Historically, October has been a rough month for investors. Many of the market’s biggest negative events, such as 1987’s Black Friday, occurred in October. This year was no exception, as stocks sank throughout the month. Between inflation, rising interest rates and new geopolitical worries in the Middle East, there was a lot for investors to consider.
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With a potential recession on the horizon in 2024, this correction could last for quite a while. There is good news, though. The recent sell-off has pushed a bunch of high-quality blue-chip stocks down to their lowest stock prices and valuations in recent times. These are five of the best stocks to buy now that can thrive amid the current unsettled economic environment:
- Chevron Corp. (ticker: CVX)
- Johnson & Johnson (JNJ)
- Hormel Foods Corp. (HRL)
- BlackRock Inc. (BLK)
- PayPal Holdings Inc. (PYPL)
Chevron Corp. (CVX)
Chevron is a dominant multinational energy company. The firm has been riding high in recent years thanks to a surge in oil and gas prices. However, momentum has reversed course recently. Chevron shares plunged in October, hitting new 52-week lows. The company’s third-quarter earnings report missed the mark. Chevron disclosed delays and cost overruns at a large investment in Kazakhstan. It also faces delays in increasing production in the Permian Basin, and analysts have panned its recently announced acquisition of Hess Corp. (HES). These are certainly all valid concerns. However, longer-term investors shouldn’t get too worried by these momentary issues as Chevron has a tremendous track record. And with geopolitical tensions surging, energy stocks are a great defensive holding for the time being. With Chevron’s recent drop, shares go for less than 11 times earnings and offer a 4.1% dividend yield.
Johnson & Johnson (JNJ)
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Founded in 1886, Johnson & Johnson has been manufacturing and selling leading health care and pharmaceutical products for more than a century. Income investors have long relied on J&J for its steady earnings and ever-increasing dividend. In fact, J&J has increased its dividend annually for the past 61 years. This makes JNJ stock a great pick whenever it’s selling at a discount. Today is one of those times. Shares have dropped nearly 15% over the past year amid a slowdown in the medical device industry. Investors are also worried about the long-term impact of weight loss drugs on potential surgery volumes in the medical device space. However, given J&J’s impressive internal diversification and tremendous brand portfolio, its outlook should remain steady. With the share price dip, JNJ stock is now on sale for less than 14 times forward earnings.
Hormel Foods Corp. (HRL)
Hormel Foods is a packaged foods company focused primarily on protein goods. The firm is known for its Spam canned pork product, and many investors may dismiss the company due to its old-timey reputation. However, Spam is just a small piece of Hormel’s brand portfolio today. The company has aggressively modernized its brands to meet the demands of millennials and Gen Z consumers. Hormel is now a leader in turkey, organic and naturally raised meats, nuts and nut butters, ready-to-eat guacamole and salsas, among other categories. Hormel’s brand diversity and dominance in niche categories such as guacamole make it better positioned to fend off competition from store brands. Hormel shares have plunged over the past year amid weight loss drug fears and slumping profit margins because of higher commodity prices. However, meat prices won’t be elevated forever, and it seems unlikely that core demand for protein will fall too much even with shifting consumer preferences. All this makes Hormel a bargain near its five-year-low stock price.
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BlackRock Inc. (BLK)
BlackRock is one of the world’s largest investment management companies. It has built its fortunes thanks to the passive investing movement. Its iShares exchange-traded funds have attracted an incredible amount of capital. And with their low fees and consistence performance, it’s understandable why so many investors and financial planners rely on iShares products. BlackRock isn’t just iShares, though; it also holds a variety of other businesses, including some focused on active asset management, which should be able to shoulder the load if investing preferences change. With the stock market entering a fall swoon and the bond market in a steep drawdown, investors have soured on asset managers. BlackRock shares fell to 52-week lows in October and are now down more than 10% in 2023. This leaves the stock at an attractive 16.4 times forward earnings ratio while boasting a 3.3% dividend yield.
PayPal Holdings Inc. (PYPL)
PayPal is a leading digital payments company. It operates its flagship PayPal platform along with ancillary services including Braintree, Venmo and Xoom. E-commerce enjoyed a boom during the early days of the pandemic as people used more of their shopping dollars on online stores and subscriptions. However, that momentum has faded as the brick-and-mortar economy reopened. Additionally, there’s been a great deal of competition in the payments space, leading to a heavy sell-off in most stocks across the sector. PayPal faces pressure on its profit margins, and analysts have also questioned some of the company’s recent acquisitions.
However, things have gotten out of hand. PayPal is still growing; analysts expect revenue to rise from $27.5 billion last year to $28 billion in 2023, followed by a $30.5 billion top-line figure in 2024. Analysts forecast a double-digit rise in earnings per share this year as well. PayPal’s growth has slowed and it’s a maturing business, but hardly one in terminal decline. After the collapse of PayPal’s stock price, shares now go for less than 10 times forward earnings.
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