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5 Safe Stocks to Buy as Severe Volatility Grips Wall Street
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April is generally known as favorable to equity investors. However, this year it is turning out to be different. Month to date, the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — have tumbled 4.6%, 2.5% and 1.2%, respectively.
For the week ended Apr 12, the Dow plunged 2.4%, marking its worst week since March 2023. The S&P 500 tumbled 1.6%, reflecting its worst week since January 2024. The tech-heavy Nasdaq Composite fell 0.5% during this time.
Sticky Inflation Delays Rate Cut Expectations
On Apr 10, the Department of Labor reported that the consumer price index (CPI) for March rose 0.4% sequentially and 3.5% year over year. Core CPI (excluding volatile food and energy items) for March rose 0.4% sequentially and 3.8% year over year.
The U.S. inflation rate remains stubborn despite a restrictive monetary policy and an extremely high interest rate regime in the last 24 months. Fed officials are concerned that even after declining to a great extent from its peak in June 2022, the inflation rate is yet to show any convincing evidence that it is moving gradually to the targeted level of 2%.
The sticky inflation rate pushed investors’ expectations to June. Following the release of the March CPI data, the CME FedWatch shows just a 17% chance in a rate cut in June. The majority of the respondents are now expecting the first reduction of the benchmark lending rate to happen in September. What is more important is that 9% of respondents are expecting no rate cut in 2024.
Bleak Outlook by Major Banks
On Apr 12, JPMorgan Chase & Co. (JPM), Wells Fargo & Co. (WFC) and Citigroup Inc. (C) reported that their net interest income declined 4%, 4% and 2%, respectively, quarter over quarter in first-quarter 2024. Net interest income is a critical metric for most of the banks, since it measures the difference between what banks earn on their assets and pay out on their deposits.
Moreover, these banking behemoths have warned that this trend is likely to continue in the near term as persistent inflationary pressures and escalation of geopolitical conflicts in the Middle-East are likely to take a toll on their global businesses.
Geopolitical Conflicts and Crude Oil Prices
The Wall Street Journal reported that Israel is preparing for a direct attack by Iran on southern or northern Israel anytime soon. Earlier, Iran threatened to take revenge on Israel for the Apr 1 airstrike on its embassy in Damascus. This is the biggest escalation in the Middle East conflicts since the Israel-Hamas war started last October.
Following the news, crude oil prices spiked. The U.S. benchmark West Texas Intermediate contract for May delivery touched $87.67 per barrel before settling at $85.66 per barrel, gaining 0.8%. Similarly, the global benchmark Brent’s contract for June delivery touched $92.18 per barrel before settling at $90.45, gaining 0.8%.
nvestors are concerned that higher crude oil prices will result in higher inflation. Higher oil prices will directly affect the transportation sector, which in turn will raise the general price level. This will make the task of the Fed more difficult for a soft landing of the U.S. economy.
Our Top Picks
We have narrowed our search to five stocks from defensive sectors like consumer staples, health care and utilities to safeguard one’s portfolio. These stocks have strong potential for 2024 and have seen positive earnings estimate revisions in the last 60 days. Each of our picks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The chart below shows the price performance of our five picks in the past three months.
Image Source: Zacks Investment Research
American Water Works Co. Inc. (AWK - Free Report) is gaining from contributions from acquired assets and military contracts. Investments in infrastructure will assist AWK in serving its expanding customer base efficiently. Water and wastewater rate hikes are also boosting AWK’s performance.
AWK continues to expand operations through organic and inorganic initiatives. AWK has ample liquidity to meet its obligations. Cost management is boosting margins. We expect an increase in revenues during 2024-2026.
American Water Works has an expected revenue and earnings growth rate of 0.8% and 6.5%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the last 30 days.
Atmos Energy Corp. (ATO - Free Report) continues to benefit from rising demand, courtesy of an expanding customer base. ATO’s long-term investment plan will further help increase the safety and reliability of its natural gas pipelines.
