7 Stocks to Buy as the Banking Sector Fallout Grows
Although the fallout from the banking sector appears to have faded, investors still should consider stocks to buy that can weather storms. Understandably, this narrative runs counter to the apparently prevailing wisdom of the moment. For example, even legendary hedge-fund manager Michael Burry stated that he was “wrong to say sell.” Nevertheless, let’s look at the fundamentals.
While the U.S. government responded quickly and decisively to recent bank failures, here’s the deal: every action generates a reaction. For federal authorities to protect depositors suggests an inflationary framework, exactly the directive policymakers want to avoid. Besides, if government action was the correct response to every problem, why aren’t we asking the government to get involved in everything? Again, the answer is that every decision (particularly major ones) carries consequences. Essentially, we might not be out of the woods just yet. Therefore, below are the reliable or relevant stocks to buy.
A business icon, beverage manufacturer Coca-Cola (NYSE:KO) symbolizes one of the brands of American free market capitalism. Just that status alone affords Coca-Cola significant social cachet, even during a potential downturn. Fundamentally, the company may benefit from the trade-down effect. Rather than purchase their caffeine fix from an overpriced café, consumers can always go to their local grocery stores and pick up a six-pack of Coke.
In terms of stability, Coca-Cola features an Altman Z-Score of 4.42, indicating low bankruptcy risk over the next two years. Also, it quietly gets the job done operationally. Its three-year revenue growth rate comes in at 4.6%, above 56.52% of the sector. As well, its book growth rate during the same period is 7.9%, above 64.13% of the competition. Perhaps most notably, Coca-Cola makes a name for itself in the profitability department. For example, its net margin pings at 22.19%, outpacing 93.46% of its peers.
Finally, Wall Street analysts peg KO as a consensus strong buy. Their average price target stands at $68.18, implying nearly 10% upside potential. Thus, it’s an intriguing case for stocks to buy.
Sempra Energy (SRE)
A public utility holding firm, Sempra Energy (NYSE:SRE) is one of the largest such entities in the U.S. According to its public profile, Sempra serves nearly 40 million consumers. Given its massive reach – and the fact that utilities represent natural monopolies – SRE ranks among the stocks to buy amid banking sector concerns. That said, SRE is on a relative discount, losing almost 2% since the Jan. opener.
If that wasn’t compelling enough for speculators, SRE dipped more than 11% in the trailing year. To be fair, its financials don’t offer the greatest level of confidence. However, because Sempra serves large swathes of the economic engine known as Southern California, investors don’t have to worry as much about the print. Still, that’s not to say that Sempra can’t hold its own. For instance, its net margin pings at 14.81%.
And it benefits from consistent annual profitability. Lastly, covering analyst peg SRE as a consensus moderate buy. Their average price target comes out to $168.11, implying over 11% upside potential.
Based in Switzerland, STMicroelectronics (NYSE:STM) represents an unsung hero in the technology space. A semiconductor manufacturer, STM undergirds various innovations while staying in the background. Because of its tremendous relevance, STM easily ranks among the stocks to buy during banking troubles. Indeed, shares gained more than 51% since the Jan. opener, a simply blistering figure.
Nevertheless, STM may offer room to run. In particular, the market prices shares at a forward multiple of 12.65. As a discount to projected earnings, STM ranks better than 82.09% of the semiconductor industry. In addition, the company represents an operational powerhouse. Its three-year revenue growth rate pings at 19.1%, outpacing 68.54% of sector rivals. Further, its net margin comes in at 24.6%, blowing past 86.25% of the field. To top it off, the enterprise features an Altman Z-Score of 6.39, indicating very low bankruptcy risk.
In closing, analysts peg STM as a consensus moderate buy. Their average price target hits $61.20, implying over 14% upside potential.
Based in Brazil, Vitru (NASDAQ:VTRU) is the nation’s largest private education institution, per the company’s website. Given Brazil’s vast population and abundant natural resources, investing in its educational infrastructure could yield significant gains. Since the start of the year, VTRU moved up over 3%. In the trailing one-year period, it returned stakeholders 44%.
Despite its impressive performance, VTRU makes for an intriguing case for stocks to buy. Overall, the company owns a stable balance sheet. In particular, its Altman Z-Score hit triple digits. Also, its debt-to-EBITDA sits at 0.03 times, favorably below the sector median value of 2.15.
Operationally, Vitru’s three-year revenue growth rate clocks in at 21.3%, above 79.46% of its rivals. Its book growth rate during the same period pings at a lofty 37.2%. On the bottom line, Vitru’s net margin is almost 13%, above 72% of the competition. Turning to Wall Street, analyst peg VTRU as a consensus moderate buy. Their average price target stands at $27, implying nearly 19% upside potential.
Also based in Brazil, Ambev (NYSE:ABEV) is a powerhouse in the brewery business. Should the global economy struggle, Ambev might be an interesting idea for stocks to buy. Essentially, the stress of yet another hardship might accelerate alcohol sales due to consumers wanting to take the edge off. Notably, since the beginning of the year, ABEV gained nearly 9% of its equity value.
Against the trailing-year comparison, ABEV still has some work to do. Still, the red ink makes the beverage investment appealing to contrarians. For example, the market prices ABEV at a forward multiple of 16.38. As a discount to projected earnings, the company ranks better than 77.27% of the underlying industry. Operationally, Ambev commands a three-year revenue growth rate of 15.3%. Its book growth rate during the same period is a respectable 10.1%. Finally, its Altman Z-Score hits 3.47, indicating low bankruptcy risk.
Looking to the Street, analysts peg ABEV as a consensus moderate buy. Their average price target stands at $3.35, implying nearly 19% upside potential.
An American agribusiness, Andersons (NYSE:ANDE) is one of the stocks to buy for its critical relevancies. Per its corporate profile, Andersons conducts business in the commodity merchandising, renewables, and plant nutrient sectors. Not surprisingly, since the start of the year, ANDE gained nearly 22% of its equity value. However, it trades at a relative discount, down more than 17% in the past 365 days.
If you can handle choppy weather, ANDE deserves closer inspection. First, the market prices ANDE at a trailing multiple of 10.87. As a discount to earnings, Andersons ranks better than 74.57% of the competition. Second, it enjoys stability in the balance sheet, buoyed by an Altman Z-Score of 4.69.
Operationally, Andersons delivers a three-year revenue growth rate of 27.7%, an impressive performance. Also, its free cash flow (FCF) growth rate during the same period is 22%, above 66.15% of the field. Finally, analysts peg ANDE as a consensus moderate buy. Their average price target is $52.50, implying 27% upside potential.
Another agribusiness and food-focused enterprise, Bunge (NYSE:BG) deserves consideration as one of the stocks to buy for permanent relevance. No matter what happens in the economy, people have to eat. Since the start of the year, BG dipped a hair below parity. In the trailing one-year period, it gave up more than 15% of its equity value.
While that certainly sounds risky, Bunge shouldn’t be ignored because it’s also quite tempting. Perhaps most conspicuously, the market prices BG at a forward multiple of 7.99. As a discount to projected earnings, Bunge ranks better than 86.22% of the competition.
Also, the company delivers on the operational front. Its three-year revenue growth rate stands at a healthy 14.7%. As well, its book growth rate during the same period is 18.7%, outpacing nearly 83% of sector rivals. Lastly, analysts peg BG as a consensus strong buy. Their average price target stands at $123, implying nearly 29% 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.