3 Top Stocks to Buy When the Going Gets Tough

While November’s headline and core CPI rates of 7.1% and 6% exhibited remarkable improvement from October’s 7.7% and 6.3% increases, respectively, it is still a long way off from the 2% targeted by the Federal Reserve.

Hence, while the Fed is expected to announce a 50-bps interest rate hike tomorrow, stronger-than-desired employment data for November is set to leave lingering concerns regarding the target interest rate Fed might reach before an eventual pivot and its effect on near-term economic growth.

Given the ongoing macroeconomic uncertainties, the market may not return to stability anytime soon. Hence, it could be wise to invest in fundamentally strong and resilient stocks Microsoft Corporation (MSFT), Sysco Corporation (SYY), and Cardinal Health, Inc. (CAH).

Microsoft Corporation (MSFT)

Being one of the global technology giants, MSFT needs no introduction. The company operates through three segments: Productivity and Business Processes; Intelligent Cloud; and More Personal Computing.

On December 8, MSFT paid a quarterly dividend of $0.68 per share, reflecting a 10% sequential increase. MSFT pays $2.72 per share annually as a dividend, representing a yield of 1.11% at the current price, better than the 4-year average dividend yield of 1.05%. The company has raised its dividends for 18 consecutive years.

On November 16, MSFT and Lockheed Martin Corporation (LMT) announced a landmark expansion of their partnership to help power the next generation of technology for the Department of Defense (DOD).

The agreement would span four critical areas: Classified Cloud Innovations; Artificial Intelligence/Machine Learning (AI/ML), Modeling and Simulation Capabilities; 5G.MIL Programs; and Digital Transformations. Both companies expect to infuse immersive experiences and other advanced commercial technologies into the most capable defense systems.

On November 14, MSFT announced the Microsoft Supply Chain Platform, which would help organizations maximize their supply chain data estate investment with an open approach. It would enable organizations to make the most of their existing investments to gain insights and act quickly.

For the first quarter of the fiscal year 2023 ended September 30, MSFT’s total revenue increased 10.6% year-over-year to $50.12 billion, while its operating income grew 6.3% from the year-ago value to $21.52 billion.

Analysts expect MSFT’s revenue for the fiscal year ending June 2023 to come in at $213.27 billion, representing an increase of 7.6% year-over-year, while the company’s EPS is expected to increase 3.5% year-over-year to $9.53. The company has an impressive earnings surprise history since it surpassed the consensus EPS estimates in three of the trailing four quarters.

The stock has gained 4.5% over the past month to close the last trading session at $252.51.

MSFT’s POWR Ratings reflect its promising outlook. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its weighting.

MSFT has a grade of B for Stability, Sentiment, and Quality. Within the Software – Business industry, it is ranked #9 of 52 stocks.

Click here for MSFT’s additional POWR Ratings for Growth, Value, and Momentum.

Sysco Corporation (SYY)

SYY sells, markets, and distributes food products, primarily to restaurants, healthcare, and educational facilities, lodging establishments, and other customers who prepare meals away from home. The company operates through three segments: U.S. Foodservice Operations; International Foodservice Operations; and SYGMA.

On December 7, SYY announced the launch of its 10th Commercial Driver’s License (CDL) training facilities. This industry-leading training program should help increase the number of qualified drivers available at the company’s disposal, thereby adding to the robustness of its supply chain. 

On November 17, SYY declared its quarterly dividend of $0.49, payable on January 27, 2023. The company pays $1.96 annually as dividends, translating to a yield of 2.36% at the current price. Its four-year average dividend yield is 2.41%, and dividend payouts have grown for seven consecutive years.

SYY’s non-GAAP gross profit for the first quarter ended October 1, 2022, increased 17.3% year-over-year to $3.48 billion. The company’s non-GAAP net earnings increased 14.6% year-over-year to $492.60 million. Its adjusted EBITDA increased 7.5% year-over-year to $916.86 million, while non-GAAP EPS increased 16.9% from the prior-year period to $0.97.

SYY’s revenue and EPS for the fiscal year ending June 2023 are expected to increase 10.9% and 27.7% year-over-year to $76.13 billion and $4.15, respectively. The stock has gained 5.3% year-to-date to close the last trading session at $83.13.

It is no surprise that SYY has an overall rating of A, which translates to a Strong Buy in our POWR Ratings system.

SYY also has an A grade for Growth and a B for Value and Stability. It is ranked #8 of 82 stocks in the B-rated Food Makers industry.

We have also given SYY grades for Momentum, Sentiment, and Quality. Get all the SYY ratings here.

Cardinal Health, Inc. (CAH)

CAH operates as an integrated healthcare services and products company through Pharmaceutical and Medical segments. It offers tailored solutions for hospitals, healthcare systems, pharmacies, ambulatory surgery centers, clinical laboratories, physician offices, and patients undergoing in-home treatment.

On November 15, CAH announced the launch of Velocare™, a supply chain network and last-mile fulfillment service to provide patients undergoing in-home treatment with critical products and services required for hospital-level care within two hours.

This would help the company better address the needs of a significant market segment comprised of patients undergoing home treatment. Hence, it is expected to impact market share and topline positively.

On November 8, CAH announced its quarterly dividend of $0.50 per share, payable on January 15, 2023, to shareholders on record as of January 3. The company pays $1.98 annually as dividends, translating to a yield of 2.49% at the current price.

CAH’s four-year average dividend yield is 3.66%. Moreover, the company has an impressive track record of increasing its dividend payouts for the past 27 years.

For the fiscal 2023 first quarter ended September 30, 2022, CAH’s revenues increased 13% from the previous year’s quarter to $49.60 billion, while its pharmaceutical segment’s revenue and profit grew 15% and 6% year-over-year to $45.80 billion, and $431 million, respectively.

The company’s cash inflows from operating activities were $23 million, compared to cash outflows of $646 million in the prior-year period.

Analysts expect CAH’s revenue and EPS for the fiscal year ending June 2023 to increase 9.9% and 4.9% year-over-year to $199.25 billion and $5.31, respectively. The stock has gained 3.7% over the past month and 52.9% year-to-date to close the last trading session at $79.52.

CAH’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.

CAH has a B grade for Growth and Value. It ranks #4 of 78 stocks in the Medical – Services industry. 

Get additional ratings for CAH’s Momentum, Stability, Sentiment, and Quality here.

MSFT shares were trading at $255.75 per share on Tuesday afternoon, up $3.24 (+1.28%). Year-to-date, MSFT has declined -23.24%, versus a -14.48% rise in the benchmark S&P 500 index during the same period.

Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities.

More...