Safeguard Your Portfolio In A Volatile Market: 5 Value Picks

Wall Street has been reeling under severe volatility over the last three months. The recent rate hike, conflicting news related to trade war between the United States and China and fear of a global economic slowdown have resulted in market skepticism regarding the future growth potential of U.S. stocks.

Despite the negatives, 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 a favorable Zacks Rank.

Fed Hikes Rate and Pursues Quantitative Tightening

On Dec 19, the Fed raised benchmark lending target rate by 0.25% to the range of 2.25-2.50%. This was the fourth rate hike by the central bank in 2018. However, the Fed hinted that it may lower the pace of rate hikes from the previous projections of three to two times for 2019. Despite the Fed’s assurance of lowering the pace of rate hikes, Wall Street remained extremely volatile in the last two days.

Investors remain highly concerned about the continuation of Quantitative Tightening through which the central bank is reducing the size of its balance sheet by $50 billion each month by redeeming government debt and mortgage bonds. This implies that a massive $600 billion will not be invested in sovereign bonds in 2019. This will significantly reduce demand for U.S. government bonds, resulting in lower bond price and higher yields. Consequently, interest rate will go up in the long term.

Fear of Partial Government Shutdown

On Dec 18, Senate Majority Lead Mitch McConnell said that a proposed short-term government funding plan worth $5 billion border security fencing was rejected by Democrat representatives. Notably, without the approval of a spending bill, several government agencies face the risk of a shutdown.

On Dec 20, President Trump refused to sign a Senate-approved appropriations bill that would avert a government shutdown. Trump stated categorically as long as both houses of Congress allocate $5 billion in funds for expansion of the U.S. southern border wall, he will not sign the bill. Investors fear that a partial government shutdown is likely to start from mid-night Dec 21.

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 three months.

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 12.6, lower than the industry average of 13.5. It has a PEG ratio of 0.8, lower than the industry average of 1.3. 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 60 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 11.8, lower than the industry average of 12.7. It has a PEG ratio of 1.1, lower than the industry average of 1.5. The company has expected earnings growth of 19.1% for current year. The Zacks Consensus Estimate for the current year has improved by 7.5% over the last 60 days.

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 7.0, lower than the industry average of 7.2. It has a PEG ratio of 0.5, lower than the industry average of 0.6. The company has expected earnings growth of 35.6% for current year. The Zacks Consensus Estimate for the current year has improved by 4.2% over the last 60 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 12.5, lower than the industry average of 12.7. It has a PEG ratio of 1.0, lower than the industry average of 1.5. 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 60 days.

Gray Television Inc. (NYSE:GTN) is leading operators of broadcast television stations and newspaper in the United States. The forward price-to-earnings ratio (P/E) for the current financial year (F1) is 7.0, lower than the industry average of 14.5. It has a PEG ratio of 0.4, lower than the industry average of 0.8. The company has expected earnings growth of 96.6% for current year. The Zacks Consensus Estimate for the current year has improved by 16.2% over the last 60 days.

In addition to the stocks discussed above, would you like to know about our 10 top tickers to buy and hold for the entirety of 2019?

These 10 are painstakingly handpicked from over 4,000 companies covered by the Zacks Rank. They are our primary picks poised to outperform in the year ahead. Be among the first to see the new Zacks Top 10 Stocks >>