The stock market had a strong month in March. Major indexes such as the S&P 500 recovered much of the losses from earlier this year. With that sharp rebound, value investors might feel like the buying opportunity is over, as there aren’t as many stocks down near their 52-week lows as there were back in February.
But for investors who want to keep allocating capital to the market in April, there are good opportunities out there. The rise in interest rates, in particular, has caused some quality stocks to go on sale. Here are five of the most compelling stocks to buy for April:
— Home Depot Inc. (ticker: HD)
— Whirlpool Corp. (WHR)
— Gilead Sciences Inc. (GILD)
— Verizon Communications Inc. (VZ)
— Goldman Sachs Group Inc. (GS)
Home Depot Inc. (HD)
Interest rates are going up sharply, and traders have started dumping anything relating to the housing industry. In some cases, that makes sense. In others, not so much. Home Depot is an example of a company being overly punished due to its sector. Higher interest rates will probably slow the new housing market to a significant degree. For the home renovation and improvement market, however, the effect should be less drastic. Meanwhile, Home Depot’s best-in-class distribution and supply chain networks should help it withstand the current inflationary shock. Traders might be missing the forest for the trees in terms of Home Depot’s exposure to short-term swings in the housing market. With HD stock down 25.7% year to date as of March 30, it’s now selling for less than 20 times forward earnings.
On a related note, makers of large household appliances are also selling off hard. People are afraid of a big drop-off in demand after a massive upgrade cycle. With people stuck at home for the past two years, many upgraded their appliances, furniture and other big household items. Perhaps that activity will drop off to a degree now as things get back to something more like normal pre-pandemic conditions. However, Whirlpool stock has already dropped so far as to negate much of the pandemic home improvement cycle growth. Whirlpool shares are now trading at less than 7 times both trailing and forward earnings. That’s a pretty cheap entry point to get exposure to longer-term trends such as millennials forming their own households and buying appliances for their new residences.
Gilead Sciences Inc. (GILD)
Gilead Sciences has felt the side effects of producing blockbuster drugs. The company commercialized a cure for the hepatitis C virus. This generated tens of billions of dollars of revenue for Gilead but has since led to a sharp drop-off in sales, as much of the patient population has already been cured. Gilead has a stable HIV treatment business, but investors have been waiting for something else to lead to more top-line revenue growth. For a while, it appeared that might be Gilead’s Veklury, or as it is more commonly known, remdesivir, for COVID-19. Now, however, the market has stopped putting large multiples on COVID-19 treatment stocks, and Gilead is back around 52-week lows. Shares are trading at less than 10 times forward earnings now. Morningstar’s analyst Damien Conover sees fair value at $81 per share, which puts the stock at a 26% discount as of March 30.
Verizon Communications Inc. (VZ)
For income investors, Verizon stock has dropped back into the buy zone. Shares slipped from $55.11 in early March to close at $51.61 on March 30, extending the downtrend that began last spring. With this latest dip, Verizon’s dividend yield, or the ratio of a year of dividend payouts to a stock’s price, has hit 5% once again. Shares are trading at less than 10 times both trailing and forward earnings. And to be sure, the low valuation makes some sense. Telecom is a mature and slow-moving industry, and leading players such as Verizon have a bunch of long-term debt. These companies don’t deserve to trade at huge multiples. This level might be too low, though, especially as things such as the 5G investment cycle appear finally ready to bear fruit for the industry. A move back up to just 12 or 13 times earnings in addition to the dividend yield would make for an attractive return from a safe-harbor blue-chip stock.
Goldman Sachs Group Inc. (GS)
Goldman Sachs has dropped from a high of more than $420 in November to about $336 as of March 30. That’s a bit surprising, given that rising interest rates help the banking industry. However, traders are selling off Goldman for other reasons. For one, analysts anticipate slower trading activity after a huge 2021. For another, the rise in interest rates may slow activity on the investment banking side of the business, such as initial public offerings. Regardless, shares are trading at less than 6 times trailing earnings and just 8.5 times forward earnings. One other important point: As of year-end 2021, Goldman Sachs had just $414 million of market exposure to Russia and $293 million of net credit exposure there, but reports indicate that the company will profit from that exposure by selling Russian debt to U.S. hedge funds and other investors. For a bank that generated more than $21 billion in net income last year, Goldman’s risk from the Russia-Ukraine conflict is minimal.
More from U.S. News
Update 03/31/22: This story was published at an earlier date and has been updated with new information.