ECB Sticks to Accommodative Monetary Stance: 5 Top Picks

Recently released economic data have given rise to some concern over Eurozone’s economic growth. Reacting to this fact, the European Central Bank (ECB) decided to keep benchmark interest rates unchanged for an indefinite time period after its latest meeting on Apr 26.

Accommodative monetary policy is likely to spur growth in the Eurozone over the medium term. At this stage, investment in Eurozone stocks with favorable Zacks Rank will be lucrative.

Economic Data Provides Mixed Signals

A slew of data released in April gives mixed signals about the region’s economic health.

The Ifo Business Climate Index for Germany, the largest economy of the Eurozone, decreased to 102.1 in April from 103.3 in March, indicating deterioration of business confidence. The business climate worsened for manufacturing sector for the third consecutive month.

Meanwhile, the IHS Markit Eurozone Purchasing Managers' Index (PMI) was steady at 55.2 in April in line with March reading. Notably, readings above 50 signal expansion of the broad-based economy of the Eurozone.

Also, per IHS Markit data, factory output growth slowed to a 17-month low. Inflows of new orders rose at the weakest rate for 15 months in April while service sector’s growth rate was marginally faster than March's seven-month low level.

However, the ECB and International Monetary Fund expect the Eurozone’s economy to expand 2.4% in 2018.

ECB to Extend Stimulus Measures

On Apr 26, the ECB announced post its Governing Council’s meeting that it has decided to keep interest rate steady for an extended period of time. The central bank of the 19-member Eurozone has also reasserted its stance on the monetary stimulus program which it intends to continue till September.

The ECB president Mario Draghi stated that the reason for maintaining easy monetary policy stems from the agency’s concern about some moderation of Eurozone’s growth in April. However, the central bank remains confident about the region’s broad-based economic expansion.

The ECB kept its main refinancing rate, and rates on marginal lending facility and deposit facility at unchanged at 0%, 0.258% and -0.4%, respectively. Moreover, the ECB will continue buying €30 billion of government and corporate bonds per month under the Quantitative Easing program.

Our Top Picks

The overall economic conditions of the Eurozone remain solid. On Apr 26, the closely watched Ifo index of business confidence rose to 90.4 from last month's low of 89.7. Additionally, several economists are hopeful that the Eurozone will be back on growth trajectory in the second half of 2018. Consequently, investment in Eurozone stocks will aid strengthen your portfolio. However, picking winning stocks can be a difficult task.

This is where our VGM Score comes in. 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 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 either a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a good VGM Score.

Chart below shows price performance of our five picks in last six months.

 

ArcelorMittal MT is the world's leading steel and mining company. With a presence in more than 60 countries, it operates a balanced portfolio of cost competitive steel plants across both the developed and developing world. The company is headquartered in Luxembourg.

ArcelorMittal has a VGM Score A and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here. The Zacks Consensus Estimate for current year has improved by 4.6% over the last 60 days.

Fresenius Medical Care AG & Co. KGaA FMS provides a range of products for treatment modalities, hemmo-dialysis and peritoneal dialysis, and is a full service provider of dialysis care. The company is headquartered in Germany.

Fresenius Medical Care has a VGM Score A and a Zacks Rank #2. The Zacks Consensus Estimate for current year has improved by 7.8% over the last 60 days.

Orion Engineered Carbons S.A. OEC operates as a supplier of Carbon Black. It offers products for coatings, printing inks, polymers, rubber and other applications. The company is headquartered in Luxembourg.

Orion Engineered Carbons has a VGM Score A and a Zacks Rank #2. The Zacks Consensus Estimate for current year has improved by 3% over the last 60 days.

Royal Dutch Shell plc RDS.A is involved in all phases of the petroleum industry from exploration to final processing and delivery. The company is headquartered in The Netherlands.

Royal Dutch Shell has a VGM Score A and a Zacks Rank #2. The Zacks Consensus Estimate for current year has improved by 2.5% over the last 60 days.

Globant S.A. GLOB is a technology services provider. The company provides engineering, design, and innovation services for clients. The company is headquartered in Luxembourg.

Globant has a VGM Score B and a Zacks Rank #2. The Zacks Consensus Estimate for current year has improved by 2.5% over the last 60 days.

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Globant S.A. (GLOB) : Free Stock Analysis Report
 
Orion Engineered Carbons S.A (OEC) : Free Stock Analysis Report
 
Fresenius Medical Care (FMS) : Free Stock Analysis Report
 
Royal Dutch Shell PLC (RDS.A) : Free Stock Analysis Report
 
ArcelorMittal (MT) : Free Stock Analysis Report
 
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