Jobs Slump, Stocks Jump: 3 Surefire Picks to Capitalize on April’s Weak NFP


  • The stock market’s positive reaction to April’s weak NFP report signals opportunities in growth stocks and capital-intensive industries.
  • American Woodmark Corporation (AMWD): Trading at a P/E ratio of just 13.2%, it is poised to benefit from the housing market with cost-cutting measures bolstering EBITDA and significant cash reserves enhancing shareholder value.
  • Palo Alto Networks (PANW): With a P/E ratio of 46x, a robust cash position of $1.78 billion, and resilient growth prospects, despite a recent drop after guidance adjustments, it presents a good opportunity.
  • BHP Group (BHP): At a P/E ratio of 20x and strategic investments in copper and nickel production, it is well-positioned to benefit from anticipated lower interest rates.
stocks to buy - Jobs Slump, Stocks Jump: 3 Surefire Picks to Capitalize on April’s Weak NFP

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The stock market reacted positively to weaker-than-expected labor market data in April’s Non-Farm Payrolls (NFP) report, producing some stocks to buy. This counterintuitive response occurred because slower hiring leads to lower wage growth, which could help control inflation and benefit certain stocks. With inflation expected to slow down, analysts believe the Federal Reserve will be more inclined to ease in the coming months, inspiring investors to start considering which stocks to buy. There is currently over a 50% chance of an interest rate cut at the September meeting, making now a good time to invest in anticipation.

Technology stocks benefited most from expectations of lower rates, as higher-valuation stocks generally perform well in easing cycles. Investors looking to capitalize on upcoming Fed rate cuts may consider growth stocks. However, with the S&P 500‘s price-to-earnings (P/E) ratio over 27x, there are many stocks to choose from. Easier access to funds from lower rates could boost virtually all sectors.

Lower borrowing costs may benefit some sectors and their stocks. Capital-intensive industries like mining, especially for “new energy” metals such as copper, could gain. The housing sector may also benefit as lower interest rates reduce mortgage costs. The following are sure-fire stocks to buy that are well-positioned to ascend if April’s weak jobs report leads to lower interest rates.

American Woodmark Corporation (AMWD)

American Woodmark Corporation (NASDAQ:AMWD) is one of the stocks to buy for exposure to potential upside in the housing market. As the third-largest kitchen and bath furniture manufacturer, the company offers various designs through different price points and sells directly to major homebuilders through distributors. Lower interest rates are expected to spur house buying this year, which will likely increase demand for furnishings and help the company’s sales return to growth. The firm has been cutting costs and streamlining over the last year, allowing it to increase its EBITDA despite slower sales. This positions American Woodmark well to maximize profits from any revenue rebound.

Furniture companies typically do not command high valuations; American Woodmark is no exception. In fact, it represents a bargain compared to other companies. It trades at a P/E ratio of just 13.2x, below the S&P 500’s ten-year mean. The company has built up significant cash reserves of $97.8 million, up from $45.8 million a year ago, giving it ample resources to pay dividends and increase share buybacks. American Woodmark is one of the stocks to buy, given its attractive valuation and positioning to benefit from an improving housing market.

Palo Alto Networks (PANW)

Palo Alto Networks (PANW) logo on corporate building
Source: Sundry Photography /

Palo Alto Networks (NASDAQ:PANW) is another stock to buy after experiencing a drop in February in the aftermath of unexpectedly cutting its guidance. However, the company still expects growth, and the trimmed sales guidance to +15-16% from 18-19% is not as significant as to warrant the 29% drop seen in its share price. This has now left the company with a lower P/E ratio of 46x compared to the sector’s 43x, while other major companies are in the 3-digit P/E ratio range.

Palo Alto Networks is an attractive stock to buy, not just because it is relatively inexpensive compared to large technology firms. It is also a cash-generating machine, having increased its cash holdings over the last year by more than $650 million, ending with $1.78 billion in cash and equivalents. This large cash position provides a strong moat during market ups and downs and ample resources to sustain its share buyback program.

BHP Group (BHP)

Smartphone with BHP Group logo in front of BHP website. BHP stock.
Source: T. Schneider / Shutterstock

When interest rates start to come down, investors may also consider which commodity stocks to buy as commodity prices tend to thrive in a low interest rate environment. A good candidate is BHP Group (NYSE:BHP). The Australia-based mining company is one of the world’s largest and most diversified commodities producers. BHP is looking to align its operations with the global energy transition, focusing on reducing high-carbon intensity projects and building out copper and nickel production. This could mean the company sees dual benefits from lower interest rates: Higher sales prices for its products and lower borrowing costs to finance new growth and acquisitions.

BHP’s stock price is down 16% this year, delivering a P/E ratio of 20x, which is below the 35x average of the sector. Unlike other companies, BHP doesn’t stand out by having a lot of cash. In fact, it increased its debt over the last year, as most of its free cash went to acquiring OZ minerals. With the company looking to buy Anglo American (OTCMKTS:NGLOY) next, the lower cost of debt resulting from lower interest rates could mean BHP has more cash flow in the future to pay back dividends and buyback stock.

On the date of publication, Stavros Tousios 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 Publishing Guidelines.

Stavros Tousios, MBA, is the founder and chief analyst at Markets Untold. With expertise in FX, macros, equity analysis, and investment advisory, Stavros delivers investors strategic guidance and valuable insights.

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