The Wall Street is grappling with continued chaos with the S&P 500, Nasdaq Composite and Dow Jones Industrial Average losing 1.8%, 1.7% and 2.2%, respectively, on Tuesday.
Meanwhile, the CBOE Volatility Index (VIX) — which measures volatility and is considered a panic indicator for investors — scaled to 22.48. Notably, market participants consider 20 as safe.
Rising trade tensions, tech weakness, declining oil prices and the U.S. Federal Reserve’s hawkish stance related to interest rate hikes are the primary factors inducing volatility.
These developments overshadowed the upbeat U.S. GDP and lower unemployment level, keeping the stock market highly strained. Is such a scenario, making the right investment moves is quite daunting.
Trade Tensions & Tech Weakness to Hurt Growth
Reportedly, the Trump administration is contemplating more export-control policies, particularly for technologies that have national security applications. The move can have a “profound and long lasting adverse impact” on relations between the United States and China, according to Deutsche Bank AG, quoted by Bloomberg.
Notably, the tech sector is already battered by the tariffs imposed on $200 billion worth of imports from China. The tariff levied on about 5,745 types of Chinese imports, including parts and materials used in semiconductor manufacturing, are set to increase from 10% in September to 25% next January.
Furthermore, the U.S. government has warned that it will levy tariffs worth $267 billion on China in the first week of December if the upcoming summit between Trump and his Chinese counterpart Xi Jinping fails to resolve the eight-month long trade dispute.
Moreover, FAANG stocks that collectively command almost $3 trillion in market cap are now in a bear market, descending 20% or more from their respective 52-week highs. Investor skepticism over FAANG’s prospects has been the primary reason for the plunge.
Elevated Market Levels a Threat
Analysts and market observers are now issuing a note of caution primarily due to an overheated equity & bond market amid growing anticipation that the 10-year bull market run may come to an abrupt halt.
Goldman Sachs recently argued that equity investors should now boost their cash levels. Investment bank Morgan Stanley also opined that the “Buying the dip” strategy hasn’t worked in 2018, a kind of market behavior that coincides with “bear markets, recessions, or both.”
Hedge fund luminary Paul Tudor Jones recently said that “bonds and stocks are overvalued in an environment that had been underpinned by easy-money policies from central banks across the global.” His opinion was also supported by the Office of Financial Research (OFR) latest annual report.
Undervalued Stocks With Growth Potential
In the highly volatile market situation, one should ideally pick stocks that are undervalued but have bright prospects. Such stocks cushion investors from market jitters, while companies’ robust fundamentals ensure solid portfolio returns.
The Zacks Style Score comes handy while picking such stocks. Our research shows that stocks with a Value and Growth Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer good investment opportunities.You can see the complete list of today’s Zacks #1 Rank stocks here.
5 Solid Picks
Here, we have zeroed in on five stocks that have a Growth and Value Score of A and a Zacks Rank #1 (Strong Buy).
Arcbest Corporation ARCB — Fort Smith, AR-based ArcBest provides freight transportation services and solutions.
Over the past 30 days, the Zacks Consensus Estimate for its 2018 earnings has increased 13.4% to $3.70, reflecting year-over-year growth of 178.2%.
ArcBest Corporation Price and Consensus
ArcBest Corporation Price and Consensus | ArcBest Corporation Quote
Arch Coal Inc. ARCH — Louis, MO-based Arch Coal produces metallurgical and thermal coal to manufacture steel and generate electricity.
The Zacks Consensus Estimate for its 2018 earnings has jumped almost 31% to $15.05 over the past 30 days, reflecting a year-over-year rise of 32.5%.
Arch Coal Inc. Price and Consensus
Arch Coal Inc. Price and Consensus | Arch Coal Inc. Quote
Eni SpA E — Based in Rome, Italy, is among the leading integrated energy players in the world.
The Zacks Consensus Estimate for its 2018 earnings has risen nearly 5% to $3.16, over the past 30 days, reflecting year-over-year growth of 109.3%.
Eni SpA Price and Consensus
Eni SpA Price and Consensus | Eni SpA Quote
Enova International ENVA — Based in Chicago, Enova is a provider of online financial services.
The Zacks Consensus Estimate for its 2018 earnings has increased 2.8% to $2.58 over the past 30 days, reflecting year-over-year growth of 88.3%.
Enova International, Inc. Price and Consensus
Enova International, Inc. Price and Consensus | Enova International, Inc. Quote
MarineMax, Inc. HZO — Recreational boat and yacht retailer MarineMax is headquartered in Clearwater, FL.
The Zacks Consensus Estimate for its fiscal 2019 earnings has risen 12.5% to $1.89 over the past 30 days , calling for a year-over-year increase of 11.2%.
MarineMax, Inc. Price and Consensus
MarineMax, Inc. Price and Consensus | MarineMax, Inc. Quote
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>
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
ArcBest Corporation (ARCB) : Free Stock Analysis Report
Arch Coal Inc. (ARCH) : Free Stock Analysis Report
Enova International, Inc. (ENVA) : Free Stock Analysis Report
Eni SpA (E) : Free Stock Analysis Report
MarineMax, Inc. (HZO) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research