Stocks continued their recent rebound with a solid month in January, though there are certainly plenty of clouds on the horizon. The Federal Reserve may still hike interest rates several times before the current tightening cycle finishes playing out. And geopolitical conflicts in Ukraine and elsewhere will continue to weigh on supply chains and risk sparking additional inflation. Regardless, investors are starting to look past these concerns and imagine the upside if the economy is able to pull off a so-called soft landing. If economic growth continues while inflation subsides, it would be a best case scenario for the market. Even if things don’t stick to the plan, however, there are pockets of value in the stock market which should offer favorable returns regardless. These five stocks have strong prospects for February and beyond:
— Microsoft Corp. (ticker: MSFT)
— Union Pacific Corp. (UNP)
— The Goldman Sachs Group Inc. (GS)
— Public Storage (PSA)
— Banco de Chile (BCH)
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Microsoft Corp. (MSFT)
Microsoft had an interesting January. Shares trended higher, then sold off on earnings, and then rallied once again to end the month. While Microsoft stock was volatile, the business’s outlook remains strong. Shares are at 27 times trailing and 23 times forward earnings, which is a reasonable price for a company that has posted as consistent and reliable earnings growth as Microsoft has done. And specifically, Microsoft’s involvement in artificial intelligence is a catalyst. Microsoft is a key investor in OpenAI, which is the company behind the ChatGPT artificial intelligence platform. Crucially for Microsoft, it is able to host much of this emerging AI activity on its Azure cloud platform, leading to a large new addressable market for Microsoft’s services for the 2020s and beyond.
Union Pacific Corp. (UNP)
Union Pacific is the largest railroad in North America. It has a dominant position across much of the Western United States. Railroads are an attractive industry due to heavy barriers to new competition, superior fuel efficiency versus trucks, and exposure to the overall growth of the American economy. Union Pacific has a kicker in that it has led the way in integrating Mexico into its network. Union Pacific has been involved in Mexico since 1992 and owns more than one-quarter of Ferromex, which is one of that country’s two primary railroads. As Mexican manufacturing booms, this will add value both at Ferromex and for Union Pacific as it hauls Mexican cargoes to end points across the U.S. UNP stock fell more than 16% over the past year. That puts shares at 16 times forward earnings while offering a decent 2.6% dividend yield.
The Goldman Sachs Group Inc. (GS)
Goldman Sachs is one of America’s prominent investment banks, and it has been building out its consumer business in recent years as well. The bank has a reputation for being some of the smartest money in the industry, with Goldman profiting, for example, during the 2008 housing crisis. However, Goldman isn’t immune to broader industry pressures. With the downturn in the stock market and economic prospects, Goldman saw its investment banking business drop off significantly in 2022. That, in turn, was bad for profits and sentiment around the company. However, longer-term investors should realize that these sorts of things are cyclical, and Goldman should see profits surge again once capital market activity picks back up. Regardless, shares go for just 10 times earnings, and the company is offering a 2.8% dividend yield as well.
Public Storage (PSA)
Public Storage is America’s largest storage-focused real estate investment trust, or REIT. The company has enjoyed tremendous success over the decades, with shares rising from $13 in 1993 to around $300 today. That’s not even taking into account the company’s generous dividend policy over the years. Storage is attractive as many Americans tend to buy lots of consumer goods and end up needing extra space to maintain these possessions. Storage demand also tends to see an increase when the housing market is active as people are moving to new locations. The surge in interest rates and potential for rising foreclosures going forward could drive incremental demand for Public Storage rentals. Shares pulled back from a high of $405 last year to around $300 now thanks to the surge in interest rates, which dinged REIT valuations. That marks a buying opportunity for Public Storage in 2023.
Banco de Chile (BCH)
Banco de Chile is the largest publicly traded bank in Chile with a market capitalization of more than $10 billion. The firm is highly profitable, and shares trade for less than seven times trailing earnings and have a dividend yield of 6.4%. Note that the dividend is variable and depends on profits in a given year. That said, profits should be trending higher. Chile’s economy is highly tied to metal mining, namely copper and gold. Gold has jumped in recent years as it serves as an inflation hedge. Copper, meanwhile, has advanced from $2.50 a pound to more than $4 as demand has surged to meet green energy and battery-related needs. Speaking of batteries, Chile has among the world’s largest lithium reserves and should enjoy an economic boom as the automobile industry continues to electrify. This augurs well for the Chilean economy, and thus shares of its largest bank.
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5 of the Best Stocks to Buy for February originally appeared on usnews.com
Update 02/01/23: This story was previously published at an earlier date and has been updated with new information.
