The stock market has been taking investors for a ride as geopolitical tensions persist and the Federal Reserve raises interest rates to tame inflation.
The S&P 500 is down 13% this year as of May 5, with the much-loved high-tech names also taking a hit: Apple Inc. (ticker: AAPL), Tesla Inc. (TSLA) and Amazon.com Inc. (AMZN), for example, are down 12%, 17% and 30% respectively through the same date. So it may be time to look at other areas of the stock market.
In a time of market turmoil, it’s important to get a good read on which stocks are poised for growth and have overall strong businesses. These three stocks are worth considering based on their strong revenue, industry leadership and fundamental value:
— Cisco Systems Inc. (CSCO)
— Shell PLC (SHEL)
— Ford Motor Co. (F)
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Cisco Systems Inc. (CSCO)
Cisco is a global technology leader that has been around since 1984, manufacturing and developing networking hardware, telecommunications equipment, and other technology services and products. The company’s goal is to help customers connect to networking, collaboration security and cloud services, and sees growth in its customer base ahead.
There are two reasons to like a stock, says David Trainer, CEO of investment research firm New Constructs: It has to be a good business, and the stock has to have an attractive valuation. Trainer says Cisco has both of those characteristics.
Cisco has historically generated consistent cash flow. In fiscal year 2021, the company’s total revenue was $49.8 billion, up 7% year over year, and consistent with pre-pandemic annual revenues, with the exception of 2019, when it delivered $51.9 billion. These revenue levels make Cisco one of the largest software companies in the world.
Cisco is a mature company, so what is the company doing to address future growth? Trainer says Cisco’s growth plans will come naturally as the number of internet users grows. “This growing software company is serving customers beyond physical equipment in 115 countries and leveraging its business with existing customers,” he explains.
The first two quarterly earnings of fiscal 2022 were strong, with revenue coming in at $12.9 billion and $12.7 billion, respectively. Cisco’s financial outlook for the year is positive, too. The company’s revenue guidance is 5.5% to 6.5% revenue growth for fiscal year 2022.
Security is also driving additional demand. Research by New Constructs shows that Cisco’s security segment is the fastest-growing by revenue, with 20% growth between fiscal 2019 and fiscal 2021.
In a post-pandemic world where many businesses operate in a hybrid work environment, Cisco customers will be more reliant on technology to facilitate collaboration and help them navigate the changing work environment, which could help boost the stock.
CSCO also carries a strong dividend yield of about 3%. According to analysis by New Constructs, Cisco’s ability to generate significant amounts of free cash flow means that it can return a large amount of capital back to investors. If you couple dividends with the company’s aggressive share buybacks, CSCO can provide a combined 6% yield, according to an analysis by New Constructs.
Market capitalization: $205 billion
1-year return (through May 5): -3%
Shell PLC (SHEL)
Founded in 1907, Shell is an international energy company that is an expert in the production, refining and marketing of oil and natural gas and has a growing renewable energy segment.
The company is one of the hottest stocks to buy now because it is well-positioned to leverage elevated energy prices in a number of ways and has strong corporate fundamentals.
Shell is the leading cash flow generator in its sector, beating competitors like Exxon Mobil Corp. (XOM), BP PLC (BP) and Chevron Corp. (CVX). The company delivered first-quarter 2022 adjusted earnings of $9.1 billion during a challenging macroeconomic and geopolitical environment, taking advantage of spiking energy commodity prices. It also recently increased its quarterly dividend by about 4% and announced a $8.5 billion share buyback program for the first half of 2022.
Shell is also the world leader in liquefied natural gas, or LNG, a fuel that could become increasingly important as Europe looks to move away from Russian energy and as economies throughout the world transition from dirtier fuels.
Shell is moving into other businesses and is extremely well-positioned to distribute power, Trainer says, because the company has been doing it for a long time, and their core business is not going away. “Electricity is the fastest growing segment of the energy industry and plays a major role for Shell too,” Trainer says.
Market capitalization: $213 billion
1-year return: +41%
Ford Motor Co. (F)
Ford is a 119-year-old American auto manufacturer that has an established international presence. Ford is focused on establishing itself as a leader in electric vehicles, and has made major inroads toward that goal. Earlier this year, the auto giant announced a strategic move to divide the company’s operations into two separate units: The Ford Model E division, focused on EVs, and Ford Blue for the company’s traditional vehicle lineup.
The legacy automaker is already seeing a lot of growth in EV sales. In 2021, Ford was ranked the No. 2 seller of electric vehicles in the U.S. The company has plans to double EV production, and expects fully electric vehicles to represent at least 40% of its product mix by 2030.
In April, Ford reported U.S. vehicles sales of 176,965, a 10.5% decline from the same time a year ago, but Ford’s electric vehicle sales increased 139% from last year.
The company also owns about 12% of EV maker Rivian Automotive Inc. (RIVN), whose slumping shares dug a hole in Ford’s recent earnings. But the investment will likely pay off into the long term, says Julie Gillespie, head of market research at TipRanks, a financial data platform.
There’s still a lot of excitement around Rivian, but 2022 has been a rough start for newer, high-growth companies. “Over the next few years, I can see it having a big positive impact,” she says.
In the auto industry, one of the major headwinds is the shortage of semiconductors, an important component in many vehicles today. The semiconductor shortage is hurting all car companies, but Ford is in a better position in the near term because it procured semiconductors early, Trainer says.
Market capitalization: $58 billion
1-year return: +25%
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3 Hot Stocks to Buy Now originally appeared on usnews.com
Update 05/06/22: This story was published at an earlier date and has been updated with new information.
