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Diagnosis on Health Day: 6 Stock Picks - Analyst Blog

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On the occasion of World's Health Day, we would like to draw investors' attention to the health of the economy and wholesome supplements for a robust investment portfolio.

Similar to the six vital nutrients required for good health, there are six pillars that uphold the economy. Solid manufacturing and industrial growth since the 2009 recession as well as better job prospects testify to economic well being. But what is the secret of this economic improvement and the resultant surge in stock prices?

We have figured out the mantra for good economic health. First, we picked six essential market nutrients in the form of sectors and then zeroed in on stocks that are in the pink through our Zacks Stock screener .

All these are Zacks Rank #1 (Strong Buy) or 2 (Buy) stocks with higher market caps in their respective sectors. Other parameters include positive current-year earnings estimate revisions over the past 60 or 90 days, positive current-year EPS growth, positive earnings surprise over the trailing four quarters, and top Zacks Industry Rank.

More importantly, these stocks crushed the broad market returns over the trailing one-year period.

Vitamins: Consumer Sector

About 70% of overall economic growth comes from consumer spending, which grew at the highest pace in more than eight years in the fourth quarter of 2014 buoyed by lower gasoline prices. Though the economy seems to have lost momentum in the first quarter of 2015 due to frigid temperatures and greater propensity to save money, consumer confidence - measured by the Conference Board - jumped to 101.3 in March from a revised 98.8 in February.

Rising consumer confidence suggests that spending will strengthen in the months ahead, taking consumer sector higher and giving the economy its regular doses of vitamin. Within this sector, a diversified international family entertainment and media leader The Walt Disney CompanyDIS is a great pick for investors.

This Zacks Rank #2 company has seen rising estimates of 5.4% over the past 90 days with an expected earnings growth rate of 13.40%. Disney beat earnings estimate in all of the past four quarters with an average surprise of 10.64% and has a solid Industry Rank in the top 26%, suggesting its potential for solid growth in the months ahead. The stock gained 33.5% over the trailing one-year period.

Proteins: Financial Sector

Like protein, the financial sector, carries out a huge array of functions through its banks and financial institutions. The sector facilitates growth in every part of the country. Overall loan growth is expected to remain tepid. But improvements in auto, credit card and student lending, rising commercial real-estate lending, easing lending standard, steadily improving credit quality, litigation settlements, heightened M&A and IPO activities, and stable balance sheets are fueling optimism in the broad sector.

Further, major U.S. banks have passed the Federal Reserve's latest round of annual stress tests, confirming the industry's advancement in terms of absorbing future losses. With that being said, Northern Trust Corp.NTRS could be the outperformer in the banking space. It is a leading provider of asset management, fiduciary, banking, asset servicing and fund administration solutions for corporations, large institutions and individuals worldwide.

The Zacks Consensus Estimate for 2015 has been revised up from $3.66 to $3.72 over the past 90 days and represents substantial year-over-year growth of 9.53%. This is higher than the industry average growth of 6.9%. Further, this Zacks Rank #2 company falls in a solid Industry Rank in the top 32% and delivered positive earnings surprises in two of the last four quarters, with an average beat of 3.08%. The stock added 12.1% in the same period.

Minerals: Medical Sector

As minerals are important for human bone structure, health care is the backbone of the economy. It is one of the largest and fastest-growing sectors thanks to an aging population, growing middle class, and insatiable demand for new treatments and drugs for many illnesses. About 10% of economic growth comes from this sector.

The industry is clearly benefiting from promising drug launches, cost-cutting efforts, a merger and acquisition frenzy, an aging population, growing middle class, expanding insurance coverage, ever-increasing health care spending, and the Affordable Care Act or Obamacare. One of the beneficiaries of this trend is Aetna Inc.AET with Zacks Rank #2 and Industry Rank in the top 11%.

Aetna is one of the nation's largest health benefits companies and one of the nation's largest insurance and financial services organizations. It has seen earnings estimates rising 1.1% over the past 60 days to $7.22, representing year-over year growth of 7.72%. This is much higher than industry growth of 5.3%. Further, Aetna beat the Zacks Consensus Estimate in all of the past four quarters, with an average surprise of 11.30%. The stock is up 47.9% over the one-year period.

Carbohydrates: Technology Sector

Similar to carbs that provide energy to the muscles and brain, the technology sector powers the economy with its wide range of products and services including electronics, software, computers and social media. Growing demand for novel and advanced technologies such as cloud computing, big data, smartphones, high-speed fiber networks, and the Internet of Things should drive growth in the sector.

Within the sector, Apple Inc.APPL is the global leader engaged in designing, manufacturing, and marketing mobile communication and media devices, personal computers, and portable digital music players. This Zacks Rank #1 company has seen its earnings estimate going up by 14 cents to $8.51 with an expected earnings growth rate of 32%, which is much higher than the industry average of 8%.

The stock delivered positive earnings surprises in the last four quarters, with an average beat of 11.39% and has a solid industry Zacks Rank in the top 43%. APPL surged over 70% in the trailing one-year period.

Fats: Construction Sector

Construction sector - accounting for 5.5% of GDP - acts as fats, which provide energy backup to the economy. This is because construction activity picks up when the economy strengthens. The sector has gained confidence over the past one year on sustained economic recovery, accelerating job market, rising consumer confidence, moderating home prices and, of course, low interest rates prevailing in the U.S.

One of the largest paint companies - The Sherwin-Williams CompanySHW - could be an exciting pick in this sector. The company's earnings estimates have gone up by 33 cents over the past three months. The current Zacks Consensus Estimate is pegged at $11.24, up 28% from last year and much higher than the industry average of 12.6%.

Sherwin-Williams delivered positive earnings surprises in the three of the last four quarters, with an average beat of 5.52%. The stock has a Zacks Rank #2 and an industry rank in the top 15%. The shares of SHW were up 50.7% over the past one year.

Water: Transport Sector

Transport acts like water in the economy that enables the movement of freight and passengers through different modes such as rail, trucks, ships, and air. It occupies an important place in the world market and is often considered a barometer of broad economic health. This sector is riding high on U.S. economic recovery and increasing investor sentiment.

Solid retail, manufacturing, and labor data act as major tailwinds to broad growth, indicating strong demand for movement of goods across many economic sectors, pushing the transport stocks higher. Among them, a leading low-fare, low-cost passenger airline JetBlue Airways Corp.JBLU has outperformed over the past one year, surging nearly 111% and will likely continue its strong performance given its Zacks Rank #2 and Industry Rank in the top 31%.

The stock has seen solid earnings estimate revisions from $1.26 to $1.67 per share for 2015 over the past 90 days. This represents a whopping year-over-year increase of 138.96% compared to the industry average of 13.2%. Further, the stock beat earnings estimates in three of the last four quarters, with an average positive surprise of 4.95%.

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AETNA INC-NEW (AET): Free Stock Analysis Report

NORTHERN TRUST (NTRS): Free Stock Analysis Report

SHERWIN WILLIAM (SHW): Free Stock Analysis Report

JETBLUE AIRWAYS (JBLU): Free Stock Analysis Report

DISNEY WALT (DIS): Free Stock Analysis Report

APPLE INC (AAPL): Free Stock Analysis Report

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


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

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