5 Value Picks To Guard Your Portfolio In A Capricious Market

Wall Street has been reeling under severe volatility over the last seven weeks. The scenario has dented investors’ confidence in risky assets like equities significantly. Conflicting news related to trade war between the United States and China, share price plunge of top technology stocks and fear of higher interest rate have made market participants skeptical about future growth potential of U.S. stocks.

Despite negatives factors, fundamentals of the U.S. economy remain strong. However, investors should be prepared to minimize fluctuations in their portfolio and consequently rebalance it with suitable financial assets to maintain stability. At this stage, it would be a prudent decision to pick up value stocks with favorable Zacks Rank to cushion the portfolio.

Conflicting News on US-China Trade War

President Donald Trump and his Chinese counterpart Xi Jinping are expected to meet at the G-20 summit later this month to resolve the eight-month old trade dispute between two of the world’s largest trading nations.

President Trump tweeted last week that he is hopeful about an amicable resolution to this issue. However, on Nov 18, Vice President Mike Pence in APEC meeting said that U.S. tariff policy with respect to China will remain unchanged until the latter accepts all trade-related demands of the United States.

Notably, the U.S. government has warned that it will levy tariffs worth $267 billion on China in the first week of December if the upcoming summit between the two presidents fails to resolve the issue.

Technology Stocks Plunge

The technology sector, which was by far the best performer in 2018, has plummeted in November. Large-cap tech behemoths, especially the powerful FAANG stocks have nosedived recently. All the five FAANG stocks are currently in the bear market, marking a drop of 20% or more from their 52-week peak.

Lingering trade conflicts with China is taking significant toll on technology sector. These companies are two-way dependent on China. A major part of their inputs come from Chinese suppliers as well as from their offshore operations in China. Furthermore, China is one of the largest markets of these companies finished products.

U.S. Economy Remains Strong

On Nov 15, the Department of Commerce reported that the U.S. retail sales for the month of October rose 0.8%, exceeding the consensus estimate of 0.5%. October data showed growing momentum for consumer spending which constitutes over 70% of U.S. GDP. This could be a signal for strong fourth-quarter GDP data.

In October, manufacturing output increased for the fifth consecutive month, per data from the Federal Reserve. Last month’s gains came despite a decline in vehicle production, offsetting the fall in utilities and mining output. This led to the headline industrial production number gaining over October.

Our Top Picks

The U.S. markets remain volatile so far in 2018. Trade-related concerns, geopolitical conflicts and inflationary concerns will certainly lead to more fluctuations at least in the short-term. This in turn will force investors to put their money in safe assets.

At this juncture, it will be a prudent decision to buy value on the dip stocks that could prove to be valuable once the rally resumes. We have selected four stocks with a Value Score of A and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that stocks with a Value Style Score of A or B when combined with a Zacks Rank #1 or 2 offer the best opportunities in the Value-investing space.

The chart below shows price performance of our five picks in the last six months.

Ally Financial Inc. (NYSE:ALLY) is an automotive financial services company. The forward price-to-earnings ratio (P/E) for the current financial year (F1) is 7.8, lower than the industry average of 9.0. It has a PEG ratio of 0.6, lower than the industry average of 0.7. The company has expected earnings growth of 35.6% for current year. The Zacks Consensus Estimate for the current year has improved by 3.8% over the last 30 days.

CBRE Group Inc. (NYSE:CBRE) is a commercial real estate services firm. The forward price-to-earnings ratio (P/E) for the current financial year (F1) is 13.7, lower than the industry average of 13.9. It has a PEG ratio of 1.1, lower than the industry average of 1.6. The company has expected earnings growth of 17.7% for current year. The Zacks Consensus Estimate for the current year has improved by 0.9% over the last 30 days.

EMCOR Group Inc. (NYSE:EME) provides electrical and mechanical construction and facilities services in the United States. The forward price-to-earnings ratio (P/E) for the current financial year (F1) is 15.2, lower than the industry average of 15.8. It has a PEG ratio of 1, lower than the industry average of 1.6. The company has expected earnings growth of 20% for current year. The Zacks Consensus Estimate for the current year has improved by 2.5% over the last 30 days.

Jones Lang LaSalle Inc. (NYSE:JLL) is a leading, global professional services and investment management firm specializing in real estate. The forward price-to-earnings ratio (P/E) for the current financial year (F1) is 13.1, lower than the industry average of 13.9. It has a PEG ratio of 1.2, lower than the industry average of 1.6. The company has expected earnings growth of 18% for current year. The Zacks Consensus Estimate for the current year has improved by 5.6% over the last 30 days.

Gulfport Energy Corp. (NASDAQ:GPOR) engages in the acquisition, exploration, exploitation, and production of natural gas, crude oil, and natural gas liquids in the United States. The forward price-to-earnings ratio (P/E) for the current financial year (F1) is 5.0, lower than the industry average of 14.8. It has a PEG ratio of 0.4, lower than the industry average of 0.8. The company has expected earnings growth of 23.4% for current year. The Zacks Consensus Estimate for the current year has improved by 10.1% over the last 30 days.

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