3 Stocks That Have Nowhere to Go but Up The Fed's hawkish stance on inflation and other macroeconomic issues have weighed on investors' sentiments lately. Since the market might remain under pressure, investors may consider buying fundamentally strong stocks...
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The Fed's hawkish stance on inflation and other macroeconomic issues have weighed on investors' sentiments lately. Since the market might remain under pressure, investors may consider buying fundamentally strong stocks Broadcom (AVGO), Energy Transfer (ET), and Flowers Foods (FLO) as they are expected to soar. Read on….
The Fed Chairman Jerome Powell made it amply evident during the annual policy speech at Jackson Hole that the central bank will continue to hike the benchmark interest rates, which might cause "some pain" to the economy.
With inflation still hovering around 40-year high levels, the Fed would keep tightening its monetary policy until inflation moves closer to 2%. The central bank's hawkish tone will likely keep the stock market under pressure in the upcoming months.
Despite the expected market volatility, staying invested in quality stocks might help to generate solid returns in the long run. Therefore, it could be wise to buy stocks of Broadcom Inc. (AVGO), Energy Transfer LP (ET), and Flowers Foods, Inc. (FLO). Given the strong fundamentals and solid growth prospects, these stocks have nowhere to go but up in the long run.
Broadcom Inc. (AVGO)
AVGO operates as a designer, developer, and supplier of various semiconductor devices, focusing on complex digital, mixed–signal complementary metal oxide semiconductor-based devices and analog III-V-based products globally.
On August 22, 2022, AVGO and Tencent Holdings Limited (TCEHY) announced a strategic partnership to accelerate the adoption of high bandwidth co-packaged optics (CPO) network switches for cloud infrastructure. Under the partnership, AVGO would provide the 25.6-Tbps Humboldt CPO switch device, with TCEHY defining the system architecture to develop hardware and software for field deployment.
AVGO's net revenue increased 22.6% year-over-year to $8.10 billion for the second quarter that ended May 1, 2022. The company's non-GAAP net income increased 34.2% year-over-year to $4 billion. Its non-GAAP EPS came in at $9.07, representing an increase of 37% year-over-year. In addition, its adjusted EBITDA increased 29.1% year-over-year to $5.11 billion.
Analysts expect AVGO's EPS and revenue for the quarter ended July 31, 2022, to increase 37.1% and 24% year-over-year to $9.55 and $8.41 billion, respectively. It surpassed Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 0.4% to close the last trading session at $499.11.
AVGO's POWR Ratings reflect solid prospects. According to our proprietary rating system, it has an overall rating of A, translating to a Strong Buy. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Growth and Quality and a B for Sentiment. It is ranked #4 out of 94 stocks in the B-rated Semiconductor & Wireless Chip industry. Click here to see the other ratings of AVGO for Value, Momentum, and Stability.
Energy Transfer LP (ET)
ET is an energy company that owns and operates a portfolio of energy assets in the United States. The company's operations include natural gas midstream and intrastate transportation and storage; interstate natural gas transportation and storage; and crude oil, natural gas liquids (NGL), and refined products transportation, terminalling services, and acquisition and marketing activities, as well as NGL storage and fractionation services.
On August 16, 2022, ET announced that it had completed the sale of its 51% stake in Energy Transfer Canada ULC (Energy Transfer Canada) to a joint venture of Pembina Pipeline Corporation and global infrastructure funds managed by KKR. The sale of the assets will enable ET to deleverage its balance sheet and redeploy capital within its U.S. operations.
For the fiscal second quarter that ended June 30, 2022, ET's revenue increased 71.8% year-over-year to $25.94 million. The company's adjusted EBITDA increased 23.4% year-over-year to $3.23 billion. Its net income rose 111.8% year-over-year to $1.32 billion. In addition, its EPS came in at $0.39, representing an increase of 95% year-over-year.
For the quarter ending September 30, 2022, ET's EPS and revenue are expected to increase 96.8% and 43.7% year-over-year to $0.39 and $23.96 billion, respectively. It surpassed consensus EPS estimates in three of the trailing four quarters. The stock has gained 42.3% year-to-date to close the last trading session at $11.71.
ET's strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It has an A grade for Momentum and a B for Value. Within the B-rated Energy – Oil & Gas industry, it is ranked #29 out of 98 stocks. To see the other ratings of ET for Growth, Stability, Sentiment, and Quality, click here.
Flowers Foods, Inc. (FLO)
FLO produces and markets packaged bakery products in the United States. It offers fresh bread, buns, rolls, snack cakes, tortillas, frozen bread, and rolls under the Nature's Own, Dave's Killer Bread, Wonder, Canyon Bakehouse, Mrs. Freshley's, and Tastykake brand names.
On July 12, 2022, FLO announced that it had invested in Base Culture, gluten and grain-free sliced bread and baked goods maker. The investment will allow FLO to grow its offerings and revenues.
FLO's sales increased 11% year-over-year to $1.13 billion for the second quarter that ended July 16, 2022. For 28 weeks ended July 16, 2022, FLO's adjusted EBITDA rose 0.6% year-over-year to $285.44 million. Its adjusted net income increased 1.2% year-over-year to $158.34 million.
Analysts expect FLO's EPS for the fourth quarter (ending December 2022) to increase 24.6% year-over-year to $0.25. Its revenue for the third quarter (ending September 2022) is expected to increase 10.9% year-over-year to $1.14 billion.
It surpassed Street EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 13.1% to close the last trading session at $27.30.
FLO's POWR Ratings reflect this promising outlook. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It has an A grade for Growth and a B for Quality. It is ranked #10 out of 86 stocks in the B-rated Food Makers industry. Click here to see the other ratings of FLO for Value, Momentum, Stability, and Sentiment.
AVGO shares fell $5.11 (-1.02%) in premarket trading Thursday. Year-to-date, AVGO has declined -24.64%, versus a -16.69% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master's degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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