Keep these 6 robust stocks on your radar – they can weather the coming storm.
Markets have been hitting all-time high after all-time high the last couple of weeks, but Canaccord Genuity says we may be in for a market pullback soon.
According to a note from Canaccord, its major indicators are approaching levels not seen since right before and during the market correction in May, which indicates that a similar correction is right around the corner.
“The S&P 500 has reached into a level of overbought territory that suggests a period of consolidation and increased volatility may lie directly ahead,” Canaccord analyst Tony Dwyer said.
So far this year, the S&P 500 is up more than 20%, and logged its most recent record close on Monday at 3,014.31. The market rolled over on Tuesday after comments from President Trump that suggested we won’t see a resolution to the trade war between the U.S. and China in the near term.
According to Dwyer, stock market participation is dropping and along with that, low volatility, extreme overbought stock levels, and increased optimism are all pointing to a looming market pullback.
Other calls for a market pullback, and even an economic slowdown have been growing louder recently.
Institutional investors have been warning about the prospect of slowing economies, lower interest rates, and rising global tensions. Meanwhile, gold has been climbing with names like Ray Dalio calling for investors to buy the precious metal as a hedge against what he calls a “paradigm shift” in the global economy.
In terms of stocks that will do well in an economic slowdown, CNBC’s Jim Cramer says there are six stocks that are worth considering.
“These six slowdown… stocks have been anointed by Wall Street. They aren’t going away,” Cramer said. “They’ll be the second-half winners that the big money guys just can’t get enough of. Memorize them, people, because I bet they keep winning for the rest of the year.”
Those six stocks are Chipotle (NYSE: CMG), Estee Lauder (NYSE: EL), McDonald’s (NYSE: MCD), Nike (NYSE: NKE), Procter & Gamble (NYSE: PG), and Starbucks (NASDAQ: SBUX).
Cramer praised former Chipotle CEO Jack Hartung’s “shrewd decision” to buy back shares of the burrito chain as it was embroiled in its food safety issue a few years ago, calling it a risk that is still paying off now. He also noted that the company’s new CEO, Brian Niccol, is providing the kind of leadership the company had been lacking.
The stock is already up 77% so far this year and surpassed its 2015 highs this week, closing at an all-time high of $764.04 on Thursday.
Estee Lauder looks like a great play on the “selfie generation where everyone has to look good anytime they step outside,” Cramer said. The cosmetics juggernaut is up 46% year-to-date.
On to McDonald’s, Cramer called the Big Mac maker’s CEO Stephen Easterbrook “a genius” for going all-in on bringing the future to the chain with self-serve kiosks and mobile ordering.
“I think this stock’s got more room to run, even in a not-so-hot economy,” he said. The stock is already up 22% so far this year.
Nike may have fallen short of analysts’ earnings expectations by $0.04 in its last quarterly report from June, but Cramer says investors shouldn’t be worried about the miss.
“People believe the next quarter will be better than the last one. I think Nike’s mad an amazing comeback on basically nothing,” Cramer said. “If this one comes down, buy it.”
Like Nike, Cramer says Procter & Gamble is a stock investors should snap up the instant it goes down.
“Higher market share, lower costs, improving Chinese business. What’s not to like? Watch this stock,” he said. “Procter’s stock does not go down. The moment it pulls back, maybe off of something market-wide, pounce.”
And finally Starbucks. The coffee giant traded flat for three years before rocketing higher starting mid-2018. And so far this year, shares are up just over 42%.
Cramer credited CEO Kevin Johnson—who took over the reins in 2017—for nailing a $7.15 billion global deal with Nestle, as well as an improved loyalty program and improved relationships in China.
“That’s important because the Chinese market is gigantic for these guys and it had slowed down,” Cramer said. “Now it’s coming back with a vengeance as Starbucks doesn’t seem to be suffering from many ill-effects from the trade war.”