3 Stocks to Buy With Rising Recession and Rate Risk

The stock market continues to be a challenging environment with rising rates a potent headwind. So far, the economy has been stable enough so that earnings growth has not contracted, but this is unlikely to persist the longer the Fed stays hawkish. This article discusses characteristics of stocks that are likely to outperform and 3 stocks with these characteristics – Lockheed Martin (LMT), Vertex Pharmaceuticals (VRTX), and Elevance Health (ELV).

The stock market dove lower following the FOMC press conference where Chair Powell made it clear that even if the Fed were to slow its pace of hikes, the job is nowhere close to completion. This led to estimates of the “terminal rate’ of this hiking cycle to increase following the meeting with 5.5% now the consensus.

Of course, the higher the terminal rate, the more pain that will be inflicted on the economy especially in areas like finance, housing, and real estate. Bonds are likely to suffer, and there are increased chances of a liquidation event if borrowers are unable to meet their obligations which becomes more likely in a high-rate world. Stocks will also suffer which could intensify if earnings materially decline.

These environments mean that investors have to be extremely judicious in terms of making their selections. They should look for stocks whose prospects are disconnected to near-term economic or monetary factors.

Lockheed Martin (LMT)

LMT is a security and aerospace company that has four segments: Aeronautics; Missiles and Fire Control; Rotary and Mission Systems; and Space. The company produces high-tech weapons and defense systems but is best known for its F-35 fighter jets. In addition to these services, LMT provides a wide variety of services for governments all over the world.

In terms of the current environment, LMT is an ideal selection to “beat’ the bear market. For one, government budgets and defense spending are much less volatile than other parts of the economy. In fact, defense spending, on a global level, has grown at about an average, annual rate of 5% over the last couple of decades with the only dip being during the dissolution of the Soviet Union in the early 90s.

Second, companies like LMT often receive long-term contracts and only have a few competitors given that these projects are quite sophisticated and require security clearance. They also tend to have large balance sheets and a long history of paying and raising dividends which also leads to outperformance during periods of economic turbulence.

LMT has an overall B rating, which translates to a Buy in our POWR Rating system. B-rated stocks have posted an average annual performance of 20.1% which compares favorably to the S&P 500’s annual performance of 8.0%.

In terms of component grades, LMT has a B for Value due to its forward P/E of 14 which is cheaper than the S&P 500 (and less prone to negative revisions). It also has a B for Quality due to being one of the leading aerospace & defense companies. Click here to see more of LMT’s POWR Ratings.

Vertex Pharmaceuticals (VRTX)

VRTX discovers and develops small-molecule drugs for the treatment of serious diseases. Its key drugs are Kalydeco, Orkambi, Symdeko, and Trikafta for cystic fibrosis, where Vertex therapies remain the standard of care globally. The company also focuses on developing treatments for pain, type 1 diabetes, inflammatory diseases, influenza, and other rare diseases.

The company’s cystic fibrosis drugs are poised to continue dominating the market for the foreseeable future due to the disease-modifying potential of the drugs, consistent use by patients, and very little competition. VRTX combination therapies also have lengthy patents, which protect its cystic fibrosis portfolio from generics. There is also potential for its non-cystic fibrosis pipeline, which has exposure to promising areas, such as AAT deficiency, sickle cell disease, and beta-thalassemia.

VRTX has an overall grade of A which equates to a strong Buy rating in the POWR Ratings service. A-rated stocks have posted an average annual performance of 31.1% which compares favorably to the S&P 500’s average annual gain of 8.0%.

VRTX also has strong component grades including an A for Quality due to 11 out of 19 analysts covering the stock having a Strong Buy rating with only 2 having a Sell rating. It’s also regarded as one of the top companies in the space due to its dominance of the CF market and strong pipeline of potential, blockbuster treatments. Click here to see more of VRTX’s POWR Ratings.

Elevance Health (ELV)

ELV is a managed care company, providing medical benefits to roughly 44 million members. The company offers employer, individual, and government-sponsored coverage plans. It is also the largest single provider of Blue Cross Blue Shield branded coverage. This sector has also been particularly strong due to a very low unemployment rate which means that the company has seen strong growth in enrollees.

Further, the pandemic was a boost to its bottom-line as less people were going to the doctor and undergoing procedures. Therefore, the company’s payout ratio declined. Many analysts had been expecting an above-average reading as the economy normalized, but so far this has simply returned to pre-pandemic levels.

Another reason to like managed care stocks is their pricing power as healthcare spending tends to rise at a faster pace than inflation. And, they tend to be less affected by economic slowdowns. Currently, the company is seeing growth from its Medicare Advantage plans and virtual care services.

With these attributes, it’s not surprising that ELV has an overall grade of A, which translates into a Strong Buy rating in our POWR Ratings system.

LMT shares . Year-to-date, LMT has gained 38.22%, versus a -19.84% rise in the benchmark S&P 500 index during the same period.

About the Author: Jaimini Desai

Jaimini Desai has been a financial writer and reporter for nearly a decade. His goal is to help readers identify risks and opportunities in the markets. He is the Chief Growth Strategist for StockNews.com and the editor of the POWR Growth and POWR Stocks Under $10 newsletters. Learn more about Jaimini’s background, along with links to his most recent articles.

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Stock Market Déjà Vu…Part 2

Last week, we talked about how it felt like deja vu as the S&P 500 (SPY) embarked on its 3rd bear market rally of the year. Well, today it feels even more that way, as the market is rapidly giving back these hard-fought gains. The market is down 4% from yesterday’s brief spurt higher when it seemed like the FOMC was endorsing a slowdown in the pace of hikes. But, these hopes were dashed during the press conference when FOMC Chair Powell pushed back against this notion and stuck to his hawkish leanings. In fact, he said that the terminal rate could go much higher which was the catalyst behind the selloff. In today’s commentary, I want to break down the Fed meeting and then discuss why it’s a bearish development for the market and confirmation of our bear market thesis. Read on below to find out more….

(Please enjoy this updated version of my weekly commentary originally published November 3^rd, 2022 in the POWR Stocks Under $10 newsletter).

Over the last week, the S&P 500 (SPY) is down by 2%. And, it’s a brutal end to the bear market rally. In fact, it is better evident if we look at the Nasdaq 100, where 2 of the market’s generals have been slaughtered and laid to waste – GOOGL and META.

The index has already given back about 75% of its gains from the bear market rally. In contrast, the losses for the Russell 2000 and S&P 500 are much more muted.

This is a continuation of a theme that we discussed last week – the “market of stocks’ is holding up much better than the stock market.

