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Are Investors Wrong to be Selling These 5 Stocks Now?

Zacks

One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute.” – William Feather

Investors often buy winning shares and sell the ones yielding negative returns. However, the stock market thrives on sentiments, and any unforeseen event in a particular sector has a ripple effect on others, which might be temporary. In fact, companies with solid fundamentals and prospects are likely to brave the temporary setbacks.

Why You Shouldn't Always Sell Stocks with Negative Returns

While invertors’ short-term concerns dent a company’s performance for a momentary period, stocks with strong fundamentals usually return to a growth path.


Meanwhile, with the latest tax reform, the new wage bill, an infrastructure plan and more, the U.S. stock markets have been shining bright. In fact, in the last month, the Dow inched up 1.8%, registering nine straight months of gains for the first time since 1959. Over last year, the index climbed 25.2% posting its best yearly increase since 2013. The Dow also notched its 71st record close in 2017, the highest number recorded in a year.

Now, when the markets are advancing at such a lightning pace, it is very difficult to find good stocks that are trading at a cheaper rate. One way could be to focus on stocks that are yielding negative returns due to some temporary issues, but have robust fundamentals that guarantee long-term growth. Furthermore, a series of positive developments, as mentioned below, are also likely to boost these stocks.

Major Market Movers

President Trump signed his new $1.5-trillion tax reform plan — the "Tax Cuts and Jobs Act" — recently. As usual, in its initial stage, the nation had given mixed reactions on the controversial bill. While the bill is claimed to primarily focus on the easing of tax woes for middle-class Americans, the massive cut in the corporate tax rate tells a different story altogether.

Trump’s “America first!” pitch has been driving employment growth like never before. Per reports, the unemployment rate was pegged at 4.1% in November 2017, the lowest since February 2001.

The minimum wage is poised to increase in 18 states and around 20 cities in the United States, according to an analysis by the National Employment Law Project. This will result in inching employees' wages closer to $15 an hour, which is known as a “living wage.”

Per a report by the Bureau of Economic analysis, real gross domestic product increased at an annual rate of 3.2% in the third quarter of 2017 compared with 3.1% increase in the second quarter. Strong contributions from personal consumption expenditures (PCE), private inventory investment, nonresidential fixed investment, exports, federal government spending, and state and local government spending has led to the GDP growth.

Stocks With Solid Fundamentals to Consider

Despite the favorable market trends, let's take a peek at five companies which have displayed lackluster performances in the last month. However, with a solid Zacks Rank #1 (Strong Buy) or 2 (Buy), along with a VGM Score of A or B, these stocks hold immense promise for long-term growth.

We note that our VGM Score encompasses all the essential metrics from a company’s financial statements to get a true sense of the quality of its stock. Our research shows that stocks with VGM Scores of A or B when combined with a Zacks Rank #1 or 2 offer the best investment opportunities.

Artisan Partners Asset Management Inc. APAM

The stock has a Zacks Rank #2 and a VGM Score of A. Artisan Partners has a market cap of $2.95 billion. However, Artisan Partners reported a negative return of 4.1% in the last week, and lost 3.7% in the last month. You can see the complete list of today’s Zacks #1 Rank stocks here.

Coming to the fundamentals, the company’s revenues saw a CAGR of 1.7% in the last four years. Of the major developments in the recent past, Artisan Partners has focused on broadening its non-U.S. distribution base, particularly in Europe, Australia and Canada. The company also has been investing to boost centralized operations. In the last couple of months, the company also made massive investment instruments, asset classes, information technology and data.

The estimate revision trend for the next year holds promise at the moment. The Zacks Consensus Estimate for earnings is pegged at $2.70 for 2018, reflecting growth of 11.4% on a year-over-year basis. The Zacks Consensus Estimate for 2018 revenues is at $875.3 million at the moment, up 10% year-over-year.

Artisan Partners Asset Management Inc. Price and Consensus

Acco Brands Corporation ACCO)

The stock has a Zacks Rank #2 and a VGM Score A. Acco Brands has a market cap of $1.32 billion. However, Acco Brands came up with a negative return of 4.7% in the last week, and lost 7.6% in the last month.

ACCO Brands designs, manufactures and sells office products, academic supplies, and calendar products primarily in the United States, Canada, Northern Europe, Brazil, Australia, and Mexico. Apart from having a significant global presence, the company’s acquisition portfolio looks promising at the moment. In 2017, the company completed the acquisition of Esselte Group Holdings AB. Per management, the development will fortify the company’s position in Europe.

The estimate revision trend for the next year looks solid. The Zacks Consensus Estimate for earnings is pegged at $1.23 for 2018, signifying growth of 7% on a year-over-year basis. The Zacks Consensus Estimate for 2018 revenues is at $1.97 billion, up 1.2% year-over-year.

Acco Brands Corporation Price and Consensus

Essent Group Ltd. ESNT)

The stock has a Zacks Rank #1 and a VGM Score B. Essent Group has a market cap of $4.41 billion. However, the company reported a negative return of 2.1% in the last week, and lost 4.5% in the last month.

Coming to the fundamental prospects, the company’s revenues witnessed a CAGR of 51.8% in the last four years. Essent Group provides private mortgage insurance and reinsurance for mortgages secured by residential properties located in the United States. As of September 30, 2017, the company’s balance is strong, with $2.5 billion of assets and $1.8 billion in equity.

The estimate revision trend for the next year holds promise. The Zacks Consensus Estimate for earnings is pegged at $3.73 for 2018, signifying growth of 21.3% on a year-over-year basis. The Zacks Consensus Estimate for 2018 revenues is at $727.3 million at the moment, up 26.7% year-over-year.

Essent Group Ltd. Price and Consensus

AMC Networks Inc. AMCX)

The stock has a Zacks Rank #2 and a VGM Score A. AMC Networks has a market cap of $3.35 billion. However, the company reported a negative return of 6.2% in the last week, and lost 3.9% in the last month.

AMC Networks’ revenues witnessed at a CAGR of 20.1% in the last four years. The company’s new commercial free upgrade option that was recently launched for Comcast CMCSA Xfinity TV customers is a promising revenue stream. Recently, the company has partnered with Charter Communications CHTR through AMC Studios.

The estimate revision trend for the next year is strong right now. The Zacks Consensus Estimate for 2018 revenues is pegged at $2.92 billion at the moment, up 3.3% year-over-year.

AMC Networks Inc. Price and Consensus

Selective Insurance Group, Inc.SIGI)

The stock flaunts a Zacks Rank #1 and a VGM Score B. Selective Insurance has a market cap of $3.41 billion. However, the company reported a negative return of 2.4% in the last week, and lost 5% in the last month.

Selective Insurance’s revenues saw a CAGR of 6.3% in the last four years. The company, together with its subsidiaries, provides insurance products and services in the United States. The company offers insurance products and services to businesses, non-profit organizations, local government agencies, and individuals through independent retail insurance agents and brokers, and wholesale general agents.

The estimate revision trend for the next year looks good right now. The Zacks Consensus Estimate for earnings is pegged at $3.56 for 2018, signifying growth of 15.6% on a year-over-year basis. The Zacks Consensus Estimate for 2018 revenues is at $2.6 billion at the moment, up 5.9% year-over-year.

Selective Insurance Group, Inc. Price and Consensus

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