3 Stocks to Navigate a Looming Recession
Everywhere you look, someone seems to warn of an imminent recession. Such concerns are reasonable considering the war in Ukraine, Covid waves frequently spiking, and escalating trade tensions and sanctions with China.
An investor’s goal is to safeguard your portfolio in such bleak times, but volatile stock prices and shaky markets make it all the more difficult.
Most value investors take a position not when stocks are rampant; but rather when they are rolling downhill with market sentiment in the dumps.
So, that said, here are several promising stocks to help capitalize on the “looming recession.”
The first stock in our crosshairs is Kroger (KR), one of the largest grocery and retail companies in the United States, operating over 2,700 stores in 35 states.
The company has a solid market share, a strong asset utilization ratio, and a track record of growing dividends. A potential merger with Albertsons could further bolster the company’s market share and scale but has yet to be approved.
Kroger’s positive Return on Equity (ROE) of 23.47% is well above the industry average of 13.71%, and a current P/E ratio of 10.70 provides good value for investors when compared to the industry P/E ratio of 17.06. Moreover, the forward P/E ratio of 10.18 is also relatively low, providing further evidence of the stock’s value.
Kroger’s Earnings Per Share (EPS) grew by 15.64% last year and 11.77% over the past five years, indicating strong and consistent growth, and the company’s low Price/Earnings to Growth (PEG) ratio implies it is undervalued.
Kroger has been consolidating between the price range of $42 and $49 recently, with traders anticipating news regarding the Kroger-Albertson merger. If the merger is approved, this could trigger a breakout through the $49 barrier, potentially sending the price shooting to the upside. Until then, Kroger will likely remain within this range as traders adopt a wait-and-see approach.
This is a safe stock in a stable sector with a decent dividend yield, making it an attractive option in light of brewing economic turbulence.
A leading medical technology company focused on transforming the aesthetic and medical industry with advanced technologies, Inmode offers a comprehensive portfolio of services and products ranging from minimally-invasive medical treatments to aesthetic procedures.
InMode’s innovations and technology, combined with its strong financial position and excellent management team, make it an attractive long-term investment.
The company delivered remarkable performance, particularly with its impressive Return on Equity (ROE) of 34.72%, which is significantly higher than the industry average of 10.59%, giving it an edge over 93% of its competitors.
(INMD)’s Price/Earnings (P/E) ratio is much cheaper than the industry average of 25.90, making it more affordable than 81% of its peers; also, its Enterprise Value to EBITDA ratio is lower than the average of 19.16, representing even greater value than 81% of industry rivals.
Its Earnings Per Share (EPS) has grown by 22.13% in the last year, underscoring its remarkable success; further proving that (INMD) is a sound investment with a solid financial footing.
After nosediving by nearly 75%, (INMD) has found support around the $20 level. In recent sessions, the stock has been pushing higher, buoyed by an ascending trendline, but appears to remain stuck well below the $39 level.
Given that bulls face difficulty inching above the $39 level, traders should wait for a decisive break above the $39 resistance level before considering entering the market.
Applied Materials Inc. (AMAT)
Applied Materials, Inc. provides manufacturing equipment, services, and software to semiconductors, displays, and related tech industries. Applied Materials is headquartered in Santa Clara, California, and employs 33,000.
It operates through three segments: Semiconductor Systems, Applied Global Services, and Display and Adjacent Markets.
Applied Materials enjoys a strong positioning in the chip fab equipment space, which helped it beat expectations and post strong growth, despite a deluge of challenges in fiscal 2022.
It stands out with a 24.41% Return on Assets (ROA) and a 53.51% Return on Equity (ROE), both of which outperform the industry average; it also has a 25.31% Profit Margin, higher than the industry average.
The stock is relatively cheap, with a Price/Earnings Ratio of 16.08 and a low Price/Earnings to Growth (PEG) Ratio, suggesting it is undervalued.
The company also demonstrated strong growth of Earnings Per Share (EPS) in the last year, with an increase of 12.39% and an average growth of 18.86% measured over the past five years; this indicates that AMAT is a solid investment opportunity.
Applied Materials has been trading in a downward trajectory since the start of 2022, finding strong support around the $71 region before rising above the $108 level, completing a “Head and Shoulders” formation.
Wait for a retracement before taking a position to capitalize on the stock’s momentum and avoid an overly inflated price.
Yes, a recession might knock on the door soon, but investment opportunities are still present if you choose carefully.
Kroger, Inmode, and Applied Materials are some of the stocks that you should watch closely, with high potential to bag excellent returns in 2023 and beyond. As the world economy bounces back from economic hardship, these companies are positioned to grow, providing investors with solid investment returns.
Consider your own unique risk tolerance and investment goals before making any investment decisions. Perform your own research and make educated investment decisions based on how they relate to your personal situation. Consult a licensed financial or tax advisor should you need professional advice.
The author (Josh Dudick) currently has no positions in the stocks mentioned, but may purchase shares within the next weeks or months. This article should not be viewed as a solicitation to purchase shares in any security and is provided for informational purposes. Investors should consult a financial advisor or exercise their own due diligence before making any investment decision.
Josh is a financial expert with 15+ years on Wall Street as a senior market strategist and trader. Josh graduated from Cornell University with a business degree in Applied Economics and has held numerous U.S. and European securities and brokerage licenses including FINRA Series 3, 7, 24, & 55. In addition to running an investment and trading firm, Josh is the founder and CEO of Top Dollar, where he teaches others how to build 6-figure passive income with smart money strategies that he uses himself.