Market to Stay Northbound Despite Volatility: 5 Growth Picks

Wall Street witnessed an impressive rally on Monday following a disappointing last week. On Apr 6, the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — surged 7.7%, 7% and 7.3%, respectively, marking their best single-day gain since Mar 24.

Although, short-term fluctuations will continue on account of the coronavirus-induced crisis and government imposed lockdowns that are hindering normal business activities, overall market movement will remain positively sloped.

Encouraging Data Regarding Coronavirus

Coronavirus cases in the United States seem to be stabilizing. There were 30,000 new cases on last Thursday, 32,100 on Friday and 33,300 on Saturday. However, the number of new cases fell to 28,200 on Sunday before increasing modestly to 30,331 on Monday. Notably, number of new cases in New York, the coronavirus hotspot of the country, declined to 7,600 on Monday from 8,200 in Sunday — its second daily decline.

Globally, the number of new cases appears to have slowed down as on last Sunday (Apr 5), new cases increased 5.9% — smallest daily increase since Mar 10. In the Eurozone, new cases in Italy (the country with largest death toll so far) declined sharply, death toll in Spain is gradually diminishing and Germany is planning to remove lockdown in a phased manner. Moreover, China reported no death for the first time on Apr 6.

At a news briefing on Apr 6, President Donald Trump said “There’s tremendous light at the end of the tunnel,” as 10 COVID 19 drugs are currently in clinical trials and 15 more are readying for clinical trials.

Recovery May Starts

Wall Street entered into bear market territory during Mar 9-10, ending its historically longest 11 years of bull run. However, it is to be noted that this bear market was not a result of any economic, financial or geopolitical factors but instead a health hazard — the coronavirus pandemic.

The bear market reached its lowest level on Mar 23 so far. Since then, the Dow and the S&P 500 have rallied 24.5% and 21.5%, respectively. Meanwhile, the Nasdaq Composite has surged 19.3% since Mar 23.

Economists and financial experts are divided on the question whether or not Wall Street has already hit rock bottom. However, if Mar 23 remains the bottom of this bear market, then the Dow and the S&P are already out of that territory and the Nasdaq Composite is very close to that landmark.

Several Good Stocks at Lucrative Prices

In fact, in the last two weeks, market received several disappointing economic data like record job loss, soaring unemployment rate, contraction in manufacturing activities, massive downturn in services sector and stiff fall in consumer confidence.

Despite this, Wall Street recovered strongly in just 10 trading days, indicating that the market is highly oversold, which has resulted in the availability of large number of good stocks at ultra-cheap prices. All negative expectations are already factored in or priced in market valuation. In the near future, we may witness several bad news and economic data. However, the stock market recovery is unlikely to cease.

Moreover, unprecedented fiscal and monetary stimulus injected by the Trump administration and the Fed, and several major Eurozone and Asian economies have instilled investor confidence. All these positives will support the recovery process.

Our Top Picks

At this stage, it will be prudent to invest in stocks with strong growth potential with a favorable Zacks Rank. We have narrowed down our search to five such stocks each carrying a Zacks Rank #1 (Strong Buy) and Growth Score A or B. You can see the complete list of today’s Zacks #1 Rank stocks here.

The chart below shows the price performance of our five picks in the past month.

Koninklijke Philips N.V. PHG is a global health technology company operating through Diagnosis & Treatment, Connected Care and Personal Health segments. It has ramped up production of patient vital signs monitors and portable ventilators and medical consumables for non-invasive and invasive ventilation to treat coronavirus-infected patients. The company has an expected earnings growth rate of 3.5% for the current year and 15.4% for the next year.

Dropbox Inc. DBX provides a collaboration platform worldwide. Its platform allows individuals, teams, and organizations to collaborate and sign up for free through its website or app and upgrade to a paid subscription plan for premium features. The company has an expected earnings growth rate of 42% for the current year and 24% for the next year.

Leidos Holdings Inc. LDOS is a global science and technology leader that serves the defense, intelligence, civil and health markets. It operates through three segments: Defense Solutions, Civil, and Health. The company has an expected earnings growth rate of 8.7% for the current year and 15.4% for the next year.

Chemed Corp. CHE provides hospice and palliative care services to patients through a network of physicians, registered nurses, home health aides, social workers, clergy, and volunteers in the United States. It operates through two segments, VITAS and Roto-Rooter. The company has an expected earnings growth rate of 17.1% for the current year and 8.8% for the next year.

Tradeweb Markets Inc. TW builds and operates electronic marketplaces in the United States and internationally. Its marketplaces facilitate trading in a range of asset classes, including rates, credit, money markets and equities offering pre-trade data and analytics, trade execution, and trade processing, and post-trade data, analytics and reporting services. The company has an expected earnings growth rate of 57.1% for the current year and 9.5% for the next year.

Today's Best Stocks from Zacks

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See their latest picks free >>

Click to get this free report Koninklijke Philips N.V. (PHG) : Free Stock Analysis Report Tradeweb Markets Inc. (TW) : Free Stock Analysis Report Leidos Holdings, Inc. (LDOS) : Free Stock Analysis Report Chemed Corporation (CHE) : Free Stock Analysis Report Dropbox, Inc. (DBX) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research