The markets this year have been anything but consistent. The stock market has never been down this much at the half-year point since 1970, a harrowing truth for any investor. Despite the doom and gloom of the broader market, a few areas of potential still stand out.
Energy stocks especially have outperformed this year’s market. With fears of a recession looming and inflation at 40-year highs, investors need to pay special attention to the potential that bedrock industries can provide.
Here’s a list of 3 hot stocks to buy now:
— H&R Block Inc. (ticker: HRB)
— Occidental Petroleum Corp. (OXY)
— Continental Resources Inc. (CLR)
H&R Block Inc. (HRB)
Founded in 1955, H&R Block is a big player in the tax preparation industry. The company focuses on providing do-it-yourself tax preparation services, while also offering tax experts that file for you. While HRB gets a large share of its business from filing consumer tax returns, the company sees potential growth in its small-business offerings, estimating that a 1% increase in business tax market share would reap roughly $60 million in incremental revenue. The company is far from stagnant, with plans to revamp its offerings for small businesses, expand its financial service offerings and consolidate its tax preparation services into its global consumer tax department.
HRB has benefited from the market’s shift from growth to value stocks; shares trade at just 11.6 times earnings and 9.7 times forward earnings, even after a dizzying 52.6% year-to-date total return (including dividends) through the end of June. Fears of a recession make HRB even more attractive — companies and consumers will have to file taxes regardless of economic conditions. With nothing in life certain but death and taxes, it’s no surprise this tax prep software company is on a roll.
Another cherry on top that makes HRB one of the best hot stocks to buy today: The company pays a 3.1% dividend and has bought back nearly one-third of its outstanding shares since 2016.
Occidental Petroleum Corp. (OXY)
OXY has been a leader in energy production for over a century. Part of the recent hype around the company has been led by Berkshire Hathaway Inc. (BRK.B, BRK.A), the iconic financial conglomerate, which has been aggressively buying up OXY stock under the guidance of famed value investor Warren Buffett. Berkshire holds roughly 16% of the company’s stock.
Bryan Cannon, CEO and chief portfolio strategist at Cannon Advisors, notes that, “During this time of heightened volatility and melting of overvalued growth stocks, Occidental Petroleum stands out of the pack as an attractive alternative” due to its diversified exposure to the chemical production space, which he concludes gives Occidental “greater long-term staying power.” OXY has performed well as oil prices soar, reporting sales growth of more than 55% year over year in its most recent earnings report. High prices mixed with its diversified portfolio ensure that OXY is well-positioned to succeed through the rest of the year, even if predictions of a recession pan out.
Cannon also notes that analysts have gone nuts over OXY stock recently, regularly revising target prices higher in the wake of positive earnings surprises. OXY shares have been crushing the market in 2022 amid a mixture of Buffett‘s interest, soaring energy prices and earnings momentum, with shares posting year-to-date total returns through June 30 of 104%.
Continental Resources Inc. (CLR)
Last but not least among the hot stocks to buy is Continental Resources — another energy giant proving to have long-term staying power. CLR in May reported year-on-year sales growth in the first quarter of 49% and a 129% gain in earnings per share.
CLR shares rose 47% in the first half of the year. The company has a history as a family business, and the founding family still owns roughly 80% of CLR. On June 13, the company announced an offer from founder and majority stakeholder Harold Hamm — and various trusts associated with his family — to buy the remaining publicly traded shares of CLR and take the company private. The $70-per-share, all-cash offer was an 11% premium to the stock’s volume-weighted average price during the previous 30 trading days, and CLR shares spiked on the news.
The $70 offer represents more than 7% upside from the stock’s $65.35 closing price on June 30, which isn’t bad for a potential short-term return, especially in a bear market like the one investors are suffering through in 2022. Given the strong bull market in the energy sector, however, the upside could be even stronger for CLR stock, as a bidding war could potentially ensue. After all, even after its 47% advance so far in 2022, shares trade for just 12 times earnings and less than 7 times forward earnings, making CLR an enticing value proposition for the second half of the year.
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Update 07/01/22: This story was published at an earlier date and has been updated with new information.