And, it shouldn’t be too surprising given the rise in long-term rates which is more of a headwind for large and mega-cap stocks.

The rise in rates could relent if the market (or the Fed) saw some weakness in inflation data or the economy. That doesn’t seem to be the case although we will learn more about the state of the employment market tomorrow.

But so far, there is no indication of truly broad-based weakness for employment (based on unemployment claims) which means that rates are going to be “higher for longer’.

Why the FOMC Was so Bearish for the Markets

One of the reasons behind the “bear market rally’ was the belief that the Fed could be on the verge of “pivoting’ in terms of slowing its pace of hikes and eventually stopping sometime in early 2023.

Well, this is now in doubt as the stubbornness of inflation and specifically, core inflation makes it clear that hikes are going to continue for some meaningful period of time.

Now, we are back to the initial conditions which made January 2022 so bearish. Rates are rising, while growth is slowing. But growth isn’t slowing fast enough to cause the Fed to pivot.

Thus, rates will keep rising until the economy breaks or inflation breaks.

Rising rates are a potent headwind for the stock market. As we learned this year, the most bullish scenario is a choppy sideways market that gets some nice rallies out of oversold conditions.

While the most bearish scenario is that the S&P 500 (SPY) plunges lower when we get the combination of rising rates and negative news on the earnings or economic front.

Now that this bout of bullishness is over, I expect reality to set in over the next couple of weeks and the market to visit lower levels.

Portfolio Strategy

We are back to a neutral setting and prepared to take more action if the market breaks key levels on the downside which includes the October lows of around 3,600.

I would expect that cyclical stocks would lead on the downside, while defensive stocks and sectors would outperform.

What To Do Next?

If you’d like to see more top stocks under $10, then you should check out our free special report:

3 Stocks to DOUBLE This Year

What gives these stocks the right stuff to become big winners, even in the brutal 2022 stock market?

First, because they are all low priced companies with the most upside potential in today’s volatile markets.

But even more important, is that they are all top Buy rated stocks according to our coveted POWR Ratings system and they excel in key areas of growth, sentiment and momentum.

Click below now to see these 3 exciting stocks which could double or more in the year ahead.

3 Stocks to DOUBLE This Year

All the Best!

Jaimini Desai
Chief Growth Strategist, StockNews
Editor, POWR Stocks Under $10 Newsletter

SPY shares were trading at $373.35 per share on Friday morning, up $2.34 (+0.63%). Year-to-date, SPY has declined -20.48%, versus a % rise in the benchmark S&P 500 index during the same period.

About the Author: Jaimini Desai

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Casey’s General Stores (CASY) is a Top Pick for the Bear Market

The S&P 500 (SPY) may be in bear market territory, but that doesn’t mean that every stock is down. In fact, there are 3 really good reasons why Casey’s General Stores (CASY) has been in the plus column this year…and likely to stay there. Read on below for why you should be filling up your portfolio with CASY shares at this time.

Let there be no doubt we are in the midst of a bear market. And most stocks will continue to head south.

(If you are unclear about that, please read my latest market outlook commentary, Investors: Wake Up and Smell the Pain (Part 2)

Gladly some stocks will go up. Casey’s General Stores (CASY) is the perfect example. Not only is it up 10% in the past month. More impressively is it up over 15% year to date while the stock market sank brutally into bear market territory.

Why is CASY rising above the pack?

First, because investors cling to more defensive names that are at less risk when a recession is on the horizon. Indeed, CASY fits nicely into the consumer staples camp which is in fashion at times like these.

Second, and more importantly, the profit picture for CASY keeps on improving. The higher EPS picture compels investors to bid up shares given the increased valued found there.

Third, our POWR Ratings model analyzes 5,300 stocks across 118 unique factors to find those built to outperform. Not only is CASY sporting a rating of A (Strong Buy) rating. But even more impressive it is in the top 1% of all stocks across these 118 factors.

All this explains why Wall Street is a big fan of this stock with the analyst at Deutsche Bank pounding the table the loudest with $276 price target. That may not seem that much higher in the grand scheme of things. However, with the bear market far from over, and most stocks likely to fall another 100-20% from here…then that $276 target makes CASY quite compelling at this time.

What to Do Next?

You may be curious to see some of my other top pick articles. In fact, I recently shared my top 2 picks for the year ahead. Check those out below:

1 Top Pick for 2023 Stock Market

#2 Investment for 2023

Wishing you a world of investment success!

Steve Reitmeister…but everyone calls me Reity (pronounced “Righty”)
CEO, StockNews.com

Editor of Reitmeister Total Return

CASY shares closed at $224.94 on Friday, down $-2.27 (-1.00%). Year-to-date, CASY has gained 14.79%, versus a -19.84% rise in the benchmark S&P 500 index during the same period.

About the Author: Steve Reitmeister

Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks.

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https://www.entrepreneur.com/article/438576

Investors: Wake Up and Smell the Pain (Part 2)

How funny it was to see traders get it wrong once again. They misread the Fed announcement at 2pm ET leading to a big 1% rally for the S&P 500 (SPY). Within minutes of Chairman Powell speaking it dawned on every body that things have not gotten better…only worse. And thus the odds of future recession and greater stock downside have greatly increased. This article spells out why. Even better it highlights a game plan and top picks to profit as the market heads lower from here.

After the famed Chairman Powell speech from Jackson Hole in August investors got the memo that the recent rally was unfounded and time to start selling stocks once again. This prompted me to write this article, Investors: Wake Up and Smell the Pain.

Wednesday’s Fed announcement and press conference feels very much the same. That being investors getting ahead of themselves with a 9% rally in October before Chairman Powell lowered the hammer once again.

They say “fool me once, shame on you…fool me twice, shame on me”.

If true, then let’s highlight the key elements from the recent Fed announcement so you understand why we are likely headed towards a recession. And why stock prices will head much lower before this bear market ends.

Market Commentary

There are so many threads to pull on from the Fed statements on Wednesday. However, at the end of the day the key point came out 45 minutes into Chairman Powell’s press conference when he had to admit that the window to create a soft landing had narrowed.

Meaning it is possible to create a soft landing for the economy. But HIGHLY UNLIKELY.

Let’s remember that Fed has a slightly optimistic bias as they don’t want to unnecessarily scare people. And indeed, a soft landing is their preferred outcome. That being to bring down inflation with as little damage to the economy as possible before resuming growth and prosperity.

You could tell that Powell was trying to be as honest as possible with his answer for which he had to begrudgingly admit that the window for creating a soft landing had narrowed. That is because they have raised rates this much with little real effect on taming inflation. Thus, how much harder they will have to push on rates to bring down demand that will most likely lead to recession.

