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3 Stocks to Prepare Your Portfolio for the Next Black Swan Event

Black swan events are world-changing events that are rare and unpredictable and have outcomes with devastating effects. These events have severe implications for financial markets and investment portfolios. While investors cannot predict a black swan event, it could be wise to prepare your portfolio by investing in high-quality stocks, such as UnitedHealth (UNH), Walmart (MT), and Lifeway Foods (LWAY). Continue reading…

Black swan events are extremely rare, unpredictable, and impactful events with severe consequences. Such events can cause catastrophic damage to an economy by adversely impacting financial markets and investments. A black-swan-event-triggered market crash negatively impacts the stock market, catching investors off guard.

It is believed that investors cannot predict a black swan event ahead of time. However, in recent times, the possibility of a highly negative event is as high as it has ever been. The GDP unexpectedly contracted for two consecutive quarters, raising the odds of the economy entering a recession.

While the inflation eased slightly in July, it is still very high and hardly indicates stability. Furthermore, the Federal Reserve recently signaled more interest rate hikes in the coming months until inflation eases meaningfully. Given these macroeconomic headwinds, there is a high probability that a black swan event could occur and crash the stock market.

We think fundamentally sound stocks UnitedHealth Group Incorporated (UNH), Walmart Inc. (WMT), and Lifeway Foods, Inc. (LWAY) could help your portfolio survive the next black swan event.

UnitedHealth Group Incorporated (UNH)

UNH operates as a diversified health care company in the United States. The company operates through four segments: UnitedHealthcare; OptumHealth; OptumInsight; and OptumRx. It provides consumer-oriented health benefit plans and services, Medicaid plans, children’s health insurance and health care programs, and hospital and clinical services.

In May, UNH’s UnitedHealthcare Community Plan of Missouri got selected by the state of Missouri as one of the three managed care organizations to manage its MO HealthNet Managed Care Program for Medicaid members in Temporary Assistance for Needy Families (TANF) and the Children’s Health Insurance Program (CHIP).

The company is committed to providing access to high-quality care for members and the communities it serves.

In the fiscal 2022 second quarter ended June 30, 2022, UNH's revenues increased 12.6% year-over-year to $80.33 billion. Its earnings from operations grew 19.3% from the prior-year period to $7.13 billion. The company's adjusted net earnings attributable to UNH common shareholders and adjusted earnings per share came in at $5.29 billion and $5.57, up 17.7% and 18.5% year-over-year, respectively.

The $322.14 billion consensus revenue estimate for the fiscal year 2022 (ending December 2022) represents a 12% improvement from the last year. Analysts expect UNH’s EPS for the current year to rise 14.9% year-over-year to $21.85. The company has topped the consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.

The stock has gained 9.1% over the past six months and 24.8% over the past year to close the last trading session at $519.33.

UNH's POWR Ratings reflect this promising outlook. The stock has an overall grade of A, equating to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

UNH has a B grade for Stability, Quality, Sentiment, and Growth. Within the A-rated Medical - Health Insurance industry, it is ranked #2 of 11 stocks.

Click here to see UNH's additional POWR Ratings (Momentum and Value).

Walmart Inc. (WMT)

WMT engages in retail, wholesale and other units throughout the United States, Africa, Canada, Chile, China, India, and Mexico. The company operates in three segments: Walmart U.S., Walmart International, and Sam’s Club. It operates supermarkets, hypermarkets, supercenters, warehouse clubs, discount stores, and e-commerce websites.

In August, WMT announced that it is recruiting Canada-based sellers to join its flagship U.S. Marketplace and serve a growing base of more than 120 million online shoppers each month. The drive to attract Canadian companies builds on WMT’s engagement with retailing and e-commerce in Canada.

In the same month, WMT announced the acquisition of Volt Systems, a technology company that provides suppliers with enhanced on-demand visibility into merchandising resources. The deal affirms the company’s continued investment in innovation and technology that might enable it to anticipate customer demand better.

In the fiscal 2023 second quarter ended July 31, 2022, WMT's total revenues increased 8.4% year-over-year to $152.86 billion. Its income before income taxes grew 12.2% year-over-year to $6.6 billion. The company’s consolidated net income rose 17.9% year-over-year to $5.15 billion, while its net income per share attributable to WMT came in at $1.88, up 23.7% year-over-year.

The consensus revenue estimate of $144.64 billion for the fiscal 2024 first quarter, ending April 2023, represents a 3.1% year-over-year growth from the same period in 2021. Also, analysts expect the company’s EPS for the same quarter to increase 14% year-over-year to $1.48. It’s no surprise that the company has surpassed the consensus revenue estimates in each of the trailing four quarters.

WMT’s shares have declined marginally over the past month to close the last trading session at $132.55.

WMT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.

WMT has a B grade for Growth, Sentiment, Quality, and Stability. Within the A-rated Grocery/Big Box Retailers industry, it is ranked #8 of 38 stocks.

Click here to see additional component grades of POWR Ratings (Value and Momentum) for WMT.

Lifeway Foods, Inc. (LWAY)

LWAY produces, markets, and sells probiotic-based products in the United States and internationally. The company’s primary product is drinkable kefir, a cultured dairy product. It also provides European-style soft cheeses; ProBugs, a line of kefir products for children; and Icelandic Skyr, a line of strained kefir and yogurt products.

The company sells its products under the Lifeway and Fresh Made brand names and under private labels through a direct sales force, brokers, and distributors.

On March 5, LWAY showcased New Probiotic Oat and Adaptogenic Beverages at Natural Products Expo West 2022. “I know this year's Expo will be significant to attendees professionally and personally. It's a special honor for us to be present to provide microbiome-supporting probiotic products to help nourish our community when mental health and immunity are top-of-mind,” said Julie Smolyanksy, LWAY’s CEO.

LWAY's net sales increased 16.1% year-over-year to $34.10 million in the fiscal 2022 first quarter ended March 31, 2022. The company’s cash and cash equivalents stood at $7.99 million as of March 31, 2022. Also, its total current assets came in at $29.59 million, compared to $29.05 million as of December 31, 2022.

The stock has gained 17.7% over the past month and 28.9% year-to-date to close the last trading session at $6.25.

LWAY's POWR Ratings reflect a promising outlook. The stock has an overall grade of A, which equates to a Strong Buy in our proprietary rating system.

LWAY has a grade of A for Growth and B for Quality, Value, Stability, and Sentiment. Within the Food Makers industry, it is ranked #4 of 49 stocks.

To see additional POWR Ratings (Momentum) for LWAY, click here.

UNH shares were unchanged in premarket trading Thursday. Year-to-date, UNH has gained 4.10%, versus a -16.18% rise in the benchmark S&P 500 index during the same period.

About the Author: Mangeet Kaur Bouns

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.


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