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The 2 Best Stocks to Buy When Hard Times Hit

The combination of resilient job growth, sticky inflation, and high retail sales could keep the Fed’s strict rate hikes in place for quite some time. With recession odds soaring alongside, quality stocks Walmart (WMT) and Flowers Foods (FLO) might be ideal buys now. Read on…

The Fed’s prolonged efforts to curb stubbornly high inflation did show some results in the near past, which raised anticipations of the Fed downsizing its rate hikes and putting a pause soon. A fresh bout of investor optimism followed.

However, January's Consumer Price Index (CPI) slowed only slightly to a 6.4% annualized gain, higher than the market forecast of 6.2%. In addition, the U.S. employment report showed that the labor market is running hotter than expected. Moreover, with significant retail sales growth of 3%, the Fed could keep the rates higher for longer than the market’s anticipation.

Since inflation is far above the central bank’s target of 2%, Fed Chair Jerome Powell signaling more rate hikes, said, “I think there has been an expectation that it'll go away quickly and painlessly and I don't think that's at all guaranteed … It will take some time, and we'll have to do more rate increases.”

Furthermore, as the cost of living soars, Americans have started financing their new spending habits with credit cards and draining their savings. Experts fear a spending slowdown or a recession could be on the horizon. With the odds of a recession soaring, a bear market could be expected in the upcoming months.

Amid such volatilities, quality stocks, Walmart Inc. (WMT) and Flowers Foods, Inc. (FLO), might be wise portfolio additions now.

Walmart Inc. (WMT)

WMT engages in the operation of retail, wholesale, and other units worldwide. The company operates through three segments: Walmart U.S.; Walmart International; and Sam’s Club.

On January 12, 2023, Walmart Commerce Technologies, one of WMT’s companies, and Walmart GoLocal recently announced a partnership with Salesforce Inc. (CRM) to give retailers access to the tools and services that enable frictionless local pickup and delivery for customers worldwide.

WMT’s trailing-12-month ROCE of 11.61% is 11.6% higher than the 10.40% industry average. Its trailing-12-month ROTC of 10.10% is 63.9% higher than the 6.17% industry average.

WMT’s board of directors approved an annual cash dividend for the fiscal year 2023 of $2.24 per share, an increase of approximately 2% from the $2.20 per share paid for the previous fiscal year. The annual dividend was paid in four quarterly installments of $0.56 per share. The last dividend for the year was paid to the shareholders on January 3, 2023.

WMT’s dividend yield of $2.24 per share translates to a 1.53% yield on the current price. Its dividends have grown at 1.9% CAGRs over the past three and five years. Its four-year average dividend yield is 1.68%. WMT has increased its dividend in each of the past 49 years.

WMT’s total revenues increased 8.7% year-over-year to $152.81 billion in the fiscal third quarter that ended October 31, 2022. Also, its net sales came in at $151.47 billion, up 8.8% year-over-year. Its adjusted EPS came in at $1.50, representing a 3.4% year-over-year rise.

Street expects WMT’s revenue to increase 4% year-over-year to $145.83 billion for the fiscal first quarter ending April 2023. Its EPS for the same quarter is estimated to be $1.37, up 5.2% year-over-year. It surpassed revenue estimates in each of the four trailing quarters.

Over the past six months, the stock has gained 6.9% to close the last trading session at $146.44. Over the past month, it has gained 4.2%. The stock is currently trading higher than its 50-day and 200-day moving averages of $143.90 and $136.41, respectively, indicating an uptrend.

WMT’s POWR Ratings reflect this promising outlook. It has an overall B rating, equating to a Buy in our proprietary system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It has a B grade for Stability and Sentiment. Within the A-rated Grocery/Big Box Retailers industry, it is ranked #10 out of 39 stocks.

Click here for the additional POWR Ratings for Growth, Value, Momentum, and Quality for WMT.

Flowers Foods, Inc. (FLO)

FLO operates as a producer and marketer of packaged bakery products in the United States. The company offers its products under Nature’s Own, Dave’s Killer Bread, Wonder, Canyon Bakehouse, Mrs. Freshley’s, and Tastykake brand names.

On February 20, FLO announced its completion of the acquisition of Papa Pita Bakery, a manufacturer and distributor of high-quality bread. Papa Pita Bakery would operate as an independent subsidiary of FLO. The acquisition is expected to drive further manufacturing and distribution synergies.

On February 17, FLO announced that its board of directors had declared a quarterly dividend of $ 0.22 per share, an increase of 4.8% over the same quarter last year. This is the 82nd consecutive quarterly dividend paid by the company and is payable to shareholders on March 17, 2023. This reflects its ability to pay its shareholders.

FLO’s dividend yield of $0.88 per share translates to a 3.11% yield on the current price. Its dividends have grown at 5.1% and 5.4% CAGRs over the past three and five years, respectively. Its four-year average dividend yield is 3.30%.

FLO’s trailing-12-month gross profit margin of 47.94% is 52% higher than the 31.53% industry average. Its trailing-12-month ROTA of 6.89% is 90.4% higher than the 3.62% industry average.

FLO’s sales increased 10.1% year-over-year to $1.08 billion in the fiscal fourth quarter that ended December 31, 2022. Its adjusted EBITDA grew 8.5% from the prior-year period to $96.18 million, while its adjusted net income per common share increased 27.8% from the prior-year quarter to $0.23.

Analysts expect FLO’s revenue for the first quarter ending March 2023 to increase 8% year-over-year to $1.55 billion. Its EPS for the same quarter is expected to come in at $0.38. Moreover, FLO surpassed consensus EPS and revenue estimates in three of the trailing four quarters, which is impressive.

FLO has gained 6% over the past month and 2.4% intraday to close its last trading session at $28.31. The stock is currently trading above its 50-day and 200-day moving averages of $28.07 and $27.28, respectively, indicating an uptrend.

Its strong fundamentals are reflected in its POWR Ratings. FLO has an overall rating of B, equating to Buy in our proprietary rating system.

FLO has a B grade in Quality. The stock is ranked #24 within the B-rated 28-stock Food Makers industry.

In addition, FLO’s ratings for Growth, Value, Momentum, Stability, and Sentiment can be seen here.

What To Do Next?

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3 Stocks To DOUBLE This Year


WMT shares fell $4.81 (-3.28%) in premarket trading Tuesday. Year-to-date, WMT has gained 3.28%, versus a 6.49% rise in the benchmark S&P 500 index during the same period.



About the Author: Sristi Suman Jayaswal

The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.

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