In the words of renowned economist Robert Shiller, “After years of stealth wealth, humility and downsizing, the president-elect is ushering in a new era of living large.”
The U.S. stock market has come a long way since the financial crisis in 2008. Analysts opine that the U.S. citizens were more into modest living post the recession. However, times are likely to change as Donald Trump — an ardent proponent of “living big, living large” — is slated to take office as the U.S. president.
Recently, the Federal Reserve raised the interest rate from 0.4% to 0.6%. Meanwhile, the Fed has projected faster increases over the next few years, raising rates for everything ranging from mortgages and auto loans to corporate bonds and bank savings rates.
The stock market rallied on the rate hike announcement and there are speculations of the economy hitting inflation under Trump Administration. While the entire equity market was awaiting a raise in interest rate, the slump in oil following the hike took the market by surprise.
The interest rate hike is channeling funds from commodities into U.S. bonds and dollars which have led to the decline in oil price. Also, markets apprehend a rougher patch for the fuel market going in 2017.
In such an extreme scenario, it is prudent to play safe and invest in growth stocks rather than in momentum or value ones. The increasing market volatility makes the momentum strategy highly risky while value investing does not find many takers in the current scenario.
Growth stocks, on the other hand, are fundamentally strong businesses aiming to make money for investors over the long run, thereby hedging the short run stock market volatility.
Picking the Right Stocks
Based on certain parameters, we have selected seven growth stocks which are poised for impressive returns in 2017. These stocks boast a solid Zacks Rank #1 (Strong Buy) or 2 (Buy), have a Growth Style Score of ‘A,’ historical sales and expected earnings growth rate of 20% or more and a market cap of $1 billion.
We note that our Growth Style Score encompasses all the essential metrics from a company’s financial statements to get a true sense of the quality and sustainability of growth.
Our research shows that stocks with Growth Style Scores of ‘A’ or ‘B’ when combined with a Zacks Rank #1 or 2 offer the best investment opportunities in the growth investing space.
Let’s get started on our 7 growth stock picks…
Growth Stocks Set to Pop in 2017: Broadcom Ltd (AVGO)
Headquartered in Singapore, Broadcom Ltd (AVGO) is a global developer and supplier of a broad range of analog semiconductor devices and digital, mixed-signal and optoelectronics components and subsystems. Broadcom products primarily serve four target markets: Wireless Communications, Wired Infrastructure, Enterprise Storage, and Industrial & Other.
In the last six months, the stock generated a high return of 14.9%, outweighing the S&P 500 market’s 7.3%. Also, for the past five years, the company has an impressive sales growth rate of 45.7% and long-term earnings growth rate of 42.1%, reflecting the company’s strong fundamentals. Broadcom sports a Zacks Rank #1.
Growth Stocks Set to Pop in 2017: Facebook Inc (FB)
Menlo Park, CA-based Facebook Inc (FB), through its web-based portal, helps create and foster social networks. Facebook helps users exchange messages, post pictures, play social games and listen to music. Application developers use the Facebook platform to build apps and websites that target a massive user base.
Facebook recorded a 13.8% gain over the last one year compared to the S&P 500’s 9.6%. Despite Facebook’s cautious stance on growth prospects, we view it as a prospective growth stock on the back of its strong fundamentals.
The company has a sales growth of 50.7% for the last five years and a long-term earnings growth rate of 94.6%.
Growth Stocks Set to Pop in 2017: Stamps.com Inc. (STMP)
Stamps.com Inc. (STMP) provides easy, convenient and cost-effective Internet-based services for mailing or shipping letters, packages or parcels anywhere in the U.S. and at anytime. The company targets small businesses and home offices and currently has postage partnerships with Avery, Microsoft Corporation (MSFT), HP Inc (HPQ), the U.S. Postal Service and others.
In the last six months, Stamps.com rallied 30.8%, higher than the S&P 500’s over the same time-frame. The Zacks Rank #1 company has a five-year historical sales growth rate of 23.9% and long-term earnings growth rate of 26.2%.
Growth Stocks Set to Pop in 2017: Evercore Partners Inc. (EVR)
Evercore Partners Inc. (EVR) is a leading investment banking boutique offering advisory services to prominent multinational corporations on mergers, acquisitions, divestitures and other strategic corporate transactions. Evercore also has a successful investment management business through which it manages private equity and venture capital funds for sophisticated institutional investors.
Over the past three months, the stock surged 35.6%, way higher than the S&P 500’s 4.4%.
Evercore has a sales growth of 23.1% and long-term earnings growth rate of 24.3% for the past five years. It has a Zacks Rank #2.
Growth Stocks Set to Pop in 2017: YY Inc (ADR) (YY)
Based in China, YY Inc (ADR) (YY) offers a communication social platform, which engages users in online group activities through voice, text and video. The platform consists of YY Client, the YY.com and Duowan.com web portals, Mobile YY and Web-based YY.
In the last six months, this Zacks Rank #1 stock has gained 20.8%, far better than the Internet-Content industry’s 10.0%. Meanwhile, the company has a five-year sales growth rate of 83.9% and long-term earnings growth rate of 87.4%.
Growth Stocks Set to Pop in 2017: Argan, Inc. (AGX)
Based in Rockville, MD, Argan, Inc. (AGN), through its wholly owned Southern Maryland Cable, Inc. subsidiary, provides inside premise wiring services to the federal government and also offers underground and aerial construction services and splicing to major telecommunications and utilities customers.
Argan carries a Zacks Rank #2. The stock currently stands at 78.0%, considerably outperforming the Zacks categorized Building Products- Miscellaneous industry’s 11.9%.
In the last five years, the company has recorded sales growth of 25.2% and long-term earnings growth rate of 28.4%.
Growth Stocks Set to Pop in 2017: Lifelock Inc (LOCK)
Based in Tempe, AZ, Lifelock Inc (LOCK) offers identity theft protection services. It operates under two segments: consumer and enterprise. The company protects consumer subscribers by monitoring identity-related events. Its customers include financial institutions, telecommunication and cable services providers, government agencies, technology companies, large retailers, automobile and mortgage lenders, and e-commerce providers.
Over the last six months the company has gained 49.6%,outperforming the 8.7% decline of Zacks categorized Business – Information Services sub industry. It carries a Zacks Rank #2. LifeLock has a five-year sales growth of 27.8% and long-term earnings growth rate of 40.8%.
All the above-mentioned stocks carry a Growth Style score of A and have a market cap of $1 billion. We encourage investors to add them to their portfolio considering the enormous long-term growth prospects they have.
Where Do Zacks’ Investment Ideas Come From?
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