The S&P 500 (SPY) was up about +1% when his speech began. Within minutes investors could finally see that there may have been an improvement in clarity in their statements…but not a real change in policy. From there stocks started heading lower. But once Powell declared the window for soft landing had narrowed…it became a downright bloodbath for stocks ending in a -2.5% session.

The above is my morning after thoughts that would not allow me to get back to sleep before I got typed it out. Meaning above is what is most important for investors to understand. Yet indeed there is more to share.

Let’s roll back to the 2pm ET when the announcement came out.

I was watching CNBC intently and could not take my eyes off the movement of stocks with every new comment made on screen. It was truly amazing how every positive comment was followed by an uptick just seconds later. And every negative comment with a decrease in stock prices.

Most of the commentators were saying how amazing it was that this pivot was taking place to discuss the idea of slowing the pace of rate hikes and then pausing to see how the “lagged effects”. I was screaming at the TV “you guys don’t get it!!!” My wife joked that I was having a mental break.

Gladly CNBC economic commentator Steve Liesman echoed my view that indeed there is an improvement in the clarity of policy steps…but not a real change in the long term Hawkishness of the Fed. This became all the more apparent within minutes of Powell’s prepared speech that echoed many of the points from Jackson Hole just a couple months back. That being…

This is a LONG TERM battle to create price stability (closer to 2% target inflation)
Will not ease off too soon as it may reignite inflation before the job is done. “It is premature to discuss pausing”.
The economy will slow and labor markets will weaken. That is because the Fed intends to weaken demand to get in line with supply. This is how they expect to achieve lower inflation.

All in all, it seems the Fed is still on a path to a restrictive 5% rates with smaller rate hikes in the future. Followed by a pause to see the “lagged effects” of policy. Some are giving this idea of a pause far too much significance.

Just remember there is a 1-2 quarter delayed effect of Fed policy on the economy. So this is just the Fed being logical about reviewing conditions before making their next move as they fear going too far which would be even more detrimental to the economy.

As stated at the top, the most beneficial Fed statement came a full 45 minutes in when many folks may have checked out. He was asked if the window to create a soft landing has narrowed. He unfortunately had to admit that was the case and odds of soft landing are greatly diminished.

Also consider that as of now the Fed sees no real improvement in inflation. Especially true in the labor markets generating wage inflation. And thus, will keep raising rates. And thus, the full measure of those policies is not yet seen in the economy.

In my book there is NO WAY to bet on start of next long term bull market til investors appreciate how bad the economy will get. That is a first half of 2023 event and thus far too early to get bullish.

Once again, given that the Fed was late to the party to raise rates means they are highly unlikely to create a soft landing. They even admitted as much which was truly the nail in coffin for stocks on Wednesday.

So a hard landing means recession with commensurate reduction in stock prices. Thus the bearish thesis is unchanged. Just a matter of when the rest of the market wakes up to the message with correlated lowering of stock prices.

Not just a retest of recent lows. I mean the full measure of pain associated with a bear market.

Remember 34% decline is the average drop for a bear market. That equates to 3,180. However, the valuations for stocks started near record highs…yes even worse than the tech bubble of 1999. Thus, may have to fall a bit further than 3,180 to find bottom.

In the end the investment story is as simple as “Don’t Fight the Fed”.

They are telling you with a straight face that the odds of recession are very high.

BELIEVE THEM!

And trade accordingly with full expectation of lower lows on the way for stocks prices.

What To Do Next?

Discover my special portfolio with 9 simple trades to help you generate gains as the market descends further into bear market territory.

This plan has been working wonders since it went into place mid August generating a robust gain for investors as the S&P 500 (SPY) tanked.

And now is great time to load back up as we make even lower lows in the weeks and months ahead.

If you have been successful navigating the investment waters in 2022, then please feel free to ignore.

However, if the bearish argument shared above does make you curious as to what happens next…then do consider getting my updated “Bear Market Game Plan” that includes specifics on the 9 unique positions in my timely and profitable portfolio.

Click Here to Learn More >

Wishing you a world of investment success!

Steve Reitmeister…but everyone calls me Reity (pronounced “Righty”)
CEO, Stock News Network and Editor, Reitmeister Total Return

SPY shares were trading at $370.94 per share on Thursday afternoon, down $3.93 (-1.05%). Year-to-date, SPY has declined -21.00%, versus a % rise in the benchmark S&P 500 index during the same period.

About the Author: Steve Reitmeister

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https://www.entrepreneur.com/article/438564

3 Big Reasons Why Oil Stocks Are No Longer a Buy

Oil stocks have been one of the few bright spots in the S&P 500 (SPY), during the doom and gloom of the 2022 bear market. However, that party could soon be coming to an end. Below I lay out 3 reasons why oil stocks are no longer a buy, plus reveal how you can still profit from oil stocks as they retreat from their recent highs. Read on for more….

Oil stocks have been the one place to make some serious upside over the past year. But even the energy names are looking tired and toppy following a frenzied rally at current levels.

Looks like it is finally time to take some profits and position for a pullback in big oil…

For our discussion, we are going to be using XLE, the Energy Select SPDR ETF, as the proxy for oil stocks. The top two holdings of XLE are the major oil companies ExxonMobil (XOM) and Chevron (CVX). Together these two comprise over 42% of the weighting for the ETF.

Oil Stocks Got Overbought But Are Weakening

The one-year price chart below shows the price action for the XLE. As you can see, XLE got to overbought levels on Wednesday before dropping sharply. 9-day RSI hit 80 then pivoted. MACD neared an extreme before softening. Bollinger Percent B approached 100 then fell.

Shares were trading at a big premium to the 20-day moving average. Previous times these indicators aligned in a similar fashion marked significant intermediate term tops in oil stocks.

I also highlighted the magnitude and length of the prior two rallies (purple lines). Note how they coincide almost identically with the current price action in XLE.

Oil Stocks Getting Extended Versus Stocks Generally

The yearly chart below of oil stocks (XLE) versus the S&P 500 (SPY) shows just how great the outperformance of XLE has gotten to stocks overall. The XLE shows a robust gain of just over 60% in the past 12 months compared to a nearly 17.5% loss for the SPY.

Remember that the major oil stocks such as ExxonMobil and Chevron are in the SPY as well, making the comparative performance even greater once the oil names are stripped out.

Interesting to note that the last time oil stocks hit such heights back in early June led to a significant drop, or mean reversion, in XLE. Look for a similar scenario to unfold with XLE being a relative underperformer to SPY over the coming months.

