While the broader market has remained volatile in recent months thanks to the ongoing trade war between the U.S. and China and fears of slowing earnings globally, the overall trend remains bullish and the major remain just below their all-time highs.
There are definitely reasons for investors to be nervous given the amount of uncertainty in both the market and the economy, but so far the market has remained focus on the underlying strength of the U.S. economy. With interest rates falling both in the U.S. and abroad, the markets could continue to rise, and once a trade deal is reached between the U.S. and China, even if it is a deal that is not very favorable to either side, the market will rally. The one thing the market hates more than anything is uncertainty, and any deal that is inked between the world’s two largest economies removes a lot of uncertainty and the markets will jump.
A lot of stocks have been on wild rides with ups and downs over the last year as trade fears and hopes have risen and fallen, while others have enjoyed nice steady gains despite the volatility. These are the stock that are best positioned to build on recent gains once uncertainty starts to lessen. Here is a closer look at four such stocks.
Southern Co. (SO)
The Southern Company (SO) is an electric utility. The stock has trended steadily higher over the last 12 months and is currently trading just shy of its all-time high. SO stock is up 38% in 2019 but remains attractively priced at just 14 times earnings. Utilities have been strong as the sector is viewed as a defensive play in weakening economies, and there is growing concern over a possible recession on the horizon due to the ongoing trade war and economic growth slowing globally. Utilities also become more attractive as interest rates fall since the sector is known for its high dividend payments. SO currently offers a big 4.1% yield with a 17-year streak of dividend increases. The big yield will keep interest in the stock as the Federal Reserve continues to cut rates in hopes of spurring the economy. SO trades at $60.83 with an average price target of $56.11.
Credit card leader Visa (V) has rewarded investors with steady gains over the last five years, and the outlook remains favorable. The stock is up 32% year to date. Consumer confidence and spending remains strong, and Americans have been running record high credit card balances. Visa has shown fantastic annual earnings growth of 21% over the last five years and looking ahead analysts expect additional earnings growth of 16% per annum over the next five years. The world is constantly moving towards cashless society and payment processors will continue to benefit. Visa has enjoyed big gains in recent years and analysts see additional upside in the stock. V currently trades at $174.54 with an average price target of $200.90.
Fast food leader McDonald’s (MCD) has enjoyed steady gains over the last five years, and the stock is currently trading just shy of its all-time high set in early August. MCD is up 18% year to date. When McDonald’s faced a consumer shift away from fatty fast food the company made strong moves in revamping its overall menu and launching all-day breakfast. The changes have worked, and earnings over the last five years have risen at an annual rate of 12% and over the next five years analysts forecast earnings growth of 6.8% per annum. The valuation on MCD is a bit high with shares trading at 27 times earnings, so the stock is currently priced for perfection and the company will need to continue delivering solid numbers for the stock to build on its recent gains. MCD trades at $208.90 with an average price target of $222.63.
Tech titan Microsoft (MSFT) has been rising steadily over the last five years as the company has carved out a leadership role in the cloud computing space. Cloud computing is currently the fastest growing sector in tech, and Microsoft’s leadership position has resulted in annual earnings growth of 17.6% annually the last five years and the company is expected to continue growing earnings 15% per annum over the next five years. The stock has traded sideways over the last two months just shy of its all-time high after appreciating 36% on the year. The stock’s valuation is a small concern with shares priced at 27 times earnings, but given the strong growth estimates and the overall strength in the cloud computing sector MSFT stock is likely to continue building on its recent gains as long as the company is able to keep hitting its estimates moving forward. MSFT trades at $137.41 with an average price target of $151.89.