ATO gains from industrial customer additions and constructive rate outcomes. Returns within a year of capital investment will further boost the company’s performance. ATO has enough liquidity to meet debt obligations.
Atmos Energy has an expected revenue and earnings growth rate of 16.3% and 8%, respectively, for the current year (ending September 2024). The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 60 days.
Celsius Holdings Inc. (CELH - Free Report) specializes in commercializing healthier, nutritional functional foods, beverages and dietary supplements. CELH markets Celsius, the calorie burner, through its wholly-owned operating subsidiary and sells its products through grocery, drug, convenience, club and mass, and health and fitness channels.
Celsius Holdings has an expected revenue and earnings growth rate of 41.6% and 41.6%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 14.7% over the last 60 days.
Molson Coors Beverage Co. (TAP - Free Report) has been benefiting from brand strength and strong performances across its portfolio and geographical segments. Also, TAP’s revitalization plan and the premiumization of the global portfolio bode well.
For 2024, net sales of TAP are projected to grow in the low single digits year over year on a constant-currency basis, while underlying earnings per share are likely to rise in the mid-single digits. The underlying EBT of TAP is likely to grow in mid-single digits year over year.
Molson Coors Beverage has an expected revenue and earnings growth rate of 1.4% and 4.2%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3.1% over the last 60 days.
HCA Healthcare Inc.’s (HCA - Free Report) revenues increase on the back of a surge in admissions and outpatient surgeries. HCA expects equivalent admissions to grow in the range of 3-4% in 2024. Significant growth in its Managed Medicare operations is expected to drive its performance.
Multiple buyouts aided in increasing patient volumes, enabled network expansion and added hospitals to the portfolio. EPS is predicted within $19.7-$21.2 in 2024, higher than the 2023 figure. The company has been gaining from its telemedicine business line. HCA resorts to prudent capital deployment via share buybacks and dividend payments.
HCA Healthcare has an expected revenue and earnings growth rate of 6.2% and 7.8%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last seven days.
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5 Safe Stocks to Buy as Severe Volatility Grips Wall Street
April is generally known as favorable to equity investors. However, this year it is turning out to be different. Month to date, the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — have tumbled 4.6%, 2.5% and 1.2%, respectively.
For the week ended Apr 12, the Dow plunged 2.4%, marking its worst week since March 2023. The S&P 500 tumbled 1.6%, reflecting its worst week since January 2024. The tech-heavy Nasdaq Composite fell 0.5% during this time.
Sticky Inflation Delays Rate Cut Expectations
On Apr 10, the Department of Labor reported that the consumer price index (CPI) for March rose 0.4% sequentially and 3.5% year over year. Core CPI (excluding volatile food and energy items) for March rose 0.4% sequentially and 3.8% year over year.
The U.S. inflation rate remains stubborn despite a restrictive monetary policy and an extremely high interest rate regime in the last 24 months. Fed officials are concerned that even after declining to a great extent from its peak in June 2022, the inflation rate is yet to show any convincing evidence that it is moving gradually to the targeted level of 2%.
The sticky inflation rate pushed investors’ expectations to June. Following the release of the March CPI data, the CME FedWatch shows just a 17% chance in a rate cut in June. The majority of the respondents are now expecting the first reduction of the benchmark lending rate to happen in September. What is more important is that 9% of respondents are expecting no rate cut in 2024.
Bleak Outlook by Major Banks
On Apr 12, JPMorgan Chase & Co. (JPM), Wells Fargo & Co. (WFC) and Citigroup Inc. (C) reported that their net interest income declined 4%, 4% and 2%, respectively, quarter over quarter in first-quarter 2024. Net interest income is a critical metric for most of the banks, since it measures the difference between what banks earn on their assets and pay out on their deposits.
Moreover, these banking behemoths have warned that this trend is likely to continue in the near term as persistent inflationary pressures and escalation of geopolitical conflicts in the Middle-East are likely to take a toll on their global businesses.
