While the equities sector might not collapse (a la the Great Recession), it might not offer a decisively directional motion, which augurs well for stocks to buy for a flat market. Generally, investors have two choices: buy enterprises that may enjoy greater success, or short companies that may fail eventually.
But what do you do when the market runs neither hot or cold? In that case, you’re going to want to direct your stocks to buy on businesses that benefit from consistent demand. Most of these names hardly warrant the description “sexy.” Rather, they’re boring “AF” as the kids like to say. However, these flat market stock picks may protect your wealth during ambiguous cycles.
After such an extraordinary run following the Covid-19 crisis, it just might be time for a cooling off. Assuming that Wall Street doesn’t fall off a cliff, these are the stocks to buy ahead of a non-committal market.
Goodyear Tire (GT)
When discussing boring enterprises, I’m not sure it gets much more snooze-inducing than Goodyear Tire (NASDAQ:GT). To be clear, Goodyear is a critical business, providing high-quality tires for various vehicle classes. However, neither the average consumer nor investor gets up in the morning excited about vulcanization. Nevertheless, as an idea for stocks to buy, GT could be intriguing.
According to data from S&P Global Mobility, the average age of passenger vehicles on U.S. roadways reached 12.5 years, a dubious record. Basically, this framework tells us that people are not out buying new replacement vehicles. Instead, they’re making their dollars stretch by staying with their current vehicles until they can’t run anymore.
That might lift GT because a fresh set of tires is a lot cheaper than buying a new or used car. Plus, it’s an unavoidable expense. To be fair, GT – while being a consensus moderate buy among analysts – may only rise modestly. Still, that’s a lot better than incurring a loss.
Skyworks Solutions (SWKS)
While technology firms may not see much inclusion as flat market stock picks (due to their volatility risk), Skyworks Solutions (NASDAQ:SWKS) might be worth investigating. Focusing on high-performance analog semiconductors, Skyworks empowers the wireless networking revolution, per its website. Also, the company commands 4,600 patents and over 6,000 customers. In addition, it claims positive environmental impacts, improving energy and water efficiency by over 20%.
Given the wide relevancies of the business, it’s not surprising that Skyworks offers a compelling financial profile. Specifically, its three-year revenue growth (per-share basis) hits 20.2%, above 69.4% of its peers. As well, its consistently profitable, printing a trailing-year net margin of 20.97%.
Over the trailing one-year period, SWKS gained over 11% of equity value. However, there could be more gains on tap given that it’s undervalued, trading at a forward multiple of only 11.99x. Lastly, while SWKS carries a moderate buy consensus view among analysts, its $118.27 price target implies less than 8% upside. However, it also carries a forward yield of 2.48%, a factor that should be considered.
Perhaps the world’s most famous big-box retailer, Walmart (NYSE:WMT) fits into many narratives. Unsurprisingly, it’s a great candidate for stocks to buy for a flat market. Thanks to its business innovations like everyday low pricing, Walmart offers tremendous relevance no matter what the market cycle. However, if the economy continues to trudge along horizontally, WMT could be an enticing idea to enliven your portfolio.
While it’s not the sexiest idea out there, Walmart delivers demand predictability. For example, its three-year revenue growth rate at 7% ranks better than 58.68% of its peers. That’s not remarkable but it’s solid. Also, the company benefits from consistently profitability. Notably, its return on equity (ROE) comes in at 18.55%, above the sector median of 8.65%.
As for passive income, Walmart isn’t generous, featuring a forward yield of only 1.41%. However, the company does command 51 years of consecutive dividend increases. Also, it’s a consensus strong buy among analysts, who anticipate shares hitting $178.32 or more than 10% higher.
Valero Energy (VLO)
A downstream petroleum company, Valero Energy (NYSE:VLO) mostly focuses on the manufacturing and marketing of transportation fuels, other petrochemical products and power. Since the start of the year, VLO gained over 11% of equity value. However, in the trailing month ended Sept. 1, VLO gained nearly 6%. With a combination of geopolitics and tightening hydrocarbon supplies, VLO could rise higher.
That might be the case even if the rest of the market goes sideways. Unlike a purely discretionary enterprise, Valero aligns with a wider necessity. Sure, some folks are pivoting toward electric vehicles. But the vast majority of drivers in the U.S. drive combustion vehicles. Given the troubling consumer economic headwinds, relatively few can comfortably afford the EV transition. Thus, VLO represents a cynical idea for stocks to buy for a flat market.
Discover Financial (DFS)
An American financial services company, Discover Financial (NYSE:DFS) might be best known for owning and operating Discover Bank, an online financial institution. Along with providing checking and savings accounts along with various lending programs, the bank also provides credit cards. Cynically, this business may empower DFS as one of the stocks to buy for a flat market. It’s also controversial and risky.
As you’ve probably heard by now, Americans’ credit card debt exceeded $1 trillion, a dubious record in my opinion. Some like Bloomberg might interpret this as a sign of strength. However, a good portion of this debt load centers on households not being able to make ends meet otherwise. On one hand, companies like Discover can help keep folks afloat. But on the other hand, it may seem like preying on misfortune.
Of course, the risk is sustainability. If people can’t pay their bills, Discover may have to eat the bad debt. Still, analysts are willing to give it a shot, pegging DFS a buy with a $113.53 price target. This forecast implies over 23% upside potential.
As a wireless network operator, T-Mobile (NASDAQ:TMUS) is an intriguing idea for flat market stock picks due to its pertinence. Many years ago, cellphones were basically toys for the rich. Today, it’s almost impossible to live without a smart device. Further, as a viable competitor to the top wireless enterprises, T-Mobile provides a much-needed consumer alternative.
Another reason why TMUS could be one of the stocks to buy centers on its penchant for share repurchases. As a Motley Fool article argued recently, share repurchases can be a more tax-efficient way for returning excess cash to shareholders. This thesis seems to carry a significant ring of truth.
In the trailing one-year period, TMUS lost a bit more than 3%. In sharp contrast, VZ stumbled almost 16% during the same period. Turning to Wall Street, analysts peg TMUS as a consensus strong buy. Among 13 experts, the worst individual rating is a hold. Also, the average price target comes in at $179.46, implying nearly 31% upside.
Essential Utilities (WTRG)
A proposition for stocks to buy reserved only for speculators, Essential Utilities (NYSE:WTRG) may be pertinent, but it’s also risky. Since the beginning of this year, WTRG gave up nearly 24% of its equity value. What raises eyebrows is that during the past five years, WTRG lost about 2%. That’s not exactly the way to endear prospective investors.
At the same time, utility firms like Essential benefit from a natural monopoly. Basically, the barriers to entry for the underlying industry is so steep that would -be competitors don’t even bother. Also, Essential truly lives up to its name thanks to its ultra-critical drinking water and wastewater treatment infrastructure and services. On the passive income front, the company carries a forward yield of 3.35%, which is pretty decent. Also, it commands 32 years of consecutive dividend increases. On a final note, analysts peg WTRG a consensus moderate buy. The average price target stands at $54, implying over 47% 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.