The stock market is currently stuck in a fall swoon. Between soaring interest rates, inflation and an aggressive Federal Reserve, investors are understandably taking some risk off the table. With a possible recession on the horizon, this probably isn’t the time to be swinging for the fences. However, as the adage goes, time in the market is more important than timing the market.
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The key to long-run investing success is, in large part, simply allocating money to attractive opportunities and then holding on through the highs and lows. A good way to achieve that is to own high-quality companies that can thrive regardless of the broader economic or political environment. Here are the best nine stocks to buy for a starter portfolio, even in today’s uncertain economic environment:
— Thermo Fisher Scientific Inc. (ticker: TMO)
— Texas Instruments Inc. (TXN)
— Goldman Sachs Group Inc. (GS)
— Canadian Pacific Kansas City Ltd. (CP)
— PayPal Holdings Inc. (PYPL)
— McCormick & Co. Inc. (MKC)
— Prologis Inc. (PLD)
— Estee Lauder Cos. Inc. (EL)
— Public Storage (PSA)
Thermo Fisher Scientific Inc. (TMO)
Thermo Fisher Scientific is one of the world’s largest lab tools and scientific equipment companies. It operates four segments including life science solutions, diagnostic products, analytical technologies, and lab products and services.
The company has grown to be a giant through unceasing mergers and acquisitions; management has demonstrated a tremendous ability to find small life sciences companies and buy them at attractive prices. Today, Thermo Fisher is a one-stop shop for labs, biotech companies, pharma and academic institutions, and it should benefit from numerous favorable demographic and spending trends.
Thermo Fisher saw a surge in revenues related to demand for COVID-19 testing and vaccine development. As that has rolled off, Thermo’s earnings growth has trailed off and the stock has sunk. That creates a buying opportunity to own this integral, $165 billion player in its industry.
Texas Instruments Inc. (TXN)
Texas Instruments is the world’s largest analog semiconductor company; it holds a wide market share lead over the next-biggest player in its niche. Analog chips are highly attractive from an investing standpoint. That’s because they tend to serve slower-moving end markets. This means that Texas Instruments chips can continue to remain on the market for many years, rather than seeing designs quickly become obsolete.
Analog chips help machines turn real-world information into digital data that computers can make sense of. As items such as cars and appliances become smart and absorb data from the real world, this is causing a massive increase in the amount of computing power going into a wide array of consumer products. Much of that is in the form of Texas Instruments’ analog chips.
Texas Instruments’ stock has slumped thanks to the slowdown in the automotive industry, but investors can be confident in the firm’s excellent management, large capital returns to shareholders, and steady growth in earnings and dividends over the decades.
Goldman Sachs Group Inc. (GS)
Goldman Sachs is one of the world’s largest investment banks, providing a vast array of underwriting, advising and deal-making services to its clients. In recent years, Goldman Sachs has expanded its retail banking division as well. Goldman Sachs has a tremendous reputation due to its legendary trading acumen. The bank, for example, skated through the 2008 financial crisis due to cautious bets on the U.S. housing market at a time when most other banks were aggressively positioned in the wrong direction. So far, Goldman’s balance sheet has been reasonably situated for the current interest rate shock as well.
GS stock has slipped in 2023 on the weakening economic and financial markets outlook. Understandably, there will probably be fewer IPOs and mergers next year if current market weakness accelerates. That said, investors are getting a long-term bargain on one of America’s strongest banking franchises with shares at their current levels. Shares trade for just 8.4 times forward earnings.
Canadian Pacific Kansas City Ltd. (CP)
Canadian Pacific Kansas City is a massive Class I North American railroad that recently emerged from the merger of Canadian Pacific and Kansas City Southern. That merger creates a dynamic route network spanning from CP’s extensive Canadian rails on down into the heart of Mexico’s manufacturing zone and countless points in between. The combined rail has exposure to several of the fastest-growing segments on the continent, including Canada’s commodity regions and the bustling factories of Texas and Northern Mexico.
As reshoring continues to gain steam, North American railroads should enjoy a long trajectory of steady growth. In the short term, however, CP stock trades near 52-week lows as investors fret about a potential recession. Yes, earnings could be down in 2024, but the company should be a steady source of outsized shareholder returns over a longer time period.
