3 Stocks to Buy if You Think a Recession is Imminent

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Wall Street is increasingly concerned about a recession. And with very high inflation, the Fed is no longer an ally for investors. For investors who believe a recession is likely, here are 3 stocks to consider: Johnson & Johnson (JNJ), EZCORP (EZPW) and Dollar Tree (DLTR). .

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Wall Street is increasingly concerned about a recession. According to Goldman Sachs CEO David Solomonthere is “probably a 30% chance of a recession while you wait for the next 12 or 24 months.”

We are also beginning to see a slowdown in the housing market with new home sales fell 16.6%, worse than expected. The new ISM order index also weakened from 60 at the beginning of the year to 53.5 in April. There is also weakness in cyclical stocks, such as trucks, discretionary consumer products and large retailers, as investors are increasingly concerned about growth.

Even in a recession, investors can find top-performing pockets with the right strategies. For investors who believe a recession is likely, here are 3 stocks to consider: Johnson & Johnson (JNJ), EZCORP (EZPW)i Dollar Tree (DLTR).

Johnson & Johnson (JNJ)

JNJ is one of the world’s leading healthcare companies. It operates through 3 divisions: pharmaceutical, medical device and consumer product divisions with approximately 250 subsidiaries. This gives investors ample exposure to the healthcare sector and sufficient diversification to withstand problems in any unit. It also has one of the largest research and development budgets in the pharmaceutical industry and is aggressive with mergers and acquisitions.

This is also what makes stocks an ideal choice for more adverse economic conditions. Healthcare revenue is disconnected from economic growth, which means it is a safe haven for investors, while the rest of the market sees growing volatility. In addition, their massive balance sheet and dividend payments become more attractive in this scenario.

In terms of operations, JNJ continues to function well. This year, the stock is expected to earn $ 9.80 per share, which is expected to slowly increase to $ 10.24 and $ 10.93 per share over the next 2 years. Its valuation is also convincing with a term P / E of 16.7 and a dividend yield of 2.5%. The company also has nearly $ 35 billion in cash for acquisitions or repurchases.

In terms of POWR ratings, JNJ has an A rating, which translates into a strong buy. This is due to its steady track record of growth, successful drug development and solid balance sheet. In terms of component grades, JNJ stands out with a Stability A and a Quality B. Click here to see more of JNJ’s POWR scores.


EZPW owns and operates pawnshops in the United States and Latin America. It offers loans secured by possessions or properties and also sells second-hand merchandise. As of September 2021, the company had 516 stores in the US, 508 in Mexico and 124 in Guatemala, El Salvador and Honduras.

This is the kind of business that works well when consumers feel more financial pressure, which is certainly the case with rising inflation which is being exacerbated by a potential growth spurt for the economy. And, inflation is more detrimental to the type of consumer that constitutes EzPW’s customer base, as it focuses on food, energy, and rent that offsets earnings.

The company’s fortunes had an impact during the pandemic, but revenues are now above pre-pandemic levels. In addition, the company was able to use this period to cut costs and operating margins. Wall Street analysts predict that this will lead to 61% profit growth in 2022, while revenue is expected to increase by 16%.

Despite these growth expectations, equities are quite cheap with a forward P / E of 8.9, which is almost half of the S&P 500. With such strong growth and value profile, it is not surprising that EZPW has a B rating that translates into a purchase. . B-rated stocks posted an average annual return of 20.1%, which compares favorably with the S&P 500’s annual return of 8.0%. Click here to see more of EZPW’s POWR ratings.

Dollar Tree (DLTR)

DLTR is headquartered in Chesapeake, VA, and was founded over 60 years ago as a variety store in Norfolk, Virginia. The company currently operates about 15,500 stores in the United States and Canada with nearly 200,000 employees. In addition to Dollar Tree, he also owns Family Dollar, which he bought for $ 8.5 billion.

Dollar stores have experienced incredible growth over the past two decades, in part because of their low-cost, luxury-free offerings that attract budget-seeking, budget-conscious customers. As a result, DLTR continues to expand aggressively. Last year, it added 600 new stores and plans to add a similar number this year.

Macroeconomic factors have also been favorable, as middle-class retailers have struggled while those focusing on the high or low range have thrived. Of course, the recent combination of inflation, along with a potentially reversed economy, could lead to an increase in revenue for DLTR.

So it’s no surprise that analysts are forecasting a 38% EPS growth and a 6% revenue growth this year. Despite this growth potential and a favorable macro environment, stocks remain reasonably priced with a P / E forward of 15.0, which is cheaper than the S&P 500.

In terms of POWR ratings, DLTR has a B rating, which equates to a purchase. It is part of the qualification A Grocery / Big Box which is the second best group in the industry according to the POWR ratings. DLTR also has a B for Growth due to continued earnings growth expectations, unlike many companies that predict a drop in profits. Click here to view full DLTR POWR ratings.

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Shares of JNJ were trading at $ 179.54 per share on Tuesday afternoon, down $ 1.55 (-0.86%). So far this year, JNJ has gained 6.30%, compared to a -12.81% increase in the S&P 500 benchmark index over the same period.

About the author: Jaimini Desai

Jaimini Desai has been a writer and financial reporter for almost a decade. Its aim is to help readers identify risks and opportunities in the markets. He is the chief growth strategist for StockNews.com and the publisher of the POWR Growth and POWR Stocks Under $ 10 newsletters. Learn more about Jaimini’s background, along with links to his latest articles.


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