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Beat The Market With These Top-Ranked Sector Stocks


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After a shaky June, Wall Street is sizzling, with the three major benchmarks gaining for the second consecutive week. In fact, the Dow Jones reclaimed its 25,000 level, the S&P 500 rebounded at 2,800 and the tech heavy-Nasdaq scaled record highs. The robust performance came despite Trump's threat to slap 10% tariff on another $200 billion in Chinese goods after levied taxes on $34 billion on Jul 6.

All these mean that complacency is back in the market. High hopes for Q2 earnings are acting as the biggest catalyst at present. Earnings for the S&P 500 index are expected to grow 19.1% from the same period last year on 8.2% higher revenues. This would be the third consecutive quarter of double-digit earnings growth, a trend that is currently expected to continue in the second half of the year. A strong economy and historic tax cuts will continue to drive earnings higher.

Further, rounds of upbeat data, signaling improving economic growth, have added to the bullish outlook for stocks. However, volatility and uncertainty will continue to show up as tariff threats are still in place.

Against such a backdrop, investors could be well served by looking at the stocks of the top-ranked sectors.

How to Find the Top Sectors

While identifying the top sector is a daunting task, the Zacks Sector Rank makes this process simpler. The Zacks Industry Rank is determined by calculating the average Zacks Rank for each stock in the sector and then assigning a rank to it. So first, we selected the best sectors that have a top Zacks Rank.

Zacks classifies all stocks into one of 16 sectors. The average Zacks Rank is calculated for every sector every day. So, if a sector has the best average Zacks Rank, it would be considered the top sector (1 out of 16), which would place it in the top 1% of Zacks Rank Sectors. The top 8 Zacks Ranked Sectors would be in the top 50% of sectors, whereas the bottom 8 Zacks Ranked Sectors would be in the bottom 50% of sectors. Thus, our Zacks Sector ranking system divides the Sectors into two groups: the top half (i.e., sectors with the best average Zacks Rank) and the bottom half (the sectors with the worst average Zacks Rank).

A top Zacks Sector Rank means that more stocks within that group are seeing upward earnings estimate revisions. This means that something positive is happening to that group. As 50% of a stock's price movement can be attributed to the sector group it's in, an average stock in a strong sector is likely to outperform a great stock in a poor sector.

Here are the stocks from the top-ranked four sectors that could outperform the market for the rest of summer.

Energy

Energy is a top ranked sector at present with an estimated earnings growth rate of 51.54% for this fiscal year compared with 15.78% for the S&P 500 Composite market. It is also relatively cheap with a P/E ratio of 16.65 versus 17.61 for the S&P 500 Composite market. The sector has gained 0.9% in a month and is likely to perform well thanks to a tightening oil market and rising global demand (read: 5 Energy Stocks Set to Explode Higher ).  

Murphy Oil Corporation MUR : This is an independent exploration and production company having a strong, oil-weighted portfolio of global offshore and onshore assets, with upside to the exploration program. You can see the complete list of today's Zacks #1 Rank stocks here .

Zacks Rank: #1
VGM Score: A
This Year Estimated Earnings Growth: 1392.31%

Retail

The retail sector has a Zacks Rank (top 13%) and has gained 0.6% in a month. A top rank is justified given a massive $1.5-trillion tax cut, tightening labor markets, and rising wages that have provided consumers with extra cash leading to higher discretionary spending.

Papa Murphy's Holdings Inc. FRSH : It operates as a franchisor and operator of the Take 'N' Bake pizza chain in the United States.

Zacks Rank: #1
VGM Score: B
This Year Estimated Earnings Growth: 153.33%

Transport

Transportation has a top Zacks Sector Rank (top 19%) but shed 4.3% over the past month. The beaten down prices has made the sector attractive at present with projected P/E ratio of 16.26 and estimated earnings growth rate of 23.53%.

Star Bulk Carriers Corp. SBLK : This global shipping company provides worldwide seaborne transportation solutions in the dry bulk sector.

Zacks Rank: #2
VGM Score: A
This Year Estimated Earnings Growth: 1942.86%

Technology

Technology has been the hottest sector this year and has been riding high on earnings optimism, a rising interest rate scenario and solid demand for cutting-edge technology. The sector has gained an average of 0.6% in a month and has a top Sector Rank (top 19%).

Turtle Beach Corporation HEAR : This audio technology company provides gaming headset solutions for various platforms, including video game and entertainment consoles, handheld consoles, personal computers, and mobile and tablet devices under the Turtle Beach brand.

Zacks Rank: #1
VGM Score: A
This Year Estimated Earnings Growth: 520.83%

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Star Bulk Carriers Corp. (SBLK): Free Stock Analysis Report

Turtle Beach Corporation (HEAR): Free Stock Analysis Report

Murphy Oil Corporation (MUR): Free Stock Analysis Report

Papa Murphy's Holdings, Inc. (FRSH): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Business , Stocks
Referenced Symbols: SBLK , HEAR , MUR , FRSH



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