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Nasdaq Sees Longest Record Stretch in 2 Years: 5 Top Picks

Nalak Das

Wall Street is set to end 2019 on a high note with all the three major stock indexes performing impressively. Notably, the tech-laden Nasdaq Composite, which posted the fifth consecutive record-high closing on Dec 18, has been no exception to the trend.

In fact, this marked the tech-heavy index’s longest stretch of highs, since the record of six consecutive highs in January 2018. Notably, the Nasdaq Composite has rallied more than 33% so far in 2019.

A stable U.S. economy that is expanding for a record 11 years, a partial trade deal with China, possible solution to Brexit and easy monetary policy adopted by the Fed are likely to pave the way for Nasdaq Composite’s rally in 2020.

U.S-China Phase-One Trade Deal

On Dec 13, both United States and China declared that they have reached a phase-one trade deal likely to be signed by the two presidents in the first half of January. Per the deal, the United States will reduce the tariff rate on Chinese exports from 15% to 7.5% on $120 billion. Moreover, the Trump administration will also cancel the imposition of fresh 15% tariff on Chinese products, primarily used for making consumer goods, worth $160 billion.

Meanwhile, China has pledged to purchase $40 billion agricultural products from the United States per year. U.S. officials are still trying to raise the threshold to $50 billion per annum. Moreover, China will also rollback some tariffs imposed on U.S. exports. U.S. Trade Representative Robert Lighthizer said the deal will address intellectual-property disputes along with strong enforcement provisions and financial services and currency issues.

Possibility of Brexit

On Dec 12, British prime minister Boris Johnson and his Conservative Party coasted to a landslide victory in the recently concluded general election in the U.K. Notably, Boris Johnson is a major supporter of Brexit and was one of his chief agendas..

After winning the election, Johnson said, “At this stage it does look as though this one-nation Conservative government has been given a powerful new mandate, to get Brexit done and not just to get Brexit done but to unite this country and to take it forward.”

Per CNBC, European Union leaders have roundly declared that it’s now time to get on with Brexit after U.K. prime minister Johnson secured an emphatic win in the country’s general election.

Easy Monetary Stance Adopted by Major Central Banks

Reversing its highly hawkish monetary stance of 2019, the Fed adopted a dovish stance since the beginning of this year and reduced the benchmark interest rate by 75 basis points in three tranches. On Dec 12, Fed Chair Jerome Powell reiterated that the central bank is set to maintain a stable monetary policy in 2020 and will contemplate about raising rates if inflation surges systematically.

The European Central Bank has also decided to maintain a negative interest rate policy and continue its bond purchase or quantitative easing strategy.  Moreover, Bank of Japan is also maintaining negative interest rate. Central banks of major emerging economies including China, India, Australia, Thailand and New Zealand have also adopted low-rate policies.  

Our Top Picks

At this stage it will be prudent to invest in Nasdaq Composite stocks that have skyrocketed in 2019 and still have momentum. However, selection of these stocks can be difficult. Here is where our VGM Score will come handy. We have narrowed down our search to five Nasdaq stocks with a Zacks Rank #1 (Strong Buy) and a VGM Score of either A or B. You can see the complete list of today’s Zacks #1 Rank stocks here.

The chart below shows price performance of our five pick year to date.

 

Hibbett Sports Inc. HIBB is engaged in the retail of athletic-inspired fashion products through its stores. Its stores offer a range of merchandise, including athletic footwear, athletic and fashion apparel, sports equipment, and related accessories. The company has expected earnings growth of 10.2% for next year. The Zacks Consensus Estimate for next year has improved by 20% over the past 60 days. The stock has soared 99% year to date.

Universal Forest Products Inc. UFPI supplies wood, wood composite and other products in retail, industrial, and construction markets of North America, Europe, Asia, and Australia. The company has expected earnings growth of 16.8% for next year. The Zacks Consensus Estimate for next year has improved by 4.3% over the past 60 days. The stock has appreciated 86.4% year to date.

Cardtronics plc CATM provides ATM services primarily in North America and Europe. The company is at the convergence of retailers, financial institutions, prepaid card programs and the customers they share. The company has expected earnings growth of 9.8% for next year. The Zacks Consensus Estimate for next year has improved by 4.3% over the past 60 days. The stock has surged 62.4% year to date.

Amkor Technology Inc. AMKR is one of the largest providers of outsourced semiconductor packaging and test services in the United States and internationally. The company has expected earnings growth of 100% for next year. The Zacks Consensus Estimate for next year has improved by 33.3% over the past 60 days. The stock has jumped 97.9% year to date.

Chuy's Holdings Inc. CHUY owns and operates full-service restaurants serving a distinct menu of authentic Mexican food in Texas and 19 states in the Southeastern and Midwestern United States. The company has expected earnings growth of 12.2% for next year. The Zacks Consensus Estimate for next year has improved by 7.7% over the past 60 days. The stock has advanced 51.2% year to date.

Zacks Top 10 Stocks for 2020

In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2020?

These 10 are painstakingly hand-picked from over 4,000 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Start Your Access to the New Zacks Top 10 Stocks >>


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Cardtronics PLC (CATM) : Free Stock Analysis Report
 
Universal Forest Products, Inc. (UFPI) : Free Stock Analysis Report
 
Amkor Technology, Inc. (AMKR) : Free Stock Analysis Report
 
Chuy's Holdings, Inc. (CHUY) : Free Stock Analysis Report
 
Hibbett Sports, Inc. (HIBB) : Free Stock Analysis Report
 
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