Geopolitical Conflicts and Crude Oil Prices
The Wall Street Journal reported that Israel is preparing for a direct attack by Iran on southern or northern Israel anytime soon. Earlier, Iran threatened to take revenge on Israel for the Apr 1 airstrike on its embassy in Damascus. This is the biggest escalation in the Middle East conflicts since the Israel-Hamas war started last October.
Following the news, crude oil prices spiked. The U.S. benchmark West Texas Intermediate contract for May delivery touched $87.67 per barrel before settling at $85.66 per barrel, gaining 0.8%. Similarly, the global benchmark Brent’s contract for June delivery touched $92.18 per barrel before settling at $90.45, gaining 0.8%.
nvestors are concerned that higher crude oil prices will result in higher inflation. Higher oil prices will directly affect the transportation sector, which in turn will raise the general price level. This will make the task of the Fed more difficult for a soft landing of the U.S. economy.
Our Top Picks
We have narrowed our search to five stocks from defensive sectors like consumer staples, health care and utilities to safeguard one’s portfolio. These stocks have strong potential for 2024 and have seen positive earnings estimate revisions in the last 60 days. Each of our picks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The chart below shows the price performance of our five picks in the past three months.
Image Source: Zacks Investment Research
American Water Works Co. Inc. (AWK - Free Report) is gaining from contributions from acquired assets and military contracts. Investments in infrastructure will assist AWK in serving its expanding customer base efficiently. Water and wastewater rate hikes are also boosting AWK’s performance.
AWK continues to expand operations through organic and inorganic initiatives. AWK has ample liquidity to meet its obligations. Cost management is boosting margins. We expect an increase in revenues during 2024-2026.
American Water Works has an expected revenue and earnings growth rate of 0.8% and 6.5%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the last 30 days.
Atmos Energy Corp. (ATO - Free Report) continues to benefit from rising demand, courtesy of an expanding customer base. ATO’s long-term investment plan will further help increase the safety and reliability of its natural gas pipelines.
ATO gains from industrial customer additions and constructive rate outcomes. Returns within a year of capital investment will further boost the company’s performance. ATO has enough liquidity to meet debt obligations.
Atmos Energy has an expected revenue and earnings growth rate of 16.3% and 8%, respectively, for the current year (ending September 2024). The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 60 days.
Celsius Holdings Inc. (CELH - Free Report) specializes in commercializing healthier, nutritional functional foods, beverages and dietary supplements. CELH markets Celsius, the calorie burner, through its wholly-owned operating subsidiary and sells its products through grocery, drug, convenience, club and mass, and health and fitness channels.
Celsius Holdings has an expected revenue and earnings growth rate of 41.6% and 41.6%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 14.7% over the last 60 days.
Molson Coors Beverage Co. (TAP - Free Report) has been benefiting from brand strength and strong performances across its portfolio and geographical segments. Also, TAP’s revitalization plan and the premiumization of the global portfolio bode well.
For 2024, net sales of TAP are projected to grow in the low single digits year over year on a constant-currency basis, while underlying earnings per share are likely to rise in the mid-single digits. The underlying EBT of TAP is likely to grow in mid-single digits year over year.
Molson Coors Beverage has an expected revenue and earnings growth rate of 1.4% and 4.2%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3.1% over the last 60 days.
HCA Healthcare Inc.’s (HCA - Free Report) revenues increase on the back of a surge in admissions and outpatient surgeries. HCA expects equivalent admissions to grow in the range of 3-4% in 2024. Significant growth in its Managed Medicare operations is expected to drive its performance.
Multiple buyouts aided in increasing patient volumes, enabled network expansion and added hospitals to the portfolio. EPS is predicted within $19.7-$21.2 in 2024, higher than the 2023 figure. The company has been gaining from its telemedicine business line. HCA resorts to prudent capital deployment via share buybacks and dividend payments.
HCA Healthcare has an expected revenue and earnings growth rate of 6.2% and 7.8%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last seven days.