Wall Street continues to bleed as investors remain worried that the trade standoff between the United States and China could get much worse than before. While President Trump is now preparing to blacklist more Chinese technology companies, an accommodative Fed is also doing no good to the stock market rally. Poor retail earnings and slide in oil prices on U.S. crude stockpiles surge are adding to the woes.
Given the widespread uncertainty over the future course of the equity market, investing in stocks unperturbed by market gyrations is the way to go. These stocks will surely capitalize on any upward journey and provide cushion during times of downturn.
Trade Tensions Simmer
Shifts in U.S.-China trade relations continue to weigh on investors’ sentiment. The broader S&P 500 tanked three times in the last four trading sessions, with tech stocks especially bearing the brunt of the latest developments in the trade war with Beijing.
Just when the stock market was gaining momentum after the United States offered temporary relief in its crackdown on Huawei Technologies, media reports from White House confirmed that the Trump administration could impose restrictions on Chinese video surveillance firm, Hikvision.
Lest we forget, the White House had added Huawei to its Entity List that includes companies that American firms can’t sell technology to without obtaining a license from the U.S. government. Following this, chip bigwigs like Intel and Broadcom to name a few have restricted supply of major software and hardware components to Huawei. To make matters worse, Google stopped offering some of its services for devices made by Huawei.
Such restrictions on Huawei compelled China to rethink its policy with the United States per the South China Morning Post. China is now expected to drop purchase of natural gas from the United States. Needless to say, China had bought $6.3 billion worth of U.S. liquefied natural gas.
Qualcomm a Big Drag on Wall Street
QUALCOMM Incorporated QCOM, in the meantime, added to market woes, declining 10.9% in the last trading session, its biggest one-day drop since Jan 23, 2017. Shares of the chipmaker fell after a federal judge ruled that the company unlawfully suppressed competition in the cellphone chip space, thereby violating the antitrust law.
U.S. District Court Judge Lucy Koh, who sided with the Federal Trade Commission, added that QUALCOMM cannot even sign exclusive supply deals with companies like Apple. Nonetheless, the news dragged the broader VanEck Vectors Semiconductor ETF down by 1.9%.
Fed Remains Accommodative
The Fed minutes dampened expectations of lower interest rates this year, which eventually weighed on the stock market. After all, lower interest rates do encourage additional investment outlays and that gives the economy a boost.
Minutes from the Federal Open Market Committee’s Apr 30-May 1 meeting indicated that officials are being patient now. Market pundits believe that Fed will continue its patience stance, thanks to sustained economic growth, strong labor market and inflation remaining short of the committee’s 2% target range. The Fed’s preferred gauge of inflation, excluding food and energy, slowed to a 1.6% increase in the 12 months through March.
Retail & Energy Shares Slid
Also weighing on the market are retail and energy shares. Retailers, in particular, are wrapping up the first-quarter earnings on a downbeat note. Lowe’s Companies, Inc. LOW shares plunged 12.3% after the home improvement chain trimmed its full-year profit forecast, while shares of Nordstrom, Inc. JWN plummeted 9.6% after the department store operator also cut its full-year sales and profit forecast (read more: Retail Sector Fails to Impress).
Energy shares fell along with global oil prices following a rather surprising buildup in U.S. oil and gasoline stockpiles. According to the U.S. Energy Information Administration, U.S. crude stockpiles rose 4.7 million barrels in contrast to analysts’ expectations of a decrease of 599,000 barrels.
5 Stocks to Play a Topsy-Turvy Market
Given the aforesaid factors, it seems like Wall Street is facing a bloodbath. Taking this into consideration, let’s take a look at stocks that may be worthy bets at the moment. The best way to go about doing this is by creating a portfolio of low-beta stocks, which are inherently less volatile than the markets they trade in. In this case, a low beta ranges from 0 to 1.
Though low-beta stocks pose less risk, they provide lower returns. So, in order to boost your returns, we have zeroed in on stocks that have seen positive earnings estimate revision, usually in the past two-month period. Rising earnings estimates generally indicate that the stock will outperform the market in the near future. After all, earnings estimates are one of the most powerful metrics that measure the fundamental strength of a company.
Our chosen picks are also dividend payers, implying they have immense financial strength and are immune to market vagaries. Such stocks reflect solid financial structure, healthy underlying fundamentals and better quality business. Further, they boast a Zacks Rank #1 (Strong Buy) or 2 (Buy).
Westlake Chemical Partners LP WLKP acquires, develops, and operates ethylene production facilities and related assets in the United States. The company has a Zacks Rank #1 and a beta of 0.6. The company has a dividend yield of 7.99%, while its five-year average dividend yield is 5.53%. The Zacks Consensus Estimate for its current-year earnings rose 2.4% in the last 60 days. The company’s expected earnings growth rate for the current year is a superb 39.7%.
Oaktree Capital Group, LLC OAK operates as a global investment management firm that focuses on alternative markets. The company has a Zacks Rank #1 and a beta of 0.54. The company has a dividend yield of 8.62%, while its five-year average dividend yield is 5.91%. The Zacks Consensus Estimate for its current-year earnings rose 4.5% in the last 60 days. The company’s expected earnings growth rate for the current quarter is a stellar 25.5%.
Northwest Bancshares, Inc. NWBI operates as a holding company for Northwest Bank that offers various personal and business banking solutions. The company has a Zacks Rank #1 and a beta of 0.69. The company has a dividend yield of 4.15%, while its five-year average dividend yield is 4.07%. The Zacks Consensus Estimate for its current-year earnings rose 4.8% in the last 60 days. The company’s expected earnings growth rate for the current quarter is a promising 12%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Flowers Foods, Inc. FLO produces and markets bakery products in the United States. The company has a Zacks Rank #2 and a beta of 0.49. The company has a dividend yield of 3.16%, while its five-year average dividend yield is 3.15%. The Zacks Consensus Estimate for its current-year earnings rose 2% in the last 60 days. The company’s expected earnings growth rate for the next quarter is an encouraging 17.4%.
Ares Capital Corporation ARCC is a business development company specializing in acquisition, recapitalization, mezzanine debt, restructurings, rescue financing, and leveraged buyout transactions of middle market companies. The company has a Zacks Rank #2 and a beta of 0.65. The company has a dividend yield of 8.91%, while its five-year average dividend yield is 9.44%. The Zacks Consensus Estimate for its current-year earnings rose 4.7% in the last 60 days. The company’s expected earnings growth rate for the current quarter is a solid 12.8%.
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QUALCOMM Incorporated (QCOM) : Free Stock Analysis Report
Lowe's Companies, Inc. (LOW) : Free Stock Analysis Report
Westlake Chemical Partners LP (WLKP) : Free Stock Analysis Report
Oaktree Capital Group, LLC (OAK) : Free Stock Analysis Report
Northwest Bancshares, Inc. (NWBI) : Free Stock Analysis Report
Ares Capital Corporation (ARCC) : Free Stock Analysis Report
Flowers Foods, Inc. (FLO) : Free Stock Analysis Report
Nordstrom, Inc. (JWN) : Free Stock Analysis Report
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