Trade related conflicts, which commenced in March due to President Trump’s imposition of tariffs on imported steel and aluminum, are showing no signs of subsiding. Investors’ apprehensions regarding an impending global trade war have kept the market on edge resulting in severe volatility for the last three months.
The United States and China is yet to reach any sort of understanding to defuse trade tensions between the two countries. Moreover, the U.S. government has extended tariffs on imports from Canada, Mexico and the European Union.
Furthermore, geopolitical conflict related to North Korea still persists. All these factors are resulting in market fluctuations on a regular basis. At this juncture, investment in low-beta stocks with favorable Zacks Rank will be a lucrative choice.
Trade Conflicts Loom Large
Since March, the United States and China are engaged in a trade tussle wherein both have imposed tariffs worth $50 billion on the other’s imports. Two rounds of meeting between the countries high-level delegations have failed to reach a meaningful resolution.
On May 31, Commerce Secretary Wilbur Ross announced that the U.S. government will impose 25% tariff on steel and 10% on aluminum for imports of Canada, Mexico and the European Union from Jun 1.
As a result of these trade conflicts, U.S. exports have become vulnerable to retaliatory tariffs. Canadian Prime Minister Justin Trudeau stated that Canada intense to impose tariffs on steel and aluminum on the U.S. imports. Further, Mexico stated that it would target several U.S. goods with tariffs including pork bellies, apples, grapes, cheeses and flat steel. The European Union is also considering imposing tariffs on a broad range of U.S. imports.
No End to Geopolitical Disturbances
The development of geopolitical disturbances is taking a toll on the stock markets. In April, it was the U.S. military intervention in Syria which angered Russia. In May, the United States withdrawal from the nuclear pact and plans of re-imposition of oil sanctions on Iran stirred up new problems. In fact it resulted in oil price shock.
President Donald Trump is scheduled to meet his North Korean counterpart Kim Jong-Un on Jun 12 in Singapore. However, the proposed meeting was jeopardized in May after Kim Kye Gwan, a senior foreign ministry official of North Korea stated that the country won’t take part in the summit as it will focus only on denuclearization of North Korea. It remains to be seen whether a truce can be reached between the countries.
Our Top Picks
Stock markets are likely to remain volatile in near future due to trade concerns, geopolitical conflicts and may be some sector specific issues. At this stage, investment in low-beta stocks will be fruitful. The beta is equal to 1 which means that the stock is as volatile as the market. So, a stock is relatively more volatile if it has beta greater than 1 and less volatile if beta is less than 1. However, picking winning stocks can be a difficult task.
This is where our VGM Score comes in handy. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select the winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM Score.
We have narrowed down our search to the following stocks, each of which has a Zacks Rank #1 (Strong Buy) and a VGM Score of A.
The chart below depicts price performance of our five picks in the last three months.
Urban Outfitters Inc. (NASDAQ:URBN) is an innovative specialty retailer and wholesaler which offer a variety of lifestyle merchandise to highly defined customer niches through Urban Retail stores in the United States, Canada, and Europe.
Urban Outfitters has a beta of 0.52. The company has expected earnings growth of 47.3% for current year. The Zacks Consensus Estimate for the current year has improved by 7.9% over the last 30 days.
Progressive Corp (NYSE:PGR) provides personal and commercial property-casualty insurance, as well as other specialty property-casualty insurance and related services primarily in the United States.
The Progressive has a beta of 0.67. The company has expected earnings growth of 54.8% for current year. The Zacks Consensus Estimate for the current year has improved by 3.8% over the last 30 days.
Computer Programs & Systems, Inc. (NASDAQ:CPSI) provides a complete health information and patient care system that encompasses the full spectrum of financial and clinical applications.
Computer Programs and Systems has a beta of 0.11. The company has expected earnings growth of 31.1% for current year. The Zacks Consensus Estimate for the current year has improved by 5.5% over the last 30 days.
Turtle Beach Corp (NASDAQ:HEAR) is a premium California-based audio technology company. It designs audio products for consumer, commercial and healthcare markets.
Turtle Beach has a beta of 0.65. The company has expected earnings growth of 504.2% for current year. The Zacks Consensus Estimate for the current year has improved by 162.2% over the last 30 days.
WellCare Health Plans, Inc. (NYSE:WCG) provides government-sponsored managed care services, primarily through Medicaid, Medicare Advantage and Medicare Prescription Drug Plans, to families, children, seniors and individuals with complex medical needs.
WellCare Health Plans has a beta of 0.94. The company has expected earnings growth of 20.3% for current year. The Zacks Consensus Estimate for the current year has improved by 2.3% over the last 30 days.
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