Although the benchmark equities index got off to a solid start this year, 2023 presents distinct challenges that warrant investors staying the course with reliable stocks to buy. Fundamentally, all eyes center on the Federal Reserve. For instance, with the Consumer Price Index (CPI) popping up slightly higher than expected, the central bank faces a stubborn inflation rate.
Unfortunately for the Fed, that’s not the only issue that could hurt sentiment. With China reopening, the overall impact should be positive for the long haul. However, a sudden rise in commercial activity means greater resource consumption. And that means more dollars will chase after fewer goods. Therefore, investors must consider reliable stocks to buy as a protective mechanism. Plus, we just don’t know what to make of geopolitical tensions and flashpoints. With so many challenges to consider, investors should target these stocks to buy.
|AEP||American Electric Power||$92.41|
Stocks to Buy: Kellogg (K)
While no one will mistake breakfast food king Kellogg (NYSE:K) for an exciting investment, it easily ranks among the reliable stocks to buy. Primarily, the company offers a healthy dividend. At the time of writing, its forward yield stands at 3.45%, above the consumer staple sector’s average yield of 1.89%. Also, it commands 18 years of consecutive dividend increases, a status it won’t give up cheaply.
Financially, the company does reasonably well for itself. On the balance sheet, its stats neither rank spectacularly nor terribly – just somewhere in the middle. Operationally, its three-year revenue growth rate pings at 4%, which sits near the industry median value. However, its net margin is 6.27%, ranking above 68% of sector peers.
Fundamentally, the company’s products will never go out of style. As well, its moving into the food industry’s innovative space, specifically plant-based meat. With Kellogg’s massive scale, it’s the one credible player in fake meat. To be fair, Wall Street analysts peg K stock as a consensus hold. However, their average price target is $71.80, implying 5% upside potential.
Stocks to Buy: Costco (COST)
Ordinarily, Costco (NASDAQ:COST) is an ideal example of stocks to buy during inflationary cycles. Of course, that’s because Costco’s business model incentivizes and encourages bulk purchases. By acquiring goods on large scale now, you can cushion the blow of inflation spiking their prices higher later. But will the same concept apply in reverse under deflationary conditions?
Whether we’re talking about relative deflation or absolute deflation, Costco would still be relevant. Fundamentally, deflation represents lower demand; therefore, retailers lower prices to attract the dwindling number of customers. However, this lower demand also implies a not-insignificant cut to the broader workforce.
Here’s the reality check that makes COST one of the stocks to buy, however. Generally speaking, Costco members make more money than shoppers at other big-box retailers. Put another way, when you own COST, you’re buying into a very resilient consumer base. Also, Wall Street analysts apparently feel the same way, pegging COST as a consensus moderate buy. Their average price target stands at $558.17, implying 10% upside potential.
Stocks to Buy: IBM (IBM)
When you’re researching stocks to buy for what amounts to an economic slowdown, your portfolio doesn’t need to resemble the wish list of a doomsday prepper. A case in point is legacy technology stalwart IBM (NYSE:IBM). While not a particularly exciting name in the innovation space, Big Blue began sharply focusing on relevant industries such as hybrid cloud. As a result, it’s incredibly relevant and reliable.
For instance, while other tech firms struggled for any sign of positive traction, IBM kept its head above water. In the trailing year, IBM stock gained nearly 9%, a far cry from many other tech players. Also, it features an extremely attractive forward yield of 4.89%. This metric ranks well above the tech sector’s average yield of 1.37%. Also, it commands 29 years of consecutive annual dividend increases.
Financially, the market prices IBM at a forward multiple of 14.13. As a discount to earnings, Big Blue ranks better than 80% of players in the software industry. Also, IBM trades at 14.52 times free cash flow (FCF). As a discount to FCF, the company ranks higher than 70.34% of its rivals. Although IBM carries a hold assessment, Wall Street analysts believe shares will hit $143.56. This implies upside potential of over 6%.
