This year’s bear market has savaged nearly every sector of the market — from the most reliable blue chips to the highest-flying technology stocks and pandemic plays. In dark times, we need heroes. But where do we look for stocks to buy amid the wreckage?
There are a few stocks that have managed to hold their own or at least claw their way back amid the current downturn, helped by strong earnings. That’s a good place to start.
Below are seven “hero” stocks to buy that could help rescue a battered portfolio or at least position it for future growth once the market bottoms.
|BAC||Bank of America||$33.70|
|PG||Procter & Gamble||$126.99|
Netflix’s (NASDAQ:NFLX) third-quarter earnings report shows the streaming giant is on the road to recovery. Shares shot up 13% in a single day after the company posted better-than-expected Q3 results, earning $3.10 a share on $7.9 billion in revenue.
Of course, the real showstopper was the 2.4 million subscribers Netflix added in the third quarter. This was more than double what the company had forecast and reversed the troubling trend of subscriber losses seen in the first two quarters of the year. Management attributed the strong Q3 results to hit TV shows and movies such as “Stranger Things” and “The Gray Man,” and said it expects to add 4.5 million new subscribers in the fourth quarter. This will be driven in large part by the new lower-priced, ad-supported streaming tier the company plans to launch in November. Additionally, management announced plans to begin cracking down on password sharing next year.
Analysts are suddenly becoming much more bullish on NFLX stock. For instance, JPMorgan analyst Doug Anmuth upgraded the stock to “overweight” from “neutral” following the Q3 print. He raised his price target to $330 from $240, implying upside of 23% over the next year.
Goldman Sachs (GS)
Goldman Sachs (NYSE:GS) finds a way to make money in any market. While third-quarter earnings from the major U.S. banks were mixed, Goldman Sachs once again knocked it out of the park. The investment bank reported earnings of $8.25 a share on $11.98 billion in revenue, much better than the $7.69 per share on $11.41 billion in revenue analysts were expecting.
Goldman Chief Executive Officer David Solomon said strong bond trading results helped offset weakness in other areas, notably investment-banking revenue and deal-making. Goldman’s bond traders generated $3.53 billion in revenue between July and September, a 41% increase from a year earlier. Revenue from equity trading of $2.68 billion, while down 14% year over year, was in line with expectations.
So far this year, GS stock is down 19%, which is better than the S&P 500’s 23% decline. Look for shares to rocket higher once the market bottoms.
United Airlines (UAL)
A lot of investors are still gun-shy when it comes to airline stocks. And that makes sense given they were among the biggest casualties of the pandemic. Airlines worldwide collectively lost $168 billion in 2020, according to a report by management consulting firm McKinsey & Company. And most were forced to take on scary amounts of debt just to survive.
However, it now looks like travel demand is back in a big way and United Airlines (NASDAQ:UAL) is a key beneficiary of the turnaround. The company just reported third-quarter revenue that was 25% higher than 2019 — i.e, pre-pandemic — levels. The company also said it anticipates surpassing its 2019 margins in the current fourth quarter.
For the third quarter, United earned $12.88 billion in revenue, which was up 13% from the same period in 2019, before anyone had heard of Covid-19. Earnings per share of $2.81 were well above the $2.28 that analysts were calling for. Perhaps most encouraging, United executives said travel demand continues to surge despite high airfares and concerns about a potential recession.
United Airlines is already gearing up for a strong holiday travel period to end the year, forecasting earnings per share of $2.25 for Q4 compared with a 98-cent estimate from the Street.
Year to date, UAL stock is down 14%. Put it on your list of stocks to buy on the dip.
Bank of America (BAC)
Bank of America (NYSE:BAC) is one of those reliable blue-chip stocks to buy that can help reinforce a portfolio and get investors through difficult times. Like the aforementioned Goldman Sachs, Bank of America has found a way to continue making money at a difficult time. The company just reported a better-than-expected Q3 profit thanks to higher interest income on loans that has occurred because of rising rates.
The bank, which is the second biggest U.S. financial institution, reported third-quarter earnings per share of 81 cents versus 77 cents that had been expected by analysts. Revenue in the quarter totaled $24.61 billion compared with an estimated $23.57 billion. Management said higher interest rates charged on its various loans are producing more revenue, allowing it to generate profits even as other areas of its business, such as investment banking, experience sharp declines this year.
BAC stock is up 6% since reporting earnings but shares remain down 24% for the year, providing a nice entry point for investors.
Procter & Gamble (PG)
Investors looking to hide from inflation should consider stalwart consumer products company Procter & Gamble (NYSE:PG). The company, whose products include Tide laundry detergent, Gillette razor blades and Crest toothpaste, has successfully managed higher prices this year and proven, once again, that it has pricing power, or the ability to lift prices without losing customers.
The company reported better-than-expected third-quarter earnings per share of $1.57. Revenue of $20.61 billion also beat estimates, up 1% year over year despite a 3% volume decline. This shows the company was able to offset the decline by raising prices. While consumers may be cutting back on discretionary purchases, they need the household essentials Procter & Gamble sells in good economic times and bad.
PG stock is down 22% on the year, making shares a steal.
Energy stocks continue to be one of the few places where investors are making money this year. Among them, Chevron (NYSE:CVX) is one of the best stocks to buy. So far in 2022, CVX stock is up 44%. In the past month alone, shares have risen nearly 8%.
Chevron has been gushing profits on the back of elevated prices for crude oil, which hit a high above $120 a barrel this year. In July, the company announced second-quarter results that included record revenue and profits. The energy giant said it earned $11.62 billion during Q2, which was 277% more than the second quarter of last year.
While crude oil prices have come down to about $85 a barrel, prices are expected to spike again this winter as energy demand increases and Europe grapples with a fuel crisis prompted by the war in Ukraine. Another increase in oil prices will only benefit Chevron.
Investors looking for stocks to buy in the current market storm need look no further than CVX.
Lockheed Martin (LMT)
With war raging in Europe, there are worse ideas than to own a defense stock. And Lockheed Martin (NYSE:LMT), the world’s largest defense contractor by revenue, is one of the few non-energy stocks that is actually up this year, rising 25% so far in 2022.
The stock is clearly riding investor interest in defense companies as the war in Ukraine drags on. However, Lockheed Martin has also won over analysts and investors with strong earnings and an aggressive share repurchase program.
The company earned an adjusted $6.87 per share in Q3, which beat the $6.72 average analyst estimate. Cash flow from operations also exceeded forecasts, rising 62% year over year to $3.13 billion. However, what really drove the stock to pop 9% in a single day was the announcement made alongside its earnings that the defense contractor is increasing its stock buyback program by $14 billion, including $4 billion of share repurchases in the current quarter.
This kind of shareholder reward can go a long way toward healing a battered portfolio.
On the date of publication, Joel Baglole held a long position in BAC. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.