The market is correcting itself, and it’s time for traders to shift strategies and seek out stocks that have managed to perform well on a volatile stage, have real growth prospects, reduced vulnerability to what’s coming out of Washington and aren’t already overvalued. It’s not the overall tech sector, and it’s definitely not the $1,000 stock.
This isn’t the same stock market we entered in the third quarter of last year, and all those stocks everyone thought were unstoppable … have been halted in their overvalued joy ride.
The new stock market world in which we live is about correction. It’s about getting back to reality. It’s about balancing an unfair global trade equation, hopefully without starting a war.
What’s it’s not about is huge companies having their cake and eating it, too. It’s a reckoning, and these 5 stocks could weather the big correction, while their growth prospects and management suggest they will survive whatever comes out of Washington next.
#1 United Health Group Incorporated (NYSE:UNH)
Over the past year, UNH has gained over 36 percent, and a recent $2.8-billion acquisition of a Chilean health insurance company, Banmedica, hasn’t hurt, either. It’s doing great state-side and has major growth prospects internationally.
One of the largest insurance companies in the U.S., UNH is the most expensive stock on our list, but revenues have been growing by over 9.5 percent on a quarterly year/year basis, and earnings are expected to continue to grow, with analysts forecasting earnings of $2.91 on a per share basis for Q1 2018.
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#2 CenterPoint Energy, Inc. (NYSE:CNP)
Defensive stocks like utilities tend to hold their value when the overall stock market sinks, and this U.S. public utility holding company in the U.S. has a dividend yield of 4.2 percent and it’s expected to return over 13 percent his year, outperforming the overall industry’s estimated return of 4.2 percent.
The 11.8-billion market cap company has a focus heavily on gas utilities, and revenues have been growing by nearly 27 percent quarterly (year-on-year basis). It’s levered free cash flow of $292 million over the past year helps. We’re looking at expectations of a $0.43-percent earnings growth for Q1 2018. Related: China Returns Fire In Escalating Trade War
Whatever minor corrections were in store for CenterPoint have already happened.
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#3 Manpower Group Inc. (NYSE:MAN)
The leading company in innovative workforce solutions has a strong fourth quarter and has beat estimates three times in a row. It’s a great value stock for investors looking to play it safer. Earnings are expected on April 19, and analysts at Argus have raised their target price to $138 (from $120.23). It’s corrected quite a bit since then, but the upside potential is strong and its February earnings report for Q4 2017 was upbeat.
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#4 Hormel Foods Corporation (NYSE:HRL)
You might not think that Spam is one of the best investments you could make in your lifetime, or that this most iconic of horrible processed meat products is the answer to an increasingly bearish market, but when it comes to dividends, this company is pure royalty.
It’s been raising dividends for more than half a century and it knows how to deal with boom and bust like no one else does. Almost 130 years in business does that for a company, and Trump’s tax reform was a huge benefit to HRL, boosting its cash flow by $140 million. Right now, the dividend yield is 2.2 percent and no one should be worried about that dropping.
There’s been a slow-down in growth, but an uptick in profitability, but the latter is poised to improve with forays into new sectors, including health foods and Latin foods. (HRL owns Muscle Milk, for instance).
Related: How The Federal Reserve Drives The Economy
The company is not, however, immune to a trade war with China, which could hit out at Hormel’s meat exports. But if anyone can survive and adapt, it’s Hormel. Sometimes, the best bet in troubled stock market times is purely on management.
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#5 Kraft Heinz / Kraft Foods (NASDAQ:KHC / NYSE:KHC)
This defensive stock may seem contrarian because it’s also taken a beating, but that means it’s a great price for a market turned bearish. The first quarter of this year saw KHC dive 22 percent, but the $75-billion market cap company is a household name with a 4-percent (or higher) dividend yield.
Warren Buffett’s Berkshire Hathaway owns a major stake. This tells us that despite the debt load, KHC should be at the top of everyone’s defensive stock list. It’s not overvalued, and it’s cheap.
Both Buffett and another major stakeholder in KHC—3G—are working hard to deal with the company’s debt, and we would expect to see some movement on that front.
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Could it be affected by a global trade war? Yes—at least in terms of growth prospects. Some 70 percent of its sales are in the U.S., but some will be eyeing the potential for emerging-market growth that may be hindered if the trade war escalates.
By David Craggen for Safehaven.com
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