Oil Stocks Getting Way Ahead of Oil Itself

Oil and oil stocks tend to be well-correlated. This certainly makes intuitive sense. If crude climbs, oil stocks should follow and vice-versa.

That certainly was the case for the first half of the year, as seen in the chart below. Both oil and oil stocks made highs in early June as West Texas Intermediate Crude prices ($WTIC) traded well over $120 barrel.

Since then, however, we have seen $WTIC retreat sharply back under $90 barrel while XLE made a fresh new high. This divergence has now gotten to an extreme. XLE is now out-performing $WTIC by over 50% in the past 12 months.

I expect oil stocks to start to drop in sympathy with lower oil prices into year-end.

Traders and investors looking to position to profit from the anticipated convergence in XLE to lower levels can buy puts and put spreads on oil stocks or sell out-of-the money bear call spreads. We have done just that recently with a put diagonal on ExxonMobil (XOM).

What To Do Next?

While the concepts behind options trading are simpler than most people realize, applying those concepts at the right time to consistently make winning trades is no easy task.

The solution is to let me do the hard work for you…by starting a no-obligation 30 day trial to my POWR Options newsletter.

With the quantitative muscle of the POWR Ratings as my starting point, I’ve uncovered some of the best options trades in the tough markets we’ve experienced this year.

That’s because I take advantage of both call and put options trades to generate big gains in ALL market conditions.

In fact, since launching the service in November 2021 I have delivered a market beating +65.44% return for my subscribers.

The good news is that you can become a subscriber today for just $1.

During your $1 trial you’ll get full access to the current portfolio, my weekly market insights and every trade alert by text & email.

Plus, I’ll be adding the next 2 exciting options trades (1 call and 1 put) when the market opens this Monday morning, so start your trial today so you don’t miss out!

About POWR Options & $1 Trial >>

Here’s to good trading!

Tim Biggam
Editor, POWR Options Newsletter

SPY shares rose $4.99 (+1.34%) in premarket trading Friday. Year-to-date, SPY has declined -20.33%, versus a % rise in the benchmark S&P 500 index during the same period.

About the Author: Tim Biggam

Tim spent 13 years as Chief Options Strategist at Man Securities in Chicago, 4 years as Lead Options Strategist at ThinkorSwim and 3 years as a Market Maker for First Options in Chicago. He makes regular appearances on Bloomberg TV and is a weekly contributor to the TD Ameritrade Network “Morning Trade Live”. His overriding passion is to make the complex world of options more understandable and therefore more useful to the everyday trader. Tim is the editor of the POWR Options newsletter. Learn more about Tim’s background, along with links to his most recent articles.

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https://www.entrepreneur.com/article/438563

3 Stocks to Buy Now for the Next Bull Market

The Fed’s recent approval to increase the interest rate by 75 basis points has once again raised recession fears. However, given the possibility of a lower pace of rate hike in the future, a bull market might be on the horizon. Amid this, we think quality stocks Microsoft (MSFT), PepsiCo (PEP), and Waste Management (WM) might be solid buys now. Read on….

On Wednesday, the Federal Reserve, for the fourth consecutive time, increased the short-term borrowing rate by 75 basis points to a target range of 3.75%-4% to curb the sky-high inflation.

Amid the Fed’s relentless fight against inflation, investor sentiments have been hit, and stocks have been pushed to a bear market. The S&P 500 index is down more than 20% this year.

In addition, UNCTAD has warned that the world might be on the brink of recession, and the economic adversities could be worse than what was faced during COVID-19 and the financial crisis of 2008.

But on the other hand, the U.S. economy has shown signs of positivity in the third quarter of 2022. GDP increased at an annual rate of 2.6% for the said period after a six-month contraction. This turnaround underscores the economy’s resilience and raises hopes of the stock market recovering.

Hence, investors could add fundamentally strong stocks, Microsoft Corporation (MSFT), PepsiCo, Inc. (PEP), and Waste Management, Inc. (WM), to await an upcoming bull market.

Microsoft Corporation (MSFT)

Tech giant MSFT is a pioneer in the software field. The company operates in three segments: Productivity and Business Processes; More Personal Computing; and Intelligent Cloud.

On November 3, it was reported that aerospace and defense company Raytheon Technologies Corporation (RTX) and MSFT had deepened their collaboration to co-develop capabilities. MSFT could benefit from helping RTX execute its digital transformation.

In September, a quarterly dividend of $0.68 per share was declared by MSFT, reflecting a six-cent or 10% increase over the previous quarter’s dividend. This is payable to shareholders on December 8 and reflects the company’s strong cash generation ability.

For the fiscal first quarter that ended September 30, MSFT’s EPS came in at $2.35. Its total revenue increased 10.6% year-over-year to $50.12 billion. Its gross margin rose 9.5% from the prior-year quarter to $34.67 billion. Operating income grew 6.3% from the prior-year period to $21.52 billion.

For the fiscal year ending June 2023, the consensus EPS estimate of $9.52 indicates a 3.4% improvement year-over-year. Revenue is expected to rise 7.2% year-over-year to $212.57 billion for the same year. In addition, MSFT topped consensus EPS estimates in three of the trailing four quarters, which is impressive.

The stock lost 2.7% intraday to close its last trading session at $214.25.

MSFT’s POWR Ratings reflect a promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

MSFT is also rated a B in Stability and Quality. Within the Software – Business industry, it is ranked #12 of 52 stocks.

To see additional POWR Ratings for Momentum, Growth, Sentiment, and Value for MSFT, click here.

PepsiCo, Inc. (PEP)

PEP is a popular food and beverage company that operates through its seven segments: Frito-Lay North America; Quaker Foods North America; PepsiCo Beverages North America; Latin America; Europe; Africa, Middle East, and South Asia; Asia Pacific, Australia and New Zealand; and China Region.

On September 14, PEP and agriculture company Archer-Daniels-Midland Company (ADM) announced a 7.5-year strategic commercial partnership. This collaboration aims to enhance regenerative agriculture across the companies’ shared North American supply chains and is a commendable step toward sustainable development.

PEP has paid consecutive quarterly cash dividends since 1965, and this year marked the company’s 50th consecutive annual dividend increase. In July, PEP declared a quarterly dividend of $1.15 per share of common stock, indicating a 7% increase year-over-year, which was payable on September 30.

PEP’s net revenue came in at $21.97 billion for the third quarter that ended September 3, 2022, up 8.8% year-over-year. Its non-GAAP gross profit increased 8.4% year-over-year to $11.73 billion.

Also, its non-GAAP operating profit came in at $3.60 billion, up 10.9% year-over-year. The company’s non-GAAP net income attributable to PEP per common share grew 10.1% year-over-year to $1.97.

