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Let These 3 Stocks Lead You Through the Bear Market

Gloomy earning guidance halted the S&P 500’s three-day winning streak. Moreover, a recession seems apparent as the U.S. economy battles sky-high inflation, aggressive rate hikes, and geopolitical headwinds. With the bear market not over yet, we think fundamentally strong stocks Walmart (WMT), Cisco Systems (CSCO), and Vertex Pharmaceuticals (VRTX) might be ideal investments to navigate through it. Keep reading...

The S&P 500 ended a three-day winning streak on Wednesday, closing in negative territory as gloomy earnings guidance added to growing fears of a global economic slowdown.

The Federal Reserve, widely expected to bring the policy rate to 3.75%-4% by delivering a fourth straight big interest-rate hike next week, is adding to the concerns. While Sen. Sherrod Brown, Ohio Democrat, sent a letter this week to Fed Chair Jerome Powell, expressing concern about the impact that interest rate hikes could have on employment. Powell has been known to be generally dismissive of political pressure in the past.

As the U.S. economy battles decades-high inflation, big interest rate hikes, and mounting geopolitical tensions, Bloomberg Economics’ latest statistical projections showed a 100% probability of a recession within the next 12 months.

While the bear market might remain for a while, fundamentally strong stocks, Walmart Inc. (WMT), Cisco Systems, Inc. (CSCO), and Vertex Pharmaceuticals Incorporated (VRTX) might be able to lead you through it, given their solid positioning in the industry.

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 October 26, WMT announced the completion of the renovations made to the retrofitted regional distribution center in Texas, transforming it into a high-tech automation center. This investment is set to modernize Walmart’s vast supply chain network to increase the speed, efficiency, and safety of product distribution.

Moreover, on September 28, WMT celebrated the grand opening of Walmart’s first of four Next Generation Fulfillment Centers in Joliet, Illinois. The new FC should improve the operational capability of the company.  

In February, WMT declared an annual dividend of $2.24 per share to be paid in four quarterly installments of $0.56 per share. The company has a record of 48 years of consecutive dividend growth. This reflects the good liquidity position of the company.

WMT’s total revenues increased 8.4% year-over-year to $152.86 billion for the second quarter that ended July 31, 2022. Its consolidated net income rose 17.9% year-over-year to $5.15 billion, while its EPS grew 23.7% year-over-year to $1.88. 

The consensus EPS estimate of $1.48 for the fiscal fourth quarter ending April 2023 represents a 14.2% improvement year-over-year. The consensus revenue estimate of $144.87 billion for the same quarter indicates a 3.3% increase from the prior-year period. The company has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in three of the trailing four quarters. 

Its stock has gained 15.7% over the last three months to close the last trading session at $141.14. It has gained 7.5% over the past month.

WMT’s POWR Ratings reflect this promising outlook. The company has an overall A rating, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting. 

It has an A grade for Sentiment and a B for Growth, Stability, and Quality. In the A-rated Grocery/Big Box Retailers industry, WMT is ranked #3 out of 38 stocks.

To see the additional POWR Ratings for WMT for Value and Momentum, click here.  

Cisco Systems, Inc. (CSCO)

CSCO designs, manufactures, and sells Internet Protocol-based networking and other products related to the communications and information technology industry globally. It provides infrastructure platforms, collaboration products, and security products.

On October 12, 2022, CSCO and Microsoft Corporation (MSFT) announced their partnership at Microsoft’s annual Ignite conference, under which MSFT Teams will run natively on CSCO Room and Desk devices Certified for MSFT Teams. Also, CSCO will become a partner in the Certified for MSFT Teams program for the first time. This should be strategically beneficial for the company.

On August 23, CSCO declared a quarterly cash dividend of $0.38 per common share, payable to shareholders on October 26, 2022. This reflects the shareholder return ability of the company.

CSCO’s total revenue came in at $51.56 billion for the fiscal year ended July 30, 2022, representing a 3.5% year-over-year growth. Its operating income grew 8.9% from the prior year to $13.97 billion, while its non-GAAP net income rose 3.4% from last year to $14.09 billion. EPS increased 4.3% from the prior year to $3.36.

Analysts expect CSCO’s revenue for the third quarter ending April 2023 to be $13.56 billion, indicating a 5.7% year-over-year growth. The company’s EPS for the same quarter is expected to increase by 3% from the prior-year quarter to $0.90. Additionally, CSCO has topped consensus EPS estimates in each of the trailing four quarters, which is impressive.

CSCO has gained 9.4% over the last month to close its last trading session at $44.38. It has gained 6.4% over the last five days.

It’s no surprise that CSCO has an overall B rating, which translates to Buy in our proprietary POWR Ratings system.

In addition, the stock has an A grade for Quality. It is ranked #6 of 49 stocks in the Technology - Communication/Networking industry.

Beyond what we’ve stated above, we have also given CSCO grades for Growth, Value, Momentum, Stability, and Sentiment. Get all CSCO ratings here.

Vertex Pharmaceuticals Incorporated (VRTX)

VRTX is a biotechnology company that develops and commercializes therapies for treating cystic fibrosis. The company sells its products primarily to specialty pharmacies and distributors in the United States, as well as specialty distributors, retail chains, hospitals, and clinics internationally.

On October 11, VRTX announced that the U.S. Food and Drug Administration had cleared the Investigational New Drug Application for VX-634, enabling the company to initiate a first-in-human clinical trial for this small molecule AAT corrector in healthy volunteers. If it passes the clinical trials successfully, this might drive up the company's revenue in the future.

On September 27, VRTX and CRISPR Therapeutics (CRSP) announced that the FDA granted exagamglogene autotemcel (exa-cel) a rolling review for the potential treatment of sickle cell disease (SCD) and transfusion-dependent beta thalassemia. Exa-cel is being investigated in multiple ongoing clinical trials as a potential one-time therapy for patients with either SCD or TDT.

VRTX’s total revenues increased 18.3% year-over-year to $2.20 billion for the fiscal second quarter ended June 30, 2022. Its non-GAAP operating income improved 1,571.8% from the year-ago value to $1.18 billion, while its non-GAAP net income rose 2,049% year-over-year to $930.50 million. The company’s non-GAAP EPS came in at $3.60, indicating a 2,017.6% improvement year-over-year.

The consensus EPS estimate of $14.16 for the current fiscal year ending December 2022 represents an 8.8% improvement year-over-year. The consensus revenue estimate of $8.78 billion for the same year represents a 16% increase from last year’s value. The company has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in three of the trailing four quarters.

Over the past nine months, the stock has gained 69.1% to close the last trading session at $311.18. It has gained 41.7% year-to-date.

VRTX’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.

It also has an A grade for Quality and a B for Value. It is ranked first among 382 stocks in the Biotech industry.

See VRTX ratings for Growth, Momentum, Sentiment, and Stability here.

WMT shares rose $0.56 (+0.40%) in premarket trading Thursday. Year-to-date, WMT has declined -1.15%, versus a -18.57% rise in the benchmark S&P 500 index during the same period.

About the Author: Kritika Sarmah

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.


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