Find safety in these top ranked stocks

 

The market has been rather volatile and unpredictable lately. The earnings season has started off pretty strongly, but the rising yield on 10-year Treasuries is weighing on the overall market, and overshadowing the positive earnings reports we have been seeing.

Rising rates are definitely a reason for concern. The yield on 10-year Treasuries has hit 3.0%, a level we haven’t seen since 2014. The current yield is still pretty low and should not result in a huge money transfer out of the market, but the fear is that if it continues to rise we will see the market correct even further as investors pull money out of equities and put that money to work in more traditional fixed income assets. That is a concern, but most analysts seem to agree at this point that the benchmark 10-year rate will not rise too much from its current level.

After years of a very bullish market, investors are not used to seeing the type of action we have seen over the last couple of months, and are unsure whether to stay in the market, or sit on the sidelines until things calm down.

For long-term investors, there is no reason to panic. The market probably needed a little correction, and the underlying fundamentals of the overall economy remain strong. Unemployment is low, wages are starting to rise (albeit slowly), and the housing market remains on solid ground.

Rising rates may not be the best short-term thing for the market, but they do suggest strength in the underlying economy, which is bullish, and should convince you to keep your money working in the market.

However, you do need to be careful where you invest. You should look for companies that have both shown recent strength, as well as show solid fundamentals that support additional growth and upside.

InvestorsObserver has a screening tool called the Stock Score Report which takes into account both technical and fundamental data when ranking stocks when ranking the overall stock universe. Combining both approaches is a great way to screen for stocks that have not only shown recent strength, but also have the best potential to build on their recent gains.

The following five stocks are among the top ranked stocks in the screener at this time.

Western Alliance Bancorporation

Western Alliance Bancorporation (WAL) is a regional bank that offers services primarily in Arizona, California and Nevada. Regional banks are considered among the top beneficiaries of rising interest rates since they generate a significant amount of their income from loan products. As interest rates rise, the banks are able to widen the spread on the money they lend versus the money they borrow, resulting in a higher bottom line. Analysts see WAL growing its earnings by 11.0% per annum over the next five years, but that forecast could be understated depending on how many times the Federal Reserve actually lifts rates in the coming years. The company’s first-quarter report in mid-April showed better than expected profits, but sales fell slightly short of analyst estimates. The market overlooked the sales miss and pushed the stock higher on the better than expected earnings number. WAL gets an overall ranking of 93 from InvestorsObserver’s Stock Score Report. The stock trades at $58.93 which is well below the $69.11 average price target that analysts have on the stock.

Click here to see a full copy of the report.

Chart courtesy of www.stockcharts.com

Textron

Textron (TXT) is an aerospace and defense contractor. The sector has been incredibly strong over the last year, and shares of TXT are currently just shy of their 52-week high. The company posted very strong quarterly numbers for its first-quarter, topping estimates on both the top and bottom line, which saw shares gap significantly higher. TXT is currently giving back some of those gains with the overall market trending lower, but the recent profit taking is a result in the weak overall market, and the stock should find support and move higher when the broader market finds its footing. TXT gets an overall ranking of 90 from InvestorsObserver’s Stock Score Report, with near perfect technical rankings, and a solid 74 fundamental ranking. Analysts see earnings rising by 13.9% per annum over the next five years and have an average price target of $70.64 on the stock versus its current trading price of $63.80. TXT has a modest 0.13% dividend yield.

Click here to see a full copy of the report.

Chart courtesy of www.stockcharts.com

Five Below

Five Below (FIVE) is a specialty retailer that sells apparel and novelty items for kids and young adults. The company has been growing at a rapid pace, with earnings climbing 27.8% per annum over the last five years. Looking ahead, analysts expect more of the same, with a forecast average annual earnings growth rate of 23.3% over the next five years. The stock has been a top performer in recent months, with shares currently down just 6.5% from the all-time high set earlier in the month. The stock is giving back some of its gains in sympathy to a weak overall market in recent weeks, but when the market finds its footing the stock should quickly start to erase its recent losses and head back to its high. The company reported earnings in late March, so its next set of quarterly numbers are not due until late June, so the stock will most likely trade in tandem with the overall market for the time being. Great technical scores, and a strong 78 fundamental ranking produces an overall ranking of 86 from InvestorsObserver’s stock score report. Analysts have an average price target of $75.70, versus the current share price of $73.05.

Click here to see a full copy of the report.

Chart courtesy of www.stockcharts.com

Danaher

Danaher Corp. (DHR) designs, manufactures and markets medical, professional, and commercial products. Over the last five years the company has managed to grow profits by 5.3% per annum, and looking ahead analysts expect to see profits rising on average by 8.6% a year over the next five years. Danaher has posted better than expected results for both the top and bottom line for six consecutive quarters, with the most recent beats coming on April 19. The stock is currently trading just shy of its all-time high at $99.72, and analysts have an average price target of $110.36 on the stock. DHR gets an overall ranking of 86 from InvestorsObserver’s Stock Score Report, with a near perfect short-term technical ranking. DHR has a 0.64% dividend yield.

Click here to see a full copy of the report.

Chart courtesy of www.stockcharts.com

Visa

Credit card companies have been strong over the last year, as strength in the underlying economy has consumer confidence high. Wages have been rising, but at a slow pace, and a lot of consumers have been using credit cards more frequently. At the end of 2017, the average American had $6,375 in credit card debt, which was up 3% versus the previous year. Total credit card debt hit a record level in excess of $1 trillion in 2017. As consumers use credit cards more, card issuers like Visa (V) enjoy the gains. Visa has seen its earnings rise by 16.7% per annum over the last five years, and analysts expect profits will continue to rise on average by 17.9% over the next five years. The strong growth has pushed the stock to record levels, and the strong technical performance, in tandem with a very strong fundamental ranking yields an overall ranking of 87 from InvestorsObserver’s Stock Score Report. V trades at $120.87 with an average price target of $141.35. The stock has a 0.7% dividend yield.

Click here to see a full copy of the report.

Chart courtesy of www.stockcharts.com

Symbols: DHR FIVE TXT V WAL
Michael Fowlkes

Michael Fowlkes

Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va.

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