For the fiscal fourth quarter ending December 2022, analysts expect PEP’s revenue to increase 5.3% year-over-year to $26.59 billion. Its EPS is estimated to grow 7.1% year-over-year to $1.64. It has surpassed EPS estimates in all four trailing quarters.

Over the past year, the stock has gained 8.2% to close the last trading session at $177.78. it gained 7.6% over the past month.

It’s no surprise that PEP’s POWR Ratings reflect a promising outlook. It has an overall rating of A, indicating a Strong Buy in our proprietary rating system.

PEP has an A grade for Quality and a B for Stability, Growth, and Sentiment. In the A-rated Beverages industry, it is ranked #9 out of 33 stocks.

Click here for the additional POWR Ratings for Momentum and Value for PEP.

Waste Management, Inc. (WM)

WM provides waste collection, transfer, disposal services, and recycling and resource recovery. It operates and owns landfill gas-to-energy facilities in the United States. The company serves residential, commercial, industrial, and municipal customers in North America.

On September 13, WM announced that it had agreed to acquire a controlling interest in Avangard Innovative’s U.S. business, which is expected to operate as Natura PCR. This is expected to scale the company’s potential in the post-consumer resin (PCR) space.

In August, WM announced a quarterly dividend of $0.65 per share, which was payable to shareholders on September 23. This reflects on the company’s ability to pay back its shareholders.

For the fiscal third quarter ended September 30, WM’s revenue increased 8.8% year-over-year to $5.08 billion. The company’s adjusted income from operations increased 19.9% from its year-ago value to $950 million, while its adjusted net income grew 21.7% year-over-year to $645 million. WM’s adjusted EPS rose 23.8% from the prior-year period to $1.56.

Analysts expect WM’s revenue and EPS for the fiscal fourth quarter ending December 2022 to increase 6.5% and 13.3% year-over-year to $4.98 billion and $1.43, respectively. Furthermore, WM has an impressive earnings surprise history, surpassing consensus EPS estimates in three of the trailing four quarters.

The stock gained 1.2% intraday to close the last trading session at $157.13.

WM’s strong fundamentals are reflected in its POWR Ratings. The stock’s overall B rating translates to a Buy in our proprietary rating system.

WM also has a grade B for Stability and Quality. It is ranked #4 among 15 stocks in the A-rated Waste Disposal industry.

In addition to the above, to see the POWR Ratings for Growth, Value, Momentum, and Sentiment for WM, click here.

MSFT shares were trading at $216.01 per share on Friday morning, up $1.76 (+0.82%). Year-to-date, MSFT has declined -35.35%, versus a -20.56% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.

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https://www.entrepreneur.com/article/438541

Bull vs. Bear Debate Reignited!

Why have stocks jumped from the October lows and more investors have become bullish? But why have many bears refused to throw in the towel? What is it that they see points to lower lows for the S&P 500 (SPY) in the months ahead? Let’s review the updated bull vs. bear debate including how best to trade this tricky market environment.

There are signs things are getting better on the inflation front. And yet signs that things are getting worse on economic front.

This contradiction creates a very confusing gumbo for investors to digest. And likely explains why we continue to teeter on the edge of bear market territory at 3,855.

Let’s talk about these competing themes and how it has created 2 different scenarios for the stock market outlook. One bullish and one bearish.

I share which scenario is most likely and what it means for our trading plan in this week’s Reitmeister Total Return commentary.

Market Commentary

Let’s start with the Fed’s game plan as clearly spelled out in Chairman Powell’s Jackson Hole speech in August:

This is a long-term battle to get inflation back to 2% target
Do NOT expect lower Fed rates through 2023
Expect “economic pain” which was further described as below trend growth and a weakening of employment.

Now let’s remember that this speech quickly sobered up investors who were enjoying a 18% summer rally up to 4,300 for the S&P 500 (SPY). A month later we were making new lows below 3,600.

The Fed cherishes clarity and consistency in their communication. And thus, I say that any investor who thinks there will be a meaningful change in policy announced Wednesday, only a couple months after the Jackson Hole speech, is smoking something that is still quite illegal.

Yet bulls do have some things to cheer such as clear signs of moderating inflation. Almost every key commodity is well off their highs this year. The Bloomberg Commodity Index shows the price trend improving.

This moderation of inflationary pressures is what is behind the hope the Fed will not raise rates as aggressively in the future…and thus would create less damage to the overall economy. This has some folks calling bottom leading to the strong October rally (and hopes for beginning of new bull market).

On the other hand, commodity prices are just one part of the inflationary picture. Don’t forget the “stickier” elements such as house prices and rents. Even more important is wage inflation. That got a JOLT in the wrong direction Tuesday morning (pun intended ;-)

See below the trend of job openings tracked in the monthly JOLTs report. For the previous 5 months it was trending lower which meant fewer job openings…which pointed to hopefully less wage inflation in the future. That is why the jump in that report Tuesday morning was greeted with an immediate stock sell off as it reignited inflationary fears.

Simultaneously to the JOLTs report was the release of ISM Manufacturing. As expected, that continues to move closer to recessionary levels with a reading of 50.2 with forward looking New Orders component a notch lower at 49.2. (Under 50 = contraction)

Here are some of the key statements recorded by ISM to go along with the Manufacturing report to provide color commentary on what is happening now and what it means for the future (bold put in by me for emphasis):

“Customers are canceling some orders. Inventories of finished goods increasing. Expect some bounce back as some customers may be waiting for commodity prices to decline (further).” [Chemical Products]
“Growing threat of recession is making many customers slow orders substantially. Additionally, global uncertainty about the Russia-Ukraine (war) is influencing global commodity markets.” [Food, Beverage & Tobacco Products]
“We have seen a general pullback in available capital budgets from our customers, and that is having a significant impact on our sales in the fourth quarter.” [Machinery]
“Customer demand has been slower for two months. Production is decreasing our inventory and (we are) implementing forecasts carefully. The headwind seems to be very strong, so we need to be prepared for that.” [Fabricated Metal Products]
“International conditions loom large and seem very foreboding. Overall, we still think 2023 will be a positive year, with at least some moderate growth.” [Nonmetallic Mineral Products]
“Lead times are improving. Plastic prices are coming down.” [Plastics & Rubber Products]
“Prices are continuing a slight decline. Suppliers are trying to hold off decreases, but competition is increasing.” [Miscellaneous Manufacturing]

Net-net these statements reiterate the main point of my commentary today. That being clear signs the economy is slowing. But so too inflationary pressures are easing.

