It’s been difficult to watch the action in the stock market lately. The Federal Reserve, or Fed, is moving to combat inflation at levels we haven’t seen in more than four decades, and most financial experts agree that there’s a high probability of an economic recession in the near term.
Of course, the market is reacting. The S&P 500 is down more than 21% year-to-date with the Dow Jones Industrial Average and Nasdaq composite falling more than 16% and 30%, respectively.
In times like these, it’s hard to decide which stocks you should buy, if any. However, even when picking stocks feels like you’re swimming through a sea of red, there are lush, green opportunities to take advantage of.
Best Stocks to Buy Right Now
When the bears take hold of the market, it’s easy to second-guess your investment decisions and difficult to find anything you’d be interested in piling your money into. However, no matter how red the market is, there’s always a glimmer of green.
You own shares of Apple, Amazon, Tesla. Why not Banksy or Andy Warhol? Their works’ value doesn’t rise and fall with the stock market. And they’re a lot cooler than Jeff Bezos.
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Where are those glimmers now?
The top stocks to buy now are large companies with a massive economic moat — a competitive advantage that keeps competitors from chipping away at them. Many of these are non-cyclical plays that offer strong dividends. And there are a few cyclical gems that risk-tolerant investors may want to dive into for a discount on gains that seem all but guaranteed in the future.
Here are some ideas for the best stocks to consider buying right now. There’s a little something for every kind of investor.
Best for the risk-tolerant investor.
- Performance: Amazon.com’s stock price has fallen more than 33% year-to-date (YTD) and more than 38% over the past year.
- Dividend Yield: 0%
- Valuation Metrics: Price-to-earnings ratio (P/E ratio): ~53; price-to-book value ratio (P/B ratio): ~8; price-to-sales ratio (P/S ratio): ~2.3.
- Market Cap: ~$1.152 trillion.
Tech stocks like Amazon.com are likely the last pick you’d expect to find on this list. The company operates in a highly cyclical industry and has given up about a third of its value this year alone. There’s no question that some AMZN investors are frustrated beyond words at this point, but that’s often the best time to buy.
Even through the recent selloff, the stock has maintained its position as a favorite among exchange-traded funds (ETFs) and mutual funds. What’s so exciting about this falling knife?
Amazon.com is an e-commerce giant with a clear ability to weather economic storms. The company’s share price didn’t even flinch in the face of the COVID-19 pandemic, likely because it benefited greatly from stay-at-home orders and store closures.
That’s not the first crisis the company has faced. Although it had its ups and downs, the company’s strong fundamentals carried it through the dot-com bubble burst and the Great Recession. And though the stock may be trading down at the moment, that trend isn’t likely to last forever.
If history is any indication, the company will be sailing toward all-time highs again in no time flat.
The company also has a potential bounce back to greatness as fears settle. Throughout the majority of its existence, Amazon.com has focused on razor-slim margins in the e-commerce space. However, its newer Amazon Web Services (AWS) cloud computing offering is anything but a thin-margin offering. Margins on the AWS business are so big that they’re pushing the company’s average margins to the roof.
All told, Amazon.com does face some economy-related headwinds ahead, but it’s nothing the company hasn’t already proven to be perfectly capable of handling. If you’re risk-tolerant enough to hold on through what may be a short-term rough patch and wise enough to dollar-cost average in the bear market, AMZN is a stock that’s worth your consideration.
2. Devon Energy Corp (NYSE: DVN)
Best for income investors.
- Performance: DVN is up more than 12% YTD and 84% over the past year.
- Dividend Yield: ~9%.
- Valuation Metrics: P/E ratio: ~11; P/B ratio: ~4; P/S ratio: ~2.75.
- Market Cap: ~$33.9 billion.
Devon Energy is an income investor’s dream. The company is the highest-paying dividend stock on the S&P 500. Devon Energy is an oil and gas powerhouse with a long history of stellar performance — and after more than 80% growth over the past year, the share price growth is expected to continue.
Income investing veterans may be thinking, “DVN is only paying dividends because oil and gas prices are soaring.” But that’s not the case. The company has consistently paid strong dividends to investors for the past 29 years, even when oil and gas prices have been down.
It has a strong balance sheet and impressive credit rating. Even when the oil and gas industry isn’t so hot, the company has access to the money it needs to pay dividends.