[READ: 7 Best Cheap Stocks to Buy Under $20]
PayPal Holdings Inc. (PYPL)
There has been a massive boom-and-bust cycle within e-commerce and related companies since 2020. This makes sense, as online shopping boomed during the early days of the pandemic and has since lost a good deal of that momentum. In addition, there were arguably too many startups chasing the payments space. From a flood of fintech special-purpose acquisition companies on through to traditional banking solutions and even cryptocurrency, there was a lot of competition flooding the zone in payments. This has caused established firms like PayPal to face more pricing pressure on their payments offerings.
However, things have gotten totally out of hand. PayPal shares have now fallen from a peak of $300 to barely $50 per share today. This is rather remarkable as PayPal continues to grow revenues steadily and analysts forecast double-digit earnings growth next year. Meanwhile, shares are down to 12 times forward earnings. PayPal has fallen into deep value territory while giving investors a long-term play on the continuing growth of e-commerce and online services.
McCormick & Co. Inc. (MKC)
McCormick is America’s largest spices company. In addition to selling its own branded goods, McCormick is a leader in producing store-brand spices and flavor solutions for restaurants and institutional kitchens. More recently, the firm has made an aggressive splash in the condiments and hot sauce market, making acquisitions such as Frank’s and Cholula.
McCormick stock has gotten slammed in recent months as investors have sold off the food and beverage sector thanks to rising interest rates along with concerns over a potential reduction in demand due to GLP-1 weight loss drugs. However, it seems unlikely that weight loss drugs would make much difference in demand for McCormick’s generally healthy and low-calorie products.
McCormick is a great long-term investment, as spices and flavorings are quite immune to technological disruption. And the firm’s unparalleled brands and supply chain expertise give it a huge competitive advantage.
Prologis Inc. (PLD)
Prologis is a real estate investment trust, or REIT, that has grown into America’s largest industrial and logistics landlord. This has become a highly attractive vertical. Many large industrial companies and retailers don’t want to own all their own warehouses, factories and fulfillment centers. Prologis has built an incredible business by rolling up a gigantic number of these properties; it now counts a stunning 1.2 billion square feet of properties across its portfolio globally.
Prologis shares rallied from about $15 coming out of the 2008 financial crisis to a figure 10 times that level at its recent highs. Since its 2022 peak, however, shares have slumped about 40% thanks to higher interest rates and fears of an economic slowdown. But between the North American manufacturing boom and the continued rise of e-commerce and omnichannel logistics needs, Prologis should have a long growth runway ahead of it.
Estee Lauder Cos. Inc. (EL)
Cosmetics giant Estee Lauder has had a fascinating couple of years. At first, there were concerns that sales would slump while people were stuck at home. As soon as the economy began to reopen, however, consumer spending surged and cosmetics fared particularly well, as folks wanted to look their best as social events started up again. Estee Lauder shares skyrocketed, hitting new all-time highs and reaching a peak valuation north of 45 times earnings.
Since then, shares have gotten pummeled as both earnings per share and the firm’s valuation multiple have tumbled in unison. All told, the stock is down more than 60% from its January 2022 peak. This is a simply incredible dive for a world-class company that has such a long track record of consistent earnings growth dating back to the 1990s.
Between recession fears and the Chinese economic slump, Estee Lauder’s 2024 outlook is uncertain. But investors willing to look past near-term blemishes should be rewarded.
Public Storage (PSA)
Public Storage is America’s largest self-storage REIT. The self-storage space is attractive for a couple of reasons. For one, it doesn’t take much underlying capital to build a storage unit as compared to other commercial real estate categories such as offices or shopping malls. For another, self-storage has proven to fare surprisingly well during economic downturns. In fact, self-storage was one of the best-performing categories of REITs during the 2008 financial crisis. This makes sense as foreclosures and other economic hardships caused people to change their living conditions and thus have a sudden need for incremental space to store their cherished possessions.
In addition, because storage is priced on short-term — often month-to-month — contracts, landlords can reset rates higher quickly during periods of high inflation. PSA stock plunged in October on interest rate fears and is now down nearly 20% over the past year. Investors should snap up the bargain.
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9 of the Best Stocks for a Starter Portfolio originally appeared on usnews.com
Update 10/27/23: This story was published at an earlier date and has been updated with new information.