Now let me add one more element to consider before I get to my final conclusions. See the negative trend for the S&P 500 (SPY) earnings outlook as we are now more than half way through Q3 earnings season.

This data shows an across the board reduction in earnings estimates for coming quarters. In particular, you will see that Q1 and Q2 of 2023 are now expected to end with negative growth. This corresponds with a growing number of economists pointing to a recession forming in the first half of 2023.

These statistics were put together by Nick Raich who went on to say that Wall Street is being far too optimistic about the outlook. Meaning that the full measure of estimates cuts are not yet showing up and thus is recommending to clients that they expect more stock price downside until we see more of the typical 15-20% earnings loss that corresponds with recessions.

Now we get down to the tricky part. That being to determine which is the more likely scenario going forward.

Scenario 1: Inflation moderates sooner than expected leading to less total Fed intervention and creation of soft landing for economy. In this case, it is not unreasonable to say that we have reached market bottom and new bull market emerging.

Scenario 2: We have already opened up Pandoras box with the economy. Once the wheels are in motion to move towards recession, then the economy can go through a vicious cycle that grinds lower and lower. In this case the bear market is still in play with likely bottom closer to 3,000.

Which scenario is right?

I believe Scenario 2 is much more likely and why I remain bearish. However, Scenario 1 is a possible outcome that needs to be monitored closely.

Until investors are convinced which scenario is correct, then expect increased volatility as we have seen this past week. Heck, Tuesday alone was a prime example.

That being where the market opens up +1% and then immediately gives it all back and then some after the JOLTs and ISM Manufacturing reports. Then it stuck like glue around 3,855 which is an interesting support/resistance level.

Remember that 3,855 is the bear market dividing line representing a 20% drop from the all time highs of 4,818. That is as good of spot as any to have a tug of war over the future of the stock market.

Given history, the odds of soft landing are very low. Famed investor Mohamed El-Erian talks about the same thing in this new article: Chances of Soft Landing are “Meager”.

Like El-Erian, my outlook skews bearish. That is why my portfolio is constructed to profit as stock prices head lower.

However, I am sleeping with one eye open for the possibility that the soft landing scenario does emerge victorious where I would gladly switch to a more bullish stance.

Unfortunately, with the jobs market still too hot, then that inflationary pressure alone will keep the Fed on a rate hike war path which doesn’t end favorably for the economy and stock prices.

What To Do Next?

Discover my special portfolio with 9 simple trades to help you generate gains as the market descends further into bear market territory.

This plan has been working wonders since it went into place mid August generating a robust gain for investors as the S&P 500 (SPY) tanked.

And now is great time to load back up as we make even lower lows in the weeks and months ahead.

If you have been successful navigating the investment waters in 2022, then please feel free to ignore.

Click Here to Learn More >

Wishing you a world of investment success!

Steve Reitmeister…but everyone calls me Reity (pronounced “Righty”)
CEO, Stock News Network and Editor, Reitmeister Total Return

SPY shares were trading at $384.97 per share on Tuesday afternoon, down $1.24 (-0.32%). Year-to-date, SPY has declined -18.01%, versus a % rise in the benchmark S&P 500 index during the same period.

About the Author: Steve Reitmeister

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Buying This Consumer Staples Stock in Q4 Is a Great Idea

Leading food and drug retailer Albertsons (ACI) recently entered a merger agreement with Kroger (KR), which is expected to add substantial value to the company and its shareholders. The fundamental strength, promising growth prospects, solid dividend record, and the non-cyclical nature of its business make ACI a safe buy this quarter. Keep reading….

Consumer staples companies enjoy inelastic demand for their products regardless of economic conditions. Due to its defensive nature, consumer staples stock Albertsons Companies, Inc. (ACI) has been performing relatively well amid the ongoing economic uncertainty.

The company operates food and drug retail stores across the United States. Its retail stores offer essentials, including groceries, general merchandise, health and beauty care products, pharmacy, fuel, and other items and services. In addition, it manufactures and processes food products for sale in stores.

On October 14, ACI and Kroger (KR) entered a definitive agreement under which the companies will merge two complementary organizations with iconic brands and deep roots in their local communities to establish a national footprint. Combining two well-known and trusted supermarket banners should expand customer reach and improve proximity to deliver affordable food to nearly 85 million householders.

Under the merger agreement’s terms, ACI’s shareholders will receive total consideration valued at $34.10 per share. As part of this transaction, ACI would pay a special cash dividend of up to $4 billion to its shareholders. The special cash dividend is expected to be approximately $6.85 per share, payable on November 7, 2022.

“This transaction with Kroger provides substantial value to shareholders and exciting opportunities for associates to be part of a combined organization with the ability better to support the lives and health of millions of Americans,” said Chan Galbato, Co-Chair of ACI’s Board of Directors and CEO of Cerberus Operations.

In addition to a special cash dividend announced in connection with the signing of the merger agreement, ACI’s Board of Directors declared a cash dividend of $0.12 per share for the third quarter of 2022. The cash dividend is payable on November 14, 2022. It pays $0.48 as dividends annually, yielding 2.34% on the current share price. This compares to its 4-year average dividend yield of 1.94%.

The retailer delivered solid results for the second quarter. Its net sales and other revenue came in at $17.9 billion for the quarter ended September 10, 2022, compared to $16.5 billion in the year-ago quarter. The increase was driven by the company’s 7.4% growth in identical sales and higher fuel sales because of retail price inflation.

Vivek Sankaran, ACI’s CEO, said, “Throughout the quarter, we continued to invest in our digital transformation, our differentiation in Fresh, and the modernization of our capabilities. As we look ahead to the balance of the year, we believe we are well-positioned to further accelerate in each of these areas as we continue to roll out our Customers for Life strategy.”

Shares of ACI have gained 8.2% over the past month to close the last trading session at $20.51. Moreover, Wall Street analysts expect the stock to hit $31.28 in the next 12 months, indicating a potential upside of 53.4%.

Here is what could influence ACI’s performance in the upcoming months:

Strong Financials

ACI’s net sales and other revenue increased 8.6% year-over-year to $17.92 billion in the fiscal 2022 second quarter ended September 30, 2022. Its operating income rose 9.3% year-over-year to $531 million. Its adjusted EBITDA grew 8.6% from the prior-year period to $1.05 billion. The company’s adjusted net income increased 13.2% from the year-ago value to $418.30 million,

Furthermore, the company’s adjusted net income per Class A common share came in at $0.72, up 12.5% year-over-year. As of September 10, 2022, its cash and cash equivalents stood at $3.39 billion, compared to $2.90 billion as of February 26, 2022.

