Forget the Bear Market, Hold Your Nose and Buy These 3 ‘For Sale’ Stocks
The stock market has fallen into bear market territory this year, having fallen more than 20% from its recent peak. This makes investing more difficult because it is unclear whether the stock market has bottomed. For this reason, many investors are likely to be sitting on the sidelines, waiting for all the clarity to buy shares again.
However, waiting can result in missing out on what appear to be attractive prices for certain stocks. Some of our shareholders think that investors should consider buying shares Stanley Black and Decker (SWK -0.04%)And the Brookfield Infrastructure (BIPC 0.14%) (BIP -0.31%)And the US waters (Arab and West Reports 0.92%)since it looks like a great long-term investment at these low prices.
Time must solve these problems
Robin Gregg Brewer (Stanley Black & Decker): Industries like Stanley Black & Decker operate in a highly cyclical space. In this case, the company makes tools, equipment, and fasteners that are used during economic booms to build everything from homes to cars. During periods of economic downturn the demand for these products tends to dwindle, which is bad for up and down earnings. Central banks are currently pushing interest rates higher, leading to fears of a recession. Furthermore, the company deals with the impact of inflation and supply chain constraints.
Investors reacted by selling the shares, sending them down about 50% from their 2021 highs. This brought the stock’s return to about 3%, well above the five-year average of about 2%, and the highest return In a decade, apart from a brief rally during the pandemic-driven bear market in 2020. It looks like Stanley Black & Decker is for sale today.
However, things can get more difficult before they get better. In the first quarter of 2022, price increases led to a 6% decrease in volume, a fact that the acquisition obscured. Gross margin decreased 6.1 percentage points year on year. These numbers will remain weak if there is a recession. But recessions eventually end, supply chains straighten, consumers accept price hikes, and eventually margins improve. It will just take time. However, Wall Street does not think long-term. You may want to accept the bad news here and buy a Dividend King while you can still get a decent price.
Quality company at a reduced price
Matt Dillallo (Brookfield Infrastructure): Brookfield Infrastructure shares are down nearly 20% over the past three months. This has global Infrastructure operator Trade at a more attractive price while paying the dividend yield to 3.4%.
The main issue weighing on Brookfield Infrastructure is concern that the global economy will start to slow as central banks raise interest rates to combat inflation. This will have some effect on Brookfield volumes. Approximately 35% of its businesses benefit from the volume growth associated with the expansion of the global economy. If the economy goes into recession, it will be a headwind for some Brookfield operations.
However, the company is also benefiting from several tailwinds that must muffle the impact of the global economic slowdown. For example, 70% of Brookfield’s cash flow will benefit from contractual or regulated adjustments for inflation. With inflation rising, Brookfield will get a noticeable inflation-driven boost. Meanwhile, it will also benefit from higher commodity prices in the midstream segment.
Another notable growth driver for the company is its investments to expand its operations. It has ongoing projects in all four of its business segments, which should drive growth over the next two years as these expansions come online. In addition, the company continues to make cumulative acquisitions. Brookfield has made four deals this year, the most recent one Approval to invest in a A leading European tower operator. These transactions will also boost its profits.
While Brookfield’s stock price could drop further if economic conditions worsen, the company is in an excellent position to continue growing during a downturn. For this reason, the recent sale looks like a great opportunity to buy shares of this high-quality infrastructure company for the long-term.
Securing dividends even in a bear market
Neha Kol (USA waters): With soaring inflation forcing the Federal Reserve to raise interest rates at a robust pace, many believe that the US economy is on the brink of a recession, or at least a slowdown if not a complete recession. The threat is real, and when you are looking to invest in stocks under these circumstances, you may want to bet on stocks that can help you sleep well at night no matter what. One such great stock that is also on sale right now is American States Water.
US water stocks have lost nearly 21% of their value so far this year, largely due to concerns about how higher interest rates could increase a company’s borrowing costs while making its earnings less attractive compared to bonds. However, all of these fears may subside if the economy slows.
The thing is, American States Water provides water and water management services, the demand for which should remain steady no matter how the economy performs. While the company primarily provides water services to individual consumers, it also distributes electricity and provides complete water and wastewater management services on military bases. Overall, it serves more than one million customers in nine states, and gets nearly 90% of its revenue from residential and commercial customers. Since it is a structured instrument, its earnings and cash flow are stable even in the toughest years.
This last part is also perhaps the most important reason why you should want to own US waters. Stable dividends can be supported by stable cash flows, which means that with a stock like this, you can expect to earn decent passive income even in the event of a stock market crash. To put that in context, consider that American States Water has increased its dividend every year for the past 67 consecutive years, with earnings growing at a compound annual growth rate (CAGR) of nearly 10% in the past decade.
Yes, its earnings growth can slow during an economic downturn, but the company is confident of increasing earnings at a compound annual growth rate of at least 7% over the long term. Adding dividend growth stocks to your portfolio is certainly a smart move during uncertain times, and American States Water, with its recent price drop, makes it a solid bet at current prices.