The bear market shows no sign of letting up. Stocks veered sharply lower in September, adding to 2022’s already considerable losses for the major market indexes. The Federal Reserve powered ahead with another 75-basis-point rate hike, further hitting market sentiment. Despite weakness in the housing market and financial assets, the Fed continues to prioritize fighting inflation rather than worrying about downside risk in the economy.
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This has created a bleak outlook for financial assets and there are few signs of any imminent catalyst for a turnaround. Even so, shrewd investors can take advantage of the huge discount sale in the stock market this autumn. These five stocks to buy for October are all trading near 52-week lows and priced for a major upturn as soon as market sentiment improves:
— Stanley Black & Decker Inc. (ticker: SWK)
— Nike Inc. (NKE)
— BlackRock Inc. (BLK)
— American Tower Corp. (AMT)
— Citigroup Inc. (C)
Stanley Black & Decker Inc. (SWK)
Stanley Black & Decker is a leading provider of power tools, storage, lawn and garden, and industrial equipment. The company enjoyed a tremendous burst of profitability in 2020 and 2021 as people bought new equipment to improve their homes and gardens. With folks stuck at home, it was a golden age for the industry. Since then, however, the tide has turned. Now vendors have too much supply as demand has dropped. Stanley Black & Decker will go from record profits in 2021 to profits far below normal levels in 2022. Inflation and supply chain issues have further deepened the current profitability issues. However, the market has dramatically overreacted. SWK stock is now off by half from its pre-pandemic levels and is on the verge of dropping below its March 2020 lows. This makes little sense. Analysts forecast Stanley Black & Decker’s profits rapidly recovering in 2023, and the stock price should follow.
Nike Inc. (NKE)
Global footwear and athletic apparel titan Nike is having a rough year. The stock is now down more than 50% from its highs in late 2021. The company is facing the same pressures that have affected so many consumer companies lately: inflation and supply chain problems have hit apparel makers hard.
Nike’s reliance on the formerly fast-growing Chinese market has also been a problem recently as that economy has been slower to reopen following the pandemic. Nike’s stock has gone from bad to worse in September, with shares selling off by more than 10% following the firm’s latest quarterly earnings. The quarterly results actually beat expectations on both the top and bottom line, but the results weren’t good enough to reverse the negative sentiment as inventory growth worried Wall Street. That said, investors can take advantage of the current extreme pessimism and buy this global consumer giant at a sharply discounted valuation.
BlackRock Inc. (BLK)
BlackRock is one of the world’s largest investment managers. It offers services to a wide array of clients including institutions, individual investors, pension funds, endowments and others. The company has had tremendous success with passive investments in particular, headlined by its iShares exchange-traded funds, or ETFs. In recent years, passive investing has taken more and more share from active mutual funds, leading to a boom for BlackRock.
Despite that long-term tail wind, BlackRock stock is down sharply in 2022 thanks to the broader market sell-off. BlackRock tends to earn fees based on the amount of capital invested, so a falling market causes earnings to dip. Over the longer term, however, the rotation from active to passive funds continues, and BlackRock will be larger and more profitable than ever once the next bull market arrives. Shares go for less than 15 times earnings.
American Tower Corp. (AMT)
American Tower is one of the three primary real estate investment trusts, or REITs, focused on cellphone towers and digital connectivity assets. American Tower has long been the leader in traditional cellphone towers, which are invaluable to mobile carriers. While the tower market is largely tapped in the United States, American Tower has invested heavily in overseas markets in recent years to keep its growth momentum going. More recently, American Tower has made a major push into data centers, which diversifies and broadens its business.
American Tower shares have plunged in recent weeks as higher interest rates reduce the relative attractiveness of income stocks such as REITs. Also, higher interest rates will hit profitability once American Tower has to refinance debt. However, with shares now down more than 25% year to date and at fresh lows, investors can get an attractive entry point today for AMT, which pays a 2.7% dividend.
Citigroup Inc. (C)
Citigroup is one of America’s largest banks, with sizable operations in investment banking, consumer finance and a large international division. The company is a deep value stock, with shares currently trading for less than six times earnings. Shares also offer a 4.6% dividend yield. Selling for less than half of book value, Citigroup is now trading as though it were distressed even though its underlying operations have been performing well over the past year.
No lesser than Warren Buffett’s Berkshire Hathaway Inc. (BRK.A, BRK.B) agrees that Citigroup is too cheap; Berkshire has purchased Citigroup shares aggressively this year. Given Buffett’s past success with banking sector investments, Citigroup could be a tremendous opportunity with shares trading near 52-week lows.
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5 of the Best Stocks to Buy for October originally appeared on usnews.com
Update 09/30/22: This story was previously published at an earlier date and has been updated with new information.