Now may be the best time to buy too.
The Organization of Petroleum Exporting Countries (OPEC), the world’s largest oil cartel, recently announced plans to boost oil production. The announcement sent DVN falling, giving up much of the gains it’s seen this year already. Although the stock is up 12% YTD, it’s given up more than 33% of its value in the past month.
These declines aren’t going to last forever.
European nations are expected to ban more than two-thirds of Russian oil imports within the next year, which could send oil prices headed for the top yet again. That’s great news for DVN and its investors.
Nonetheless, if you’re an income investor, chances are you’re not too concerned with price appreciation; you’re more interested in the quarterly dividend check. When you invest in Devon Energy, you can rest assured that meaningful dividend payments will come on schedule, just as they have for nearly 30 years.
Best for growth investors.
- Performance: Meta Stock has fallen more than 50% YTD and more than 52% over the past year.
- Dividend Yield: 0%.
- Valuation Metrics: P/E ratio: ~12; P/B ratio: ~3.5; P/S ratio: ~2.75.
- Market Cap: ~$453 billion.
Meta Platforms, formerly Facebook, is a favorite on Wall Street; it’s the fourth most commonly found stock in ETF portfolios. However, the past year has been a tough time. Although that may send most investors running for the hills, it’s actually an opportunity.
Meta is a growth stock by just about any definition. The company has had solid revenue growth for years, and earnings per share (EPS) growth was impressive until the most recent earnings report. Moreover, the stock was known for tremendous price appreciation until the rug was pulled from the tech sector as inflation concerns set in earlier this year.
The declines have created an opportunity you don’t see often — a growth stock that can make value investors drool. Meta is trading with a P/E ratio of around 12, while the S&P 500’s P/E is over 19. The stock’s P/B ratio is also sitting at a five-year low.
Sure, there are a few short-term headwinds to consider, including:
- Weak E-Commerce Spending. As prices rise and recession fears mount, e-commerce and consumer spending will likely fall, which could weigh on the company’s advertising revenue.
- Transition to the Metaverse. Meta recently changed its name from Facebook in an effort to rebrand the company as the center of all things metaverse. This transition may come with some growing pains in the near future.
- Economic Headwinds. Many experts are warning of a potential recession, which could eat into the company’s revenue and profitability in the short term.
Even with these headwinds, Meta offers a unique opportunity to tap into a stock that has historically outperformed the market in a big way but to do so at a steep discount to the current market value.
4. H&R Block Inc (NYSE: HRB)
Best for value investors.
- Performance: HRB is up nearly 50% YTD and more than 54% over the past year.
- Dividend Yield: ~3%.
- Valuation Metrics: P/E ratio: ~5; P/B ratio: ~123; P/S ratio: ~1.4.
- Market Cap: ~$5.8 billion.
H&R Block is a household name, offering do-it-yourself tax services as well as full-service tax professionals. It’s also one of the most appealing value stocks on the market.
First, let’s address the elephant in the room — the 123 P/B ratio. Sure, that’s high by any standard. However, it’s inconsequential to HRB. The company has few tangible assets because it’s in the service sector.
To get a true picture of the discount the stock trades at, just look at its P/E and P/S ratios, which stand at around 5 and 1.4, respectively. That’s low for any sector. Its P/E ratio is about a quarter of that of the S&P 500.
Beyond the seriously discounted valuation, HRB stock has significant appeal in the current economic times.
All people eat, sleep, and pay taxes. Increasing interest rates and dwindling consumer spending may have a negative impact on other businesses, but people still have to file their taxes regardless of the state of the economy. HRB’s business model fares well even if a recession were to set in.
While other companies are looking for ways to cut costs headed into a recession, HRB is working on revamping its small-business product to increase profitability.
If that’s not enough for you, the company even provides a nice, thick layer of icing on the cake with a respectable 3% dividend yield.
5. ASML Holding NV (NASDAQ: ASML)
Best for banking on the microchip shortage.
- Performance: ASML shares have fallen ~45% YTD and ~37% in the past year.
- Dividend Yield: ~1.4%.
- Valuation Metrics: P/E ratio: ~41; P/B ratio: ~18.5; P/S ratio: ~9.
- Market Cap: ~$184.28 billion.
