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4 Top Stocks to Buy Amid the Evergrande Crisis-led Market Dip

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A massive stock sell-off took place globally on Sep 20, as investors were gripped by contagion fears from the most likely collapse of China’s property behemoth, Evergrande Group. The real estate giant currently has mammoth debt obligations, and its crisis could easily roil the second-largest economy in the world. Fears are mounting that China’s real estate giant may not have enough cash to pay its debt obligations leading to a liquidity crisis. What’s more, if the company is forced to sell its properties to pay the debt, then its assets will be less than its liabilities leading to a solvency crisis.

Evergrande, which was founded in Guangzhou in 1996, turned out to be one of China’s biggest property developers. The Evergrande Group had expanded its wings across 280 cities in China. However, now the property developer is on the verge of collapse as it is overwhelmed by a $300 billion-plus in debt.  Its reputation is now at stake, while its credit rating and share prices have tanked. Without a doubt, Evergrande’s ordeal is likely to hurt China’s economy, which is already decelerating at this point in time.

The cascading effect of the Evergrande crisis was felt across the major indexes in the United States as well, with the Dow registering its worst daily percentage decline yesterday since July 19, as mentioned in a MarketWatch article. The article further noted that the broader S&P 500 booked its worst percentage drop since May 12, while the teach-laden Nasdaq recorded its biggest percentage decline since May 12. The Russell 2000 index of small-caps also tumbled. However, the question is whether the Evergrande crisis a major threat to the US economy, and will it continue to impact the US stock market, in particular.

With a degree of certainty, the Evergrande crisis is unlikely to impact the United States severely. This is because most of the real estate giant’s debt is denominated in the People’s Republic of China’s currency and not in US dollar terms, or in any other foreign currency. Therefore, it’s expected that there will be little contagion effect across the globe and most of it will only be limited to China. To put things into perspective, the bankruptcy of Lehman Brothers way back in 2008 shook the global stock markets as it was linked to several financial organizations across the world. But in the case of Evergrande, its estimated humongous debt is actually not widely held.

Some may argue that the Evergrande crisis may impact China’s economy and slow down consumer spending, which may have a repercussion on the United States since both countries have trade relations. However, the Chinese government has time and again proved its ability to pull its economy out of any crisis and has habitually resorted to stimulus measures to boost the same. This time as well, the Chinese government is widely expected to take steps to prevent the Evergrande-led economic crisis.

Thus, it can be safely concluded that China’s property market crisis had led to a short-term selloff. The markets are certainly expected to bounce back, and anyhow the US economy is doing pretty good at present. After all, sales at US retailers unexpectedly rebounded last month, squashing any expectations of a sharp slowdown in the third-quarter GDP and indicated continued strength among American consumers.

Hence, despite momentary blips, it would be wise for investors to consider equities. They should invest in companies that are fundamentally solid enough to regain strength after yesterday’s blow. By doing so, investors will be buying shares at a discounted price as well. Here, we have highlighted four such stocks that possess a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Apple Inc.’s AAPL business primarily runs around its flagship iPhone. However, the Services portfolio that includes revenues from cloud services, App store, Apple Music, AppleCare, Apple Pay, and licensing and other services has now emerged as the cash cow. The Zacks Consensus Estimate for its current-year earnings has moved up 7.7% over the past 60 days. The company’s expected earnings growth rate for the current year is 70.4%. Shares of Apple slipped 2.1% yesterday.

Eagle Bulk Shipping Inc. EGLE is the largest U.S. based owner of Handymax dry bulk vessels. The Zacks Consensus Estimate for its current-year earnings has moved up 27.8% over the past 60 days. The company’s expected earnings growth rate for the current year is 395%. Shares of Eagle Bulk Shipping lost 13.6% on Sep 20.

J & J Snack Foods Corp. JJSF is an American manufacturer, marketer, and distributor of branded niche snack foods and frozen beverages for the food service and retail supermarket industries. The Zacks Consensus Estimate for its current-year earnings has moved up 32.1% over the past 60 days. The company’s expected earnings growth rate for the current year is almost 182%. Shares of J & J Snack Foods dipped 1.1% yesterday.

Nucor Corporation NUE is a leading producer of structural steel, steel bars, steel joists, steel deck and cold finished bars in the United States. The Zacks Consensus Estimate for its current-year earnings has moved up 22.3% over the past 60 days. The company’s expected earnings growth rate for the current year is 508.1%. Shares of Nucor fell 7.6% on Sep 20.


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