It may be just after Halloween, but investors haven’t had much to be scared of lately. Indeed, the market has been almost all treats in recent weeks. The S&P 500 surged 6.9% in October and closed the month at new all-time highs.
The strength wasn’t just in that index either, the Dow Jones and Nasdaq Composite both reached new all-time highs as well. With everything on a winning streak, however, it might seem hard to put new money to work. No one wants to buy stocks at all-time highs and then see them tank when the market starts to correct. So where are there still safe places to invest that should offer favorable returns going forward? These five stocks to buy for November should fit the bill nicely:
— Volkswagen AG (ticker: VWAGY)
— Yum China Holdings Inc. (YUMC)
— Visa Inc. (V)
— Johnson & Johnson (JNJ)
— Wells Fargo & Co. (WFC)
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Volkswagen AG (VWAGY)
Tesla Inc. ( TSLA) has been one of the hottest stocks of 2021. Its shares jumped another 40% in October as the firm passed a $1 trillion market capitalization. That valuation is rather difficult to justify based on fundamentals, however, given Tesla’s lackluster profitability.
For a much smarter investment in electric vehicles, there’s Volkswagen. Shares of the German automaker have been flat over the past few months; its last earnings report underwhelmed thanks to the ongoing semiconductor shortage which curtailed production. That sets up an opportunity. Volkswagen is one of the fastest adopters of electric vehicles among the legacy automakers. It anticipates that 20% of its sales will be electric vehicles in 2025.
That EV focus pairs well with the company’s wide range of upscale and luxury brands, including Porsche, Bugatti, Lamborghini and Bentley. Volkswagen is highly profitable and shares trade at a single-digit price-earnings ratio. Morningstar’s Richard Hilgert sees VWAGY stock as 19% undervalued right now.
Yum China Holdings Inc. (YUMC)
Yum China operates KFC, Pizza Hut, Taco Bell and other restaurant brands in China. Shares have dipped 20% from their highs this summer. The company has gotten caught up in the twin problems of the general aversion to Chinese investments and a rebound in COVID-19 activity in that country. The long-term future of the business remains bright, however.
Yum China has sped up its plans in terms of new restaurant openings as it uses more digital and delivery-focused models. A large company like Yum China is generally better able to adapt to sudden changes, such as a pandemic, as opposed to small businesses. While profits are depressed this year due to the pandemic, analysts see the company bringing in $2.20 of earnings per share next year. That amounts to just 26 times forward earnings for a company that should grow at a faster than 15% rate annually. While many COVID-19 recovery plays have already become expensive, Yum China still stands out as a relative bargain.
Visa Inc. (V)
Visa stock has slid from a high of $252 to $211 in recent weeks. That’s one of the steeper sell-offs the market has seen for the payments giant for quite a while. Over the years, Visa has been one of the best long-term wealth compounders around; shares are up nearly 800% over the past decade. The long-term story hasn’t changed. Over time, people will use plastic instead of cash to an increasing degree.
[SEE: 7 ‘Warren Buffett Stocks’ to Buy]
Although this transition is generally played out in many developed markets, there’s still a massive runway for adoption in emerging markets. Visa’s last earnings report disappointed as there have been some delays in economic recovery in certain segments such as the leisure and travel industries. That will pass in due time, however, and other segments of the economy are booming. Meanwhile, Visa shares are selling for less than 30 times forward earnings for the first time in ages. Analysts see the company continuing to grow earnings at a high teens rate annually going forward, making Visa stock a strong option today.
Johnson & Johnson (JNJ)
Johnson & Johnson is one of the best blue-chip stocks available. The company is a three-in-one health care conglomerate offering investors exposure to personal hygiene products, medical devices and pharmaceutical drugs. The firm’s shares have underperformed direct peers recently. That’s in large part because Johnson & Johnson decided to sell its COVID-19 vaccine at cost rather than trying to make a fortune from it as Moderna Inc. ( MRNA) did with its competing vaccine.
There had also been a great deal of concern that the current infrastructure legislation in Washington would go after drug prices as part of its funding mechanism. However, it appears that any drug price reform will get left out of legislation for this year, alleviating that concern. Add it all up, and Johnson & Johnson is selling at just 16 times forward earnings despite there not being much of a real downside case. On the upside, it has one of the market’s strongest balance sheets and diversified lines of business.
Wells Fargo & Co. (WFC)
Wells Fargo is one of the nation’s most compelling comeback stories. For years, it was the country’s most reputable big bank, and famous investors including Warren Buffett held massive stakes in the firm. Everything changed when the company created fake customer accounts and a major scandal developed. Buffett and others sold their stakes. Shares dropped nearly two-thirds from prior levels by the time the COVID-19 crash ended.
Now, the bank is rising from the ashes.
Wells Fargo brought in Charles Scharf, previously the CEO of Visa, to be the new chief executive. He’s implemented a massive cost-cutting program to save $8 billion per year. Meanwhile, he’s cleaned up much of the regulatory and legal overhang from the scandals. Earnings are already back up to pre-pandemic levels and set to grow dramatically as the cost savings take effect. The company has also instituted a massive share buyback program which will accelerate the gains in the company’s earnings and share price. More broadly, bank stocks are surging as well thanks to rising interest rates.
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5 of the Best Stocks to Buy for November originally appeared on usnews.com