There’s been quite a bit of interest in semiconductor manufacturers like NVIDIA (NASDAQ: NVDA) and Advanced Micro Devices (NASDAQ: AMD) as of late. A widespread semiconductor shortage is having a profound impact on nearly every industry from automobiles to computers and even healthcare.
However, companies like NVIDIA and AMD couldn’t survive without companies like ASML Holdings, a semiconductor equipment manufacturer that makes tools for the aforementioned brands and several others.
ASML Holdings enjoys a monopoly on the extreme ultraviolet (EUV) lithography machines needed to make the tiny patterns you find on microchips. They’re not just aesthetically pleasing either. The smaller and more complex these patterns, the more data a chip is capable of processing.
These machines aren’t cheap either. ASML snags about $150 million in revenue every time it sells one, and revenue is expected to climb ahead. Even with a potential recession looming, analysts are forecasting significant growth in earnings through the rest of 2022 and 2023.
The bottom line is simple. ASML holds a global monopoly on a tool used to create an in-demand product in a global supply shortage. Its tools are used to create the microchips auto manufacturers, medical device manufacturers, and tech companies can’t seem to get enough of. Not to mention, recent declines in the stock have brought the share price to a more than reasonable valuation.
6. Exxon Mobil Corp (NYSE: XOM)
Best for combating inflation.
- Performance: Exxon Mobil stock is up ~33% YTD and ~38% over the past year.
- Dividend Yield: ~4%.
- Valuation Metrics: P/E ratio: ~13; P/B ratio: ~2; P/S ratio: ~1.2.
- Market Cap: $357 billion.
Exxon Mobil is one of the biggest names in oil and gas, making it a great stock to combat inflation. Economists often use the price of gasoline as a first-glance gauge of inflation. When gas prices start to rise, it begins a domino effect. Shipping costs increase, which leads to higher end-consumer prices.
That’s why Exxon Mobil is one of the best stocks you can buy to combat inflation.
The company is the largest gas station chain in the U.S. As prices rise, Exxon becomes a direct beneficiary that rakes in ever-growing revenues and profits. Sure, the stock isn’t so impressive when gas prices are down, but at the moment, it’s a great play.
Exxon isn’t just a gas station chain either. The company has its fingers in all streams of the production process, from drilling crude oil to refineries to selling the end product directly to consumers.
With gas prices rising to well over $4 per gallon, the company is adding plenty of free cash flow to its balance sheet.
At the same time, XOM shares are more than fairly priced. The company’s P/E ratio is well below the average for the S&P 500 and its P/S ratio is approaching 1. Add in a yield of around 4%, and we have a winner, my friends.
7. UGI Corp (NYSE: UGI)
Best for risk-averse investors.
- Performance: UGI has fallen ~15% YTD and ~16% over the last year.
- Dividend Yield: ~3.75%
- Valuation Metrics: P/E ratio: ~15; P/B ratio: ~1.4; P/S ratio: ~0.9.
- Market Cap: ~$8 billion.
Many investors’ stance on risk has changed since the bear market set in. If you’ve become more risk-averse and want a stable utility play with great dividends to fill the void in your portfolio, UGI is a compelling pick.
The company is a regulated natural gas and propane distributor with a history that spans well over a century. It has consistently paid dividends to investors for 138 years and raised its dividend payments for the past 35 years consecutively.
That means that even in 2001 when the dot-com bubble popped, in 2008 and 2009 when the Great Recession took hold, and in 2020 when COVID-19 reared its ugly head, UGI investors enjoyed dividend increases.
Sure, the stock price has had a painful fall over the past year, but its declines are still a meaningful beat compared to the S&P 500’s losses.
Moreover, the company’s growth metrics suggest recent declines will be short-lived. In the most recent quarter, UGI produced 34%+ revenue growth, 90%+ net income growth, 85%+ diluted earnings growth, and 42%+ net profit growth.
When you invest in UGI, you’re investing in a company that has more than a century under its belt — one that hasn’t missed a beat on paying investors dividends in all that time and has a history of outperforming the S&P 500 in bear markets.
8. Duke Energy Corp (NYSE: DUK)
Best for recession-proofing your portfolio.
- Performance: DUK stock has grown ~2.75% YTD and ~6.5% over the last