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U.S. Markets Recover as Yuan Stabilizes: What Stocks Are Ripe for the Picking?

Christopher Vargas

The stock market rose after China’s central bank set the yuan at a stronger than expected rate against the dollar. The news calmed concerns about the brewing trade war between Beijing and Washington turning into a currency war. On Monday, China depreciated its yuan in response to President Trump opting to hike tariffs 10% on an additional $300 billion in Chinese imports.

In intraday trading, the DOW rose over 300 points, while the S&P 500 gained over 1.5% and the NASDAQ Composite rose over 1.83% on Thursday. For the time being, it seems that the potential currency war has been averted. What stocks should investors keep their eyes on as uncertain sentiments ease? Let’s take a look at four stocks that can make sound investments for those feeling more optimistic about the market.

Advanced Micro Devices AMD popped 15% in intraday trading Thursday as investors cheered the release of a second-generation chip for data centers. The company announced its development Wednesday, and Twitter TWTR and Alphabet GOOGL would be customers for the new chip. The server chip, which is named Rome, will nearly double the performance of Intel’s INTC Xeon processor at about half the cost, according to the company. AMD is listed as a Zacks Rank #3 (Hold) and has soared 82.7% year-to-date outpacing its respective industry. The company was able to beat our Enterprise, Embedded and Semi-Custom estimate by 2.36%, bringing in $591 million. For the current quarter, estimates are calling for the bottom line to surge 46.15% and revenue to reach $1.8 billion for a 9.04% jump.

Kirkland Lake Gold KL is a gold mining company that has brought substantial returns to shareholders this year, up 78.5% YTD. The looming sentiment of uncertainty in the markets have prompted investors to flock towards commodities and bonds. Gold reached a six-year high on Wednesday as investors looked for safe havens. The spike in demand for the commodity itself can in turn propel the gold mining industry into solid returns for investors. KL beat earnings estimates three out of the previous four quarters for an average EPS surprise of 6.07%. Consensus estimates for the current year are projecting KL’s earnings to surge 63.24% on the back of a 41.29% revenue jump to $1.29 billion. Analyst revisions have also ticked favorably for the company in the last 30 days for the current quarter.

Chipotle Mexican Grill CMG has been benefiting from consumers’ love for the fast-casual dining experience. Shares of chains like CMG are seen as defensive stocks because people still go out to buy fast food despite market volatility. Fast food chains are also conventionally attractive because they offer healthier options and use technology to make ordering their products more convenient for consumers.

In Q2 2019, CMG’s digital sales grew 99.1% and accounted for 18.2% of total sales. Their total revenue jumped 13.2% to $1.4 billion, further cementing another solid quarter for the company. Chipotle is a Zacks Rank #3 (Hold) with a Style Score of A in Growth. Estimates are forecasting for the company’s growth to continue in Q3 with earnings jumping 43.52% and revenue increasing 11.77% to $1.37 billion. While investors will be paying for the growth up front with the stock’s current valuation, CMG is a growth stock that has upside potential that can offset its value.

Shake Shack SHAK is another fast-casual chain restaurant that has been able to thrive. The stock is currently up 95.5% YTD and is coming off a solid quarterly report. The company’s total revenue rallied 31.3% from the year ago quarter to $152.7 million. Shack sales gained 30.98% to $147.9 million while licensing revenue surged 42.9% to $4.84 million. Total net income also rose by 5.68% to $11.2 million in the quarter. Shake Shack beat our earnings estimate by 22.73% with earnings of $0.27 per share.

The company reported its earnings after the closing bell on Monday and closed Tuesday trading up 18.24% for its best daily percentage gain on record. Shake Shack has surpassed our earnings estimates three out of the last four quarters for an average EPS surprise of 33.57%. Looking ahead to the company’s full year outlook, earnings revisions have looked solid for the company, with analysts revising their estimate upwards with 100% consensus.

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Alphabet Inc. (GOOGL) : Free Stock Analysis Report
 
Twitter, Inc. (TWTR) : Free Stock Analysis Report
 
Advanced Micro Devices, Inc. (AMD) : Free Stock Analysis Report
 
Shake Shack, Inc. (SHAK) : Free Stock Analysis Report
 
Chipotle Mexican Grill, Inc. (CMG) : Free Stock Analysis Report
 
Intel Corporation (INTC) : Free Stock Analysis Report
 
Kirkland Lake Gold Ltd. (KL) : Free Stock Analysis Report
 
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