The U.S. equity market has been highly volatile this year due to uncertainties associated with the coronavirus pandemic, geopolitical tensions and supply-chain challenges. These factors have been taking a toll on various sectors, including technology, retail, automotive and industrial, in the form of rising inflationary pressure, resulting in a massive decline in the major U.S. indexes.
This is evident from year-to-date declines of 7.5%, 17.5% and 29.9% in the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite, respectively. To counter inflation woes, the Federal Reserve hiked interest rates four times this year by 0.75 basis points on each occasion. The Fed has further vowed to hike interest rates to drag down inflation to its target of 2% at best by 2025. This has turned the market jittery. Moreover, the Fed might take a more aggressive step in hiking the interest rates to curtail inflation further. This, in turn, might aggravate the fears of economic recession. Nevertheless, the situation is likely to improve in the near term, which is evident from Fed Chair Jerome Powell’s recent short-term message stating that the Fed is about to slow down the pace of interest rate hikes in the upcoming meeting. It is expected that Fed would spike the interest rates by 50 basis points this time instead of 75 basis points. Against this backdrop, we advise investors looking for good investment opportunities to park their money in high fliers with strong growth potential, such as high-quality stocks. We recommend four high-quality stocks, namely Fortinet ( FTNT Quick Quote FTNT - Free Report) , Airbnb ( ABNB Quick Quote ABNB - Free Report) , Agilent Technologies ( A Quick Quote A - Free Report) and The Kroger ( KR Quick Quote KR - Free Report) . Why Invest in These Stocks?
Amid market volatility, it is prudent to pick the above stocks, as these are highly reputed, fundamentally strong and financially resilient. These factors instill the potential in the stocks to defy recessionary woes.
Apart from having solid fundamentals, the aforementioned stocks have a favorable combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or #2 (Buy), with a market capitalization greater than $10 billion. Per Zacks’ proprietary methodology, stocks with such a favorable combination offer solid investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here. Fortinet has been benefiting from the rising demand for security and networking products amid the growing hybrid working trend. It has also been gaining from robust growth in Fortinet Security Fabric, cloud and Software-defined Wide Area Network offerings. Increasing IT spending on cybersecurity is expected to help Fortinet grow faster than the security market. Its focus on enhancing the unified threat management portfolio through product development and acquisitions remains another tailwind. Strong deal wins remain the company’s key growth drivers. FTNT currently has a Zacks Rank #2 and a Growth Score of A. It has a market capitalization of $39.73 billion. The Zacks Consensus Estimate for Fortinet’s 2023 earnings has improved 7% to $1.38 per share in the past 60 days. The long-term earnings growth rate for the stock is pegged at 18%. The stock has a trailing four-quarter earnings surprise of 14.5%, on average.
Airbnb is gaining from strengthening travel demand across the world. The company is witnessing solid growth in average daily rates and gross booking value. Growing momentum across North America, EMEA and Latin America remains a tailwind. Its rising Nights & Experiences booked and gross nights booked in high-density urban areas remain a major positive.
Airbnb’s strong relationships with hosts of several properties worldwide are likely to continue aiding its presence in the booming online travel booking space. Further, its growing presence in the hotel accommodation space is expected to drive its momentum among travelers or guests.
ABNB currently has a Zacks Rank #2 and a Growth Score of A. It has a market capitalization of $59.82 billion. The Zacks Consensus Estimate for Airbnb’s 2023 earnings has improved 10.8% to $2.98 per share in the past 60 days. The long-term earnings growth rate for the stock is pegged at 20.7%. The stock has a trailing four-quarter earnings surprise of 52.8%, on average.
Agilent Technologies is riding on the growing momentum in the pharma and applied markets. Further, it benefits from strength across Liquid Chromatography and Mass Spectrometry instruments. Additionally, the company’s expanding genomic portfolio remains a major positive.
Agilent’s growing strategic partnerships in a bid to provide advanced technological solutions to its customers are likely to continue driving its financial performance in the days ahead. Its partnership with Amazon Web Services and NVIDIA to improve its processing speeds for variant calling workflows remains noteworthy. Also, Agilent’s collaboration with Advanced Mammalian Biomanufacturing Innovation Center to bring innovative measurement tools for bioprocess development and biomolecular, cell and gene-based therapeutics manufacturing applications, is another positive.
Agilent currently has a Zacks Rank #2 and a Growth Score of B. It has a market capitalization of $44.81 billion. The Zacks Consensus Estimate for A’s fiscal 2023 earnings has increased 2.7% to $5.62 per share over the past 60 days. The long-term earnings growth rate for the stock is pegged at 10%. The stock has a trailing four-quarter earnings surprise of 6.7%, on average.
Kroger is benefiting from its strengthening digital business. Its solid Delivery Now initiative, Boost membership program and robust network of customer fulfillment centers remains major positives. Further, the company continues to gain traction with its “Restock Kroger” program which involves investments in the omni-channel platform, identifying margin-rich alternative profit streams, merchandise optimization, and lowering of expenses. This is another positive.
Kroger’s growing investments to enhance product freshness and quality as well as expand digital capabilities are likely to aid it in sustaining strong momentum in the retail world. Further, its deepening focus on expanding its Our Brands portfolio is likely to continue driving its customer momentum in the days ahead.
Kroger currently has a Zacks Rank #2 and a Growth Score of B. It has a market capitalization of $33.16 billion. The Zacks Consensus Estimate for KR’s fiscal 2024 earnings has improved 0.2% to $4.20 per share over the past 60 days. The long-term earnings growth rate for the stock is pegged at 6.1%. The stock has a trailing four-quarter earnings surprise of 13.4%, on average.