Solid Growth Story

ACI’s revenue has grown at a 7.4% CAGR over the past three years. The company’s net income and EPS have grown at 48.1% and 15% CAGRs over the past three years, respectively. Moreover, its levered FCF has increased at a 38.9% CAGR over the same period.

Discounted Valuation

In terms of forward non-GAAP P/E, ACI’s 6.91x is 63% lower than the industry average of 18.69x. The stock’s 0.29x forward EV/Sales is 83.3% lower than the industry average of 1.73x. Likewise, its forward EV/EBITDA multiple of 5.02 compares with the industry average of 11.94.

In addition, ACI’s forward EV/EBIT of 8.45x is 45.1% lower than the 15.39x industry average. Its 0.14x forward Price/Sales is 88.4% lower than the 1.23x industry average. Also, the stock’s forward Price/Cash Flow of 3.62x is 74% lower than the 13.96x industry average.

Favorable Analyst Estimates

Analysts expect ACI’s revenue for the fiscal 2023 third quarter (ending November 2022) to come in at $17.47 billion, indicating an increase of 4.3% year-over-year. The company’s consensus revenue estimate of $76.56 billion for the ongoing year indicates a 6.5% year-over-year increase. The company has surpassed the consensus revenue estimates in each of the trailing four quarters.

High Profitability

ACI’s trailing-12-month ROCE, ROTC, and ROTA of 45.44%, 8.75%, and 5.93% compare to the industry averages of 11.68%, 6.21%, and 4.63%, respectively. Also, its trailing-12-month asset turnover ratio of 2.69% is 231.1% higher than the industry average of 0.81%.

POWR Ratings Show Promise

ACI has an overall A rating, which equates to a Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by accounting for 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. ACI has a B grade for Quality, consistent with its higher-than-industry profitability metrics. In addition, it has a B grade for Value, in sync with its lower-than-industry valuation multiples.

ACI is ranked #9 out of 38 stocks in the A-rated Grocery/Big Box Retailers industry.

Beyond what I stated above, our POWR Ratings system has also rated ACI for Growth, Sentiment, Momentum, and Stability. Get access to all ACI ratings here.

Bottom Line

ACI’s merger deal with KR is expected to deliver superior value to its customers, associates, and shareholders. Moreover, the company’s near-term prospects look bright, driven by steady product demand.

The company’s solid near-term growth prospects, growing dividends, and the defensive nature of its business make ACI an attractive buy now.

How Does Albertsons Companies, Inc. (ACI) Stack Up Against its Peers?

ACI has an overall POWR Rating of A. One could also check out these other stocks within the Grocery/Big Box Retailers industry with an A (Strong Buy) rating: Koninklijke Ahold Delhaize N.V. (ADRNY), George Weston Limited (WNGRF) and Caseys General Stores, Inc. (CASY).

ACI shares were trading at $20.50 per share on Tuesday morning, down $0.01 (-0.05%). Year-to-date, ACI has declined -7.89%, versus a -17.81% rise in the benchmark S&P 500 index during the same period.

About the Author: Mangeet Kaur Bouns

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.

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https://www.entrepreneur.com/article/438288

3 Tech Stocks You’ll Be Kicking Yourself Later for Not Buying

While disappointing third-quarter earnings from big tech added to the pressure tech companies were facing due to the consistent increase in borrowing costs and slowing demand, the industry is consistently evolving and is well-positioned to grow significantly in the long run. Therefore, you would regret not investing in fundamentally sound tech stocks Microsoft (MSFT), Gartner (IT), and Jabil (JBL) at the current low-price levels. Read on….

The technology industry has been bearing the brunt of the Fed’s aggressive interest rate hikes this year. Concerns over rising borrowing costs and slowing demand have led to tech stocks witnessing massive sell-off since the beginning of the year. The tech-heavy Nasdaq has lost close to 30% year-to-date.

The latest disappointing third-quarter earnings and weak guidance from big tech companies added to the pressure on tech stocks. Except for Apple (AAPL), all tech giants disappointed investors with weak results and dreary guidance last week.

Although the headwinds are expected to be around for a while, the tech industry’s opportunities for growth and competitive advantage are assured, given its increasing role in this digital era. The information technology market is expected to grow at a CAGR of 8.8% to reach $13,092.49 billion in 2026.

Therefore, the current low prices of quality tech stocks, Microsoft Corporation (MSFT), Gartner, Inc. (IT), and Jabil Inc. (JBL), make them solid investments to capitalize on the industry’s rosy long-term prospects. These companies are forming partnerships and building systems to streamline supply-chain challenges and adapt to the changing economy.

Microsoft Corporation (MSFT)

Global software giant MSFT needs no introduction. The company develops, licenses, and supports software, services, devices, and solutions worldwide. The company operates in three segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing.

On October 12, 2022, Cisco (CSCO) and MSFT announced a new partnership to provide customers with more choices. President of Collaborative Apps and Platforms at Microsoft, Jeff Teper, said, “By welcoming Cisco as our newest partner building devices Certified for Microsoft Teams, we are excited to bring leading collaboration hardware and software to market together for our joint customers.”

For the fiscal quarter ended September 30, 2022, MSFT’s total revenues increased 10.6% year-over-year to $50.12 billion. The company’s operating income increased 6.3% from the prior-year period to $21.52 billion. In addition, its gross margin increased 9.5% year-over-year to $34.67 billion.

MSFT’s revenue for the quarter ending December 31, 2022, is expected to increase 3.1% year-over-year to $53.33 billion. The company has an impressive earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters. Over the past six months, the stock has fallen 18.6% to close the last trading session at $235.87.

MSFT’s POWR Ratings reflect solid prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

Within the Software – Business industry, it is ranked #10 out of 52 stocks. The company has a B grade for Stability and Quality.

Click here to see the additional POWR Ratings of MSFT for Growth, Value, Momentum, and Sentiment.

Gartner, Inc. (IT)

IT operates as a worldwide research and advisory company. It operates through three segments: Research, Conferences, and Consulting. The Research segment delivers its research primarily through a subscription service, the Conferences segment caters to business professionals in an organization, and the Consulting segment offers market research, custom analysis, and on-the-ground support services.

For the fiscal second quarter ended June 30, 2022, IT’s revenues increased 18% year-over-year to $1.38 billion. Its operating income increased 8.2% year-over-year to $297.1 million. The company’s non-GAAP adjusted EBITDA increased 9.6% year-over-year to $389 million. Additionally, its non-GAAP adjusted EPS came in at $2.85, representing a 27.2% increase from the prior-year quarter.