Should the Fed impose aggressively hawkish monetary policies to get inflation truly under control, investors should target Deere (NYSE:DE). A specialist in agricultural equipment, Deere represents an extraordinarily relevant enterprise. No matter how advanced we become as a society, we’ll always need to eat. Therefore, Deere’s tie-in with the broader food value chain should make it one of the best stocks to buy.
However, Deere also represents an old dog learning new tricks. At last year’s CES, Deere introduced a fully autonomous tractor. Aside from the incredible advancements in artificial intelligence and machine learning necessary to make this remarkable equipment work, Deere also facilitates another solution: not many people want to be farmers. Therefore, Deere took a disruptive tech and made it socially accretive – a genius move if you ask me.
To be fair, DE doesn’t rank highly in the yield department at only 1.11%. That’s conspicuously below the industrial sector’s average yield of 2.36%. However, Wall Street analysts peg DE as a consensus moderate buy. Also, their average price target stands at $481.41, implying over 11% upside potential.
An agribusiness and food company, Bunge (NYSE:BG) garnered a reputation for its international soybean export business. Further, its public profile states that the enterprise specializes in food processing, grain trading, and fertilizer. Because it’s directly involved in the food value chain, Bunge carries natural relevancies as one of the stocks to buy.
However, as the Fed attempts to control inflation, the subsequent deflationary forces should make no outrageously bad impact on Bunge. Let’s face it – on a fundamental level, the company benefits from inelastic demand. Essentially, humans need a minimum amount of calories to survive. Thus, BG makes plenty of sense as one of the stocks to buy. Objectively, the market prices BG at a forward multiple of 8.21. As a discount to earnings, Bunge ranks better than 85.84% of the competition. In addition, BG trades at 0.22 times (trailing) sales. As a discount to revenue, the food company ranks better than 89% of its rivals.
Finally, Wall Street analysts peg BG as a consensus strong buy. Moreover, their average price target stands at $123, implying 26% upside potential.
American Electric Power (AEP)
If you anticipate that the Fed will throw the kitchen sink at inflation, then American Electric Power (NASDAQ:AEP) is a top candidate for stocks to buy. Of course, as an electric utility firm, AEP commands extraordinary relevance. Basically, bad things happen when people flip the switch and no light materializes. Further, utilities benefit from a natural monopoly. Basically, an extremely high barrier to entry prevents competition.
You can see how AEP’s pertinence played out in the charts. While many other publicly traded companies suffered sharp valuation erosions in 2022, AEP held its own. In the trailing year, the stock managed to gain nearly 8% of equity value.
As well, the company provides a solid form of passive income via a forward yield of 3.59%. Its payout ratio of 58.84% isn’t low but it’s quite manageable. Plus, with 13 years of consecutive dividend increases, management won’t want to give up on this track record. Finally, covering analysts peg AEP as a consensus moderate buy. Further, their average price target stands at $103.44, implying 12% upside potential.
Exxon Mobil (XOM)
Back in 2022, geopolitical flashpoints contributed to the hydrocarbon energy sector blossoming, albeit for truly cynical reasons. While I don’t like what’s going on in the world these days, as investors, we must deal with realities. And one reality is that Exxon Mobil (NYSE:XOM) ranks among the stocks to buy. With economic and geopolitical forces likely to drive up demand (and reduce supply), XOM may be a no-brainer.
Financially, it’s going to be difficult to ignore XOM, even if you support green initiatives over fossil fuels. For one thing, according to Gurufocus.com’s discounted cash flow analysis, XOM ranks as an undervalued – if not significantly undervalued – investment. The investment resource calculates the fair value at $165.55. Presently, XOM trades at $111.28.
Moreover, the company enjoys strong operational statistics. Its three-year revenue growth rate stands at 16.6%, outpacing 81.54% of its peers. As well, the net margin posted up at 13.98%, beating out 66% of the industry. Turning to Wall Street, analysts peg XOM as a consensus moderate buy. Further, their average price target stands at $125.47, implying nearly 13% upside potential.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.