Dollar strengthens on blockbuster jobs data 5 top gainers – september 10, 2018 – zacks.com

Small caps, having domestic focus, are better poised to weather a stronger U.S. dollar. This category of stocks is ripping fresh records as they are cushioned against the loss of competitiveness and currency translation impact of a stronger greenback. Needless to say that as the dollar rises multi-nationals lose their competitive advantage, as foreign customers see U.S. goods as more expensive than non-U.S. goods.

The jobless rate remained at an 18-year low of 3.9%, indicating that the nine-year stretch of economic expansion has scope to continue. However, the biggest news in the August employment report was a sharp rise in paychecks. The average wage paid to American workers increased by 10 cents to $27.16 an hour. To top it, the yearly pay rate climbed to 2.9% from 2.7%, the highest since the end of the Great Recession.


However, now the Fed is widely expected to raise more rates to keep the economy from overheating. Traders are expecting the central bank to hike rates by a quarter point to 2.00-2.25% at its Sep 25-26 meeting. If this happens, the Fed will be raising rates for the third time this year. Traders are, in fact, pricing in a 76% chance of another quarter-point hike at its Dec 18-19 meeting, according the CME Group’s FedWatch program.

Fed Chairman Jerome Powell, by the way, has already defended the central bank’s push to raise interest rates at a gradual pace despite President Trump’s criticism of higher borrowing costs. Powell said that gradual rate hikes seem appropriate as inflation has recently moved close to the Fed’s desired 2% (read more: 5 Top Stocks to Gain as Powell Backs Gradual Rate Hikes).

A rising dollar impedes earnings growth, which suggests that returns from the equity market might be subdued. Particularly, companies that derive a lion’s share of their earnings from overseas will be dealt the biggest blow. Such companies are exposed to foreign exchange risks between the United States and other countries they are operating in. Thus, if dollar gains strength, it tends to dent foreign sales of such companies.

The S&P Global added that with every 1% rise in the greenback, large-cap companies with heavier U.S. concentration in terms of revenue generation have gained 71 basis points on average. For small caps, the correlation was way better. In fact, small caps have outperformed large caps so far this year. One of the popular measures of small caps, the Russell 2000 Index, has risen 8% year to date, while the broader S&P 500 has gained 6.5%.

Small caps are set to benefit from wider domestic revenue exposure, which insulates them from the effects of a stronger dollar. Thus, investing in stocks with high domestic exposure in terms of revenue generation seems judicious. We have picked five such stocks that carry a Zacks Rank #1 (Strong Buy) or 2 (Buy). Such stocks also have a VGM Score of A or B. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners.

Riverview Bancorp, Inc. ( RVSB – Free Report) operates as the holding company for Riverview Community Bank that provides community banking services. The company operates through a network of 19 branch offices in Camas, Washougal, Stevenson, White Salmon, Battle Ground, Goldendale, Vancouver, and Longview, WA; and Portland, Gresham, Tualatin, and Aumsville, OR. The company has a Zacks Rank #2 and VGM Score of B. In the past 60 days, one earnings estimate has moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings has increased 10.8% in the same period. The company’s projected growth rate for the current year is 35.9%, while the Financial – Savings and Loan industry is expected to rise 21%.

BG Staffing, Inc. ( BGSF – Free Report) provides temporary staffing services in the United States. The company has a Zacks Rank #2 and VGM Score of B. In the past 60 days, two earnings estimates have moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings has increased 19.9% in the same period. The company’s projected growth rate for the current year is 61.4%, while the Staffing Firms industry is expected to rise 10.9%.

Natural Grocers by Vitamin Cottage, Inc. retails natural and organic groceries, and dietary supplements in the United States. The company has a Zacks Rank #2 and VGM Score of A. In the past 60 days, one earnings estimate has moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings has increased 32% in the same period. The company’s projected growth rate for the current year is 6.5%, while the Food – Natural Foods Products industry is expected to decline 2.9%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Summer Infant, Inc. ( SUMR – Free Report) designs, markets, and distributes branded juvenile health, safety, and wellness products primarily in the United States. The company has a Zacks Rank #1 and VGM Score of A. In the past 60 days, one earnings estimate has moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings has increased 50% in the same period. The company’s projected growth rate for the current year is 114.3%, while the Consumer Products – Discretionary industry is expected to rise 4.8%.

Hallmark Financial Services, Inc. ( HALL – Free Report) , through its subsidiaries, underwrites, markets, distributes and services property/casualty insurance products to businesses and individuals in the United States. The company has a Zacks Rank #1 and VGM Score of A. In the past 60 days, one earnings estimate has moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings has increased 10.7% in the same period. The company’s projected growth rate for the current quarter is 322.2%, while the Insurance – Property and Casualty industry is expected to rise 75.1%.

At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. Since 1988 it has more than doubled the S&P 500 with an average gain of +25.67% per year. These returns cover a period from 1988-2018. Zacks Rank stock-rating system returns are computed monthly based on the beginning of the month and end of the month Zacks Rank stock prices plus any dividends received during that particular month. A simple, equally-weighted average return of all Zacks Rank stocks is calculated to determine the monthly return. The monthly returns are then compounded to arrive at the annual return. Only Zacks Rank stocks included in Zacks hypothetical portfolios at the beginning of each month are included in the return calculations. Zacks Ranks stocks can, and often do, change throughout the month. Certain Zacks Rank stocks for which no month-end price was available, pricing information was not collected, or for certain other reasons have been excluded from these return calculations.