Analysts expect IT’s revenue for the quarter ended September 30, 2022, to increase 12.1% year-over-year to $1.30 billion. The company has a commendable earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. Over the past month, the stock has gained 9.2% to close the last trading session at $302.01.

IT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. It is ranked #4 of 10 stocks in the A-rated Outsourcing – Tech Services industry. It has an A grade for Quality.

We have also given IT grades for Growth, Value, Momentum, Stability, and Sentiment. Get all IT ratings here.

Jabil Inc. (JBL)

JBL provides manufacturing services and solutions worldwide. It operates in two segments, Electronics Manufacturing Services, and Diversified Manufacturing Services. The company serves 5G, wireless, cloud, digital print and retail, industrial, and semi-cap industries.

On July 12, 2022, IdentifySensors Biologics, a pathogen-detection platform technology company, partnered with JBL to develop processes for manufacturing portable devices that rapidly detect a wide range of infections with accuracy.

CEO and co-founder of IdentifySensors, Gregory Hummer, believes it is a great partnership and that JBL has the experience and bandwidth to ensure it is manufactured efficiently and effectively with the highest quality controls.

JBL’s net revenue for the fiscal fourth quarter ended August 31, 2022, increased 21.9% year-over-year to $9.03 billion. The company’s non-GAAP operating income increased 42.4% from the year-ago period to $447 million, while the net income attributable to JBL increased 80% year-over-year to $315 million. In addition, its non-GAAP EPS came in at $2.34, representing a 62.5% increase from the prior-year quarter.

JBL’s EPS and revenue for the quarter ending November 30, 2022, are expected to increase 16.9% and 9% year-over-year to $2.24 and $9.33 billion, respectively. It has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. Over the past month, the stock has gained 10.8% to close the last trading session at $65.35.

JBL’s solid prospects are reflected in its POWR Ratings. The company has an overall rating of A, which equates to a Strong Buy. In the Technology – Services industry, it is ranked #2 out of 76 stocks. In addition, it has a B grade for Value, Momentum, and Quality.

To see the other ratings of JBL for Growth, Stability, and Sentiment, click here.

MSFT shares fell $2.87 (-1.22%) in premarket trading Monday. Year-to-date, MSFT has declined -29.98%, versus a -17.53% rise in the benchmark S&P 500 index during the same period.

About the Author: Dipanjan Banchur

Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.

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https://www.entrepreneur.com/article/438194

2 Cybersecurity Stocks to Own for the Long-Term

One strategy to take advantage of bear markets is to use the lower prices as an opportunity to buy stocks in sectors with improving prospects. Cybersecurity is an example as the industry continues to grow despite adverse economic conditions. Checkpoint (CHKP) and Fortinet (FTNT) are 2 of the top stocks in the sector.

Despite the stock market’s more than 10% rally over the last 2 weeks, it’s still far from certain that a new bull market has begun. So far, there has been some but not too much damage from the Fed’s rate hikes on employment and corporate earnings.

However, inflation has also remained stubbornly high which means these elevated rates will remain at least for the next 3-6 months. At this point, it’s likely that earnings will start to feel impacted and the unemployment rate should tick higher which would commence the next stage of the bear market.

Amid these challenging circumstances, investors should focus on companies and sectors whose prospects are going to improve regardless of economic conditions. One example is cybersecurity as the increased digitalization of the world only increases the urgency and importance of the sector.

In fact, these companies continue to deliver earnings growth while their total addressable market (TAM) continues to expand at a healthy clip. It’s a necessity for every company to secure its cloud infrastructure and IT stack which are increasingly integral to daily operations. It’s also an area of national security importance as cyberspace is another frontier on which countries battle. Given the bear market in stocks and improving prospects for cybersecurity stocks, investors should consider buying these 2 stocks:

Checkpoint (CHKP)

CHKP is a security as service provider, targeting large and mid-sized organizations to defend, archive, and organize their sensitive data. It offers protection against threats, email security, cloud security, threat detection, and solutions to enable secure communication.

The need for IT and email security is only going to expand in the coming years, and CHKP is one of the leading firms in this category. Email security is one of the largest markets with an estimated billion users while remaining relatively untapped. However, this is also one of the biggest points of vulnerability.

CHKP is attractive from a growth and value perspective. Next year, the company is forecast to increase earnings by 31% which is quite impressive in a market where growth opportunities are scarce. Additionally, the stock is quite cheap with a forward P/E of 16.3 which is close to the market average despite higher growth and very attractive 35.1% profit margins.

CHKP has an overall rating of B according to the POWR Ratings. The stock also has an A rating for Quality which is consistent with the bulk of Wall Street analysts having a Buy rating on the stock.

Given the selloff in tech and cybersecurity stocks, CHKP’s status as one of the highest-quality cybersecurity companies makes it a good fit for the portfolio as it will be able to continue growing amid a tough environment. It also has no financial risk given its low debt and substantial cash holdings. Click here to see more of CHKP’s POWR Ratings.

Fortinet (FTNT)

FTNT is a provider of cybersecurity and networking solutions and services. Its customers include enterprises, communication service providers, government organizations, and small businesses.

It’s a leading provider of firewall services and VPN services. Its premier product is FortiOS, which is a network operating system to manage network security appliances. Its cloud security offerings are available for deployment in public and private cloud environments and include application security.

Like QLYS, FTNT has been an outperformer relative to the sector and broader tech industry. While most tech stocks have been mired in a brutal bear market, FTNT has consolidated in a tight range, indicating that institutions are using adverse market conditions to accumulate shares.

Next year, FTNT’s earnings per share are expected to increase from $0.81 per share to $1.31 per share which is nearly a 60% increase in earnings. Given these strong fundamentals and trajectory, it’s not surprising that FTNT is rated a B by the POWR Ratings which translates to a Buy. B-rated stocks have posted an average annual performance of 21.1% which compares favorably to the S&P 500’s average annual growth of 8.0%. Click here to see more of FTNT’s POWR Ratings.

9 “MUST OWN” Growth Stocks

What makes them “MUST OWN“?

All 9 picks have strong fundamentals and are experiencing tremendous momentum. They also contain a winning blend of growth and value attributes that generates a catalyst for serious outperformance.

Even more important, each recently earned a Buy rating from our coveted POWR Ratings system where the A rated stocks have gained +31.10% a year.

Click below now to see these top performing stocks with exciting growth prospects:

9 “MUST OWN” Growth Stocks

CHKP shares closed at $127.83 on Friday, up $0.54 (+0.42%). Year-to-date, CHKP has gained 9.67%, versus a -17.15% rise in the benchmark S&P 500 index during the same period.

About the Author: Jaimini Desai

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