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4 Stock Picks From Top-Performing Sectors of Q3

Zacks Equity Research

Performances of major U.S. benchmarks were rather mixed during the third quarter of 2019, owing to an array of factors that helped Wall Street gain as well as post losses. But, it is interesting to note that a few sectors not only performed well in the erratic quarter and actually garnered decent gains.

Therefore, investors can pay attention to these sectors rather than focus on those that failed to impress last quarter.

A Dull Q3

The broader S&P 500 gained 0.4% in the third quarter while both Dow Jones Industrial Average and tech-laden Nasdaq Composite underwent losses, shedding 0.5% and 2.3%, respectively.

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The third quarter started on an optimistic note for Wall Street, owing to the longest bull run in U.S. history. However, the bull run came to an end in August, stopped by an yield curve inversion. Continuing trade tensions between the United States and China, and a slowing global economy remained on investor radar, often weighing on the stock markets during Q3.

Needless to say, these considerably affected investor confidence in the third quarter. Nonetheless, U.S. markets somewhat recovered in September after the Federal Reserve cut the benchmark interest rates for a second time this year. Investors also hoped for an end to the ongoing U.S.-China trade conflict after the two countries decided to hold talks in October.

Top Performing Sectors of Q3

Among the major sectors of the broader S&P 500, technology, utilities, real estate and consumer staples posted impressive gains during the third quarter.

Utilities Select Sector SPDR Fund (XLU) added 8.6%, followed by The Real Estate Select Sector SPDR Fund (XLRE), which garnered 6.3%. Consumer Staples Select Sector SPDR Fund (XLP) and Technology Select Sector SPDR Fund (XLK) gained 4.9% and 1.6%, respectively.

Since the third quarter saw both ups and downs, one can see that defensive sectors such as utilities and consumer staples gained because investors fear an impending economic drawback.

However, sectors such as technology gained because of developments in areas such as artificial intelligence, big data and machine learning. The real estate sector also witnessed considerable growth as the sector registered striking existing home sales data in July and August, which marked consecutive growth for two months.

Our Picks

We have, therefore, selected four stocks from the aforementioned sectors. All of these stocks carry a Zacks Rank #1 (Strong Buy).

NRG Energy, Inc. NRG is an integrated power company. The company’s stock price outperformed the Zacks Utility – Electric Power industry in the third quarter (+11.8% vs +6.9%). The Zacks Consensus Estimate for its current-year earnings has risen 1.6% over the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

KB Home KBH is a homebuilding company. The company’s stock price outperformed the Zacks Building Products – Home Builders industry in the third quarter (+31% vs +16.3%). The Zacks Consensus Estimate for its current-year earnings has risen 5.2% over the past 60 days.

Gannett Co., Inc. GCI is a media company. The company’s stock price outperformed the Zacks Publishing - Newspapers industry in the third quarter (+31.9% vs -7.7%). The Zacks Consensus Estimate for its current-year earnings has risen 7% over the past 60 days.

Cirrus Logic, Inc. CRUS is a supplier of semiconductors and related products. The company’s stock price outperformed the Zacks Electronics - Semiconductors industry in the third quarter (+19.3% vs -4.5%). The Zacks Consensus Estimate for its current-year earnings has risen 2.6% over the past 60 days.

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NRG Energy, Inc. (NRG) : Free Stock Analysis Report
 
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Gannett Co., Inc. (GCI) : Free Stock Analysis Report
 
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Zacks Investment Research