 800,000 federal employees across the United States missed their first paycheck, leaving several of them unable to pay mortgages and other liabilities. At the same time, lapse in paychecks means that almost four of five U.S. workers will be living without a savings safety net.

In fact, JPMorgan Chase CEO Jamie Dimon warned that the U.S. GDP may get reduced to zero in the first quarter of this year if the partial shutdown lingers. He believes that consumers are in a pretty good shape and wages are also going up. But, shutdown can push the economy into a recession.

Regrettably, there doesn’t seem to be any end to this record-long shutdown. And even if a short-term bill manages to provide funding, traditionally these political fights more or less continue on a regular basis and another shutdown is in the offing instead of a long-term solution.

How to Make Your Portfolio Shutdown-Proof?

As the government shutdown looks like its here to stay, raising doubts over economic growth, investors might be pondering how to make their portfolio shutdown-proof. Military spending is an essential part of the U.S. government. Defense stocks, hence, aren’t tied to U.S. federal spending trends and are unperturbed by any political impasse.  

The fiscal 2018 federal budget saw massive increase in military spending through 2020. Trump himself assured that despite high profile troop withdrawal by the end of last year, he won’t be curtailing military outlays. Rather, he promised to increase spending during a visit to Iraq after Christmas season.

With such unrest shrouding the investment scenario, rising sales of arms is but obvious. Sales of guns have risen considerably, helping shares of stocks like Sturm Ruger & Company RGR, Vista Outdoor VSTO and American Outdoor Brands AOBC move north. Having said that, it’s definitely not good for the society and it’s a sad development. Then again, purely from an investment stand point, publicly-traded gun stocks look alluring amid a government shutdown.

5 Solid Picks

We have, thus, selected five stocks from the said areas that remain untroubled by a government shutdown. These stocks flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).

Northrop Grumman Corporation NOC operates as a security company for government and commercial customers. The stock currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has moved up 0.3% in the past 60 days. The company’s expected earnings growth rate for the current quarter and year are 56% and 43.7%, respectively.

Huntington Ingalls Industries, Inc. HII engages in the designing, building, overhauling, and repairing military ships in the United States. The stock currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved 2.1% north in the past 60 days. The company’s expected earnings growth rate for the current quarter and year are 41.2% and 50%, respectively.

The Boeing Company BA designs, develops, manufactures, sales, services, and supports commercial jetliners, military aircraft, satellites, missile defense, human space flight, and launch systems and services. The stock currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has moved up 3.2% in the past 90 days. The company’s expected earnings growth rate for the next quarter and current year are 14.6% and 25%, respectively. You can see the complete list of today’s Zacks #1 Rank stocks here.

American Outdoor Brands designs, manufactures, and sells firearms. The stock currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved up 8.9% in the past 60 days. The company’s expected earnings growth rate for the current quarter and year are 33.3% and 58.7%, respectively.

Vista Outdoor’s shooting sports segment designs, develops, produces, and sources ammunition and firearms. The stock currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved up 8.7% in the past 60 days. The company’s expected earnings growth rate for the next quarter is 168.2%.

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Huntington Ingalls Industries, Inc. (HII) : Free Stock Analysis Report
 
American Outdoor Brands Corporation (AOBC) : Free Stock Analysis Report
 
Sturm, Ruger & Company, Inc. (RGR) : Free Stock Analysis Report
 
Vista Outdoor Inc. (VSTO) : Free Stock Analysis Report
 
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