6 Growth Stocks To Buy As Iran Sanctions End

A landmark joint statement on Jan 16 heralded the end of sanctions on Iran which have prevented the oil rich country from exporting its output. The agreement immediately came into effect following a confirmation from the U.N. atomic agency.

Following the end of sanctions, the international oil glut is expected to intensify. This is expected to place further pressure on oil prices already undergoing a major slump. Stocks from several sectors are expected to gain as a result and it would be wise for you to add them to your portfolio.

Landmark Agreement

The nuclear agreement, concluded between Iran, the permanent members of the U.N. Security Council and the EU, has substantially reduced the country’s nuclear capability. The conditions met by Iran for the agreement included shipping out nuclear fuel stockpiles, dismantling centrifuges used to enrich uranium and removing the reactor core at a plutonium facility located close to Tehran.

These steps will result in a situation where it would take the country nearly a year to produce enough fuel for a nuclear weapon. Additionally, the country’s activities related to nuclear material and energy will remain under strict oversight for almost a decade. Only after that period will it be able to increase production of nuclear fuel

Price War Likely?

Possibly the most important outcome of the deal is the removal of embargoes on oil exports. An additional 500,000 to a million additional barrels of oil from Iran will inflate the supply glut. Prices had fallen considerably on Jan 15, a day before the announcement of the agreement. WTI Crude plunged 6.1% to settle at $29.42, its lowest closing level since Nov 2003. Crude oil fell almost 0.1% to close at $31.01.

An immediate decline seems surprising considering the event had mostly been priced in. However, the country is likely to offer generous discounts to lure customers. Also, as its relations with competitor Saudi Arabia worsen, a price war is likely to ensue.

Market watchers feel that Saudi Arabia will push up output and the Iranians are likely to follow suit. This is the first time in 10 years that prices have declined below the $29 level. If a price war breaks out between the two regional competitors, crude prices may fall below $25 a barrel or even $20. 

Auto, Airlines, Consumer Discretionary Stocks to Gain

A further plunge in oil prices is likely to benefit sectors across the board. However, there are three sectors where a price fall has a direct and immediate impact. The oil slump has led to an increase in demand for larger vehicles like SUVs which consume higher amounts of fuel. If prices fall below $25 a barrel, automobiles of all variants could see an uptick in demand. 

Airlines are already witnessing a major improvement in their bottom lines. This is quite natural, since aviation fuel makes up 30% or more of their costs. Most major operators are well positioned to post record earnings. Lastly, consumer discretionary stocks are in a good position to benefit as fuel makes an increasingly smaller portion of household costs.  

Our Choices

The removal of the embargo on Iran’s oil exports is expected to push oil prices even lower in the days ahead. As a result, companies from the airlines, auto and consumer discretionary sectors are expected to make substantial gains.

This is why it would be a smart move to pick up some of these stocks with strong metrics. Our selection is also backed by a good Zacks Growth Score and Zacks Rank.

We narrowed down our choices with the help of our new style score system.

Our research shows that stocks with a Growth Style Score of ‘A’ or ‘B’ when combined with a Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy) offer the best investment opportunities in the growth investing space.

Autoliv, Inc. (ALV - Analyst Report) manufactures occupant restraint systems for automobiles and has a product portfolio consisting primarily of safety airbags, seat belts and steering wheels.

Autoliv holds a Zacks Rank #2 (Buy) and has a Growth Style Score of ‘B.’ The company has expected earnings growth of 11.7% for the current year. The earnings estimate for the current year has increased by 0.58% over the last 30 days.  

Visteon Corporation (VC - Snapshot Report) is a designer, producer and manufacturer of connected car solutions and vehicle cockpit electronic products.  

Visteon holds a Zacks Rank #2 and has a Growth Style Score of ‘B.’ The company has expected earnings growth of 34% for the current year. The earnings estimate for the current year has increased by 3.3% over the last 30 days.  

Carnival Corporation (CCL - Analyst Report) operates as a cruise and vacation company.

Apart from a Zacks Rank #2, Carnival has a Growth Style Score of ‘B.’ The company has expected earnings growth of 23.8% for the current year. The earnings estimate for the current year has increased by 2.7% over the last 30 days.  

SeaWorld Entertainment, Inc. (SEAS - Snapshot Report) is a theme park and entertainment company operating primarily in the US.

SeaWorld Entertainment holds a Zacks Rank #2 (Buy) and has a Growth Style Score of ‘B.’ The company has expected earnings growth of 20% for the current year. The earnings estimate for the current year has increased by 4.4% over the last 30 days. 

Delta Air Lines, Inc. (DAL - Analyst Report) is a leading provider of scheduled air transportation for passengers and cargo throughout the U.S., and around the world.

Apart from a Zacks Rank #1 (Strong Buy), Delta Air Lines has a Growth Style Score of ‘B’. The company has expected earnings growth of 36% for the current year. The earnings estimate for the current year has increased by 9.7% over the last 30 days.  

Hawaiian Holdings Inc. (HA - Snapshot Report) is a holding company of Hawaiian Airlines, the largest airline headquartered in Hawaii.

Hawaiian Holdings holds a Zacks Rank #1 and has a Growth Style Score of ‘A.’ The company has expected earnings growth of 19.2% for the current year. The earnings estimate for the current year has increased by 7.7% over the last 30 days.