Analysts recommend these high-quality stocks.
U.S. stocks have had a huge rally off of 2020 lows, but near-term risks are elevated heading into the end of the year. Inflation is eating into corporate profit margins, the Federal Reserve is set to taper its monthly asset purchases, supply chain disruptions have created market uncertainty and a labor shortage is pressuring many U.S. companies. Investors are understandably looking for safe stocks to buy just in case any of these headwinds worsen heading into 2022. Here are seven safe stocks CFRA Research analysts recommend that also have an S&P Capital IQ quality rating of A+.
UnitedHealth Group Inc. (ticker: UNH)
UnitedHealth is the largest U.S. managed health care company. Analyst Paige Meyer says the recent news that UnitedHealth will expand its Affordable Care Act exchanges to seven new states is bullish for investors. Meyer says UnitedHealth has “solid growth prospects,” and its $8 billion buyout of Change Healthcare is a significant near-term catalyst given the potential for cost synergies and product expansion in its Optum division. While UnitedHealth faces ongoing pandemic headwinds, Meyer says the company’s goal of at least 13% annual earnings per share growth is achievable. CFRA has a “strong-buy” rating for UNH stock.
Home Depot Inc. (HD)
Home Depot is a leader in U.S. home improvement retail. Analyst Kenneth Leon says Home Depot has been a top performer in the past two years thanks to its ability to gain wallet share in a retail sector that has generally struggled to compete with Amazon.com Inc. (AMZN) and other e-commerce leaders. Leon says home improvement retailers will face extremely difficult year-over-year comparisons over the next couple of quarters. However, overall trends should remain strong in an environment of elevated demand from both do-it-yourself projects and professional contractors. CFRA has a “buy” rating for HD stock.
Mastercard Inc. (MA)
Mastercard is a credit card leader and the second-largest global payment processor. Analyst David Holt says investors do not fully appreciate the revenue growth potential Mastercard has in coming years as mobile and electronic payment volumes accelerate. He says Mastercard’s business has impressive operating leverage given its massive scale and asset-light model. Mastercard has international growth potential and opportunities to expand outside of its core credit card business, Holt says. Mastercard is a relatively low-risk play on the secular shift away from cash and check payments. CFRA has a “buy” rating for MA stock.
Thermo Fisher Scientific Inc. (TMO)
Thermo Fisher Scientific produces analytical instruments and services used in scientific research, pharmaceutical development and industrial production. Analyst Sel Hardy says Thermo Fisher’s ability to innovate and leverage its product portfolio to contribute to the pandemic response is impressive. In the longer term, Hardy says Thermo Fisher’s strategy of investing in both organic growth and strategic acquisitions will pay off for investors. Hardy is projecting revenue growth of 12% in 2021 and 7% in 2022 as the company continues to benefit from COVID-19 demand. CFRA has a “buy” rating for TMO stock.
Lowe’s Companies Inc. (LOW)
Like Home Depot, home improvement giant Lowe’s has benefited from both a booming U.S. housing market and a rise in do-it-yourself home improvement projects during economic shutdowns. Leon says Lowe’s is a beneficiary of a lasting shift in consumer spending toward home renovations. He says rising home prices and demand for repairs and remodeling are all bullish catalysts for the stock. In recent months, home improvement spending has begun to shift from do-it-yourself projects to professional projects, a transition Leon says the company is well positioned to capitalize on. CFRA has a “buy” rating for LOW stock.
Northrop Grumman Corp. (NOC)
Northrop Grumman is an aerospace and defense technology company that contracts primarily with the U.S. Department of Defense. Analyst Colin Scarola says Northrop has an impressive track record of growth regardless of economic or political climate, and he says the stock has an attractive valuation for such a reliable investment. Given an estimated 98% of the company’s sales come from government contracts, Northrop isn’t exposed to risks associated with general U.S. economic health or stock market cycles. Scarola is projecting steady, long-term revenue growth. CFRA has a “strong-buy” rating for NOC stock.
General Dynamics Corp. (GD)
General Dynamics is a diversified aerospace and defense contractor that supplies Gulfstream jets, nuclear submarines, Abrams tanks and other products and services to the U.S. military. Scarola says General Dynamics owns a valuable portfolio of defense brands, and the stock benefits from a lack of competition in the space. Scarola says General Dynamics’ defense business is undervalued even without incorporating the company’s aerospace business, which accounts for about 20% of total revenue. Scarola says negative investor sentiment, not poor fundamentals, is driving the stock’s low valuation. CFRA has a “strong-buy” rating for GD stock.
Top safe stocks to buy now:
— UnitedHealth Group Inc. (UNH)
— Home Depot Inc. (HD)
— Mastercard Inc. (MA)
— Thermo Fisher Scientific Inc. (TMO)
— Lowe’s Companies Inc. (LOW)
— Northrop Grumman Corp. (NOC)
— General Dynamics Corp. (GD)
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