Despite the ongoing trade war with China and political uncertainty surrounding the impeachment proceedings currently taking place, the markets have remained very resilient.
The S&P traded up to a new all-time high again in today's trading, and both the Dow Jones and the NASDAQ are just shy of their all-time high. Investors continue to drive the market higher in reaction to a strong start to the current earnings season and another expected interest rate cut this week.
Consumer confidence in October slipped to 125.9, which was lower than the expected 128, but the reading remains strong and raises no concerns ahead of the upcoming holiday shopping season.
Barring a string of negative surprises this earnings season the market should remain strong into the final months of the year. Investors are upbeat, but with so many uncertainties in the market there is a lot of cautious optimism with fears over the possible outcome of a drawn out trade war with China should that occur.
As a result, investors are worried about where to put their money to work in order to best safeguard their investments from a possible correction. Here are a few stocks that look like good buys as the markets trade at record highs.
Microsoft (MSFT)
Microsoft (MSFT) has been one of the top stocks in recent years, and the stock is currently trading at its all-time high. The company recently reported better than expected first-quarter numbers on both the top and bottom line, the third straight quarter of earnings and sales beats. Microsoft is a leader in the cloud computing space which continues to show rapid growth. The company's commercial cloud revenue rose 36% year over year last quarter. The pentagon recently awarded the company a coveted $10 billion cloud-computing contract. Amazon (AMZN) is expected to challenge the decision, citing pressure from President Trump, but for now Microsoft came out the winner for the huge contract that will provide a huge revenue stream moving forward. MSFT trades at $143.24 with an average price target of $158.50.
Visa (V)
Credit card company Visa (V) has traded sideways over the last three months. The company reported strong Q4 numbers on October 24 and issued upbeat 2020 guidance that pushed the stock higher. While the stock remains strong, it has failed to break through resistance multiple times at the $180 level and needs to rally above that resistance line in order to form a new support level as we head into the final months of the year. Another interest rate cut should boost investor confidence in both the market and the overall economy and allow all the payment processors to show strength in the upcoming months. V trades at 24 times future earnings, but with profits forecast to rise at an annual rate of 16% over the next five years the valuation is reasonable and should not prevent the stock from trading higher. V trades at $178.46 and analysts have an average price target of $204.52.
Wells Fargo (WFC)
Financial giant Wells Fargo (WFC) has trended strongly higher over the last several months, with shares moving even higher in October despite a mixed Q3 report. The company missed on the bottom line, but reported quarterly revenue of $22 billion, which easily outpaced the $20.96 billion forecast. Falling interest rates are a small concern for the sector, but if lower rates have the intended effect of boosting the overall economy the slightly lower rates could actually be a positive for the sector. WFC is currently trading at $52.15 with an average price target of $50.41. While the stock is above its price target, shares are very reasonably priced at just 11 times earnings, which are expected to rise at an annual rate of 8% over the next five years. Based on the stock's current valuation I look for analysts to ratchet up their price targets to allow the stock to move higher following the recent sales beat.
Walmart (WMT)
Retail leader Walmart (WMT) has been a top stock in recent years as the company's investments in e-commerce and in its employees has led to solid growth both online and in-store sales. The company last reported quarterly numbers in August that topped estimates on both the top and bottom line. The strong numbers pushed the stock higher and it is currently trading just of its all-time high. Over the last five years the company has managed to grow profits at just 0.5% per annum but looking ahead analysts see growth accelerating to an annual rate of 4.6% over the next five years. As we head into the very important holiday shopping season the overall economy remains strong and consumer confidence is running high. Low unemployment and a strong stock market should keep consumer confidence high and lead to a strong holiday shopping season. With Walmart's improvements in both online and in-store sales the holiday season should be strong and allow WMT stock to build on its recent gains. WMT is trading at $117.50 with an average price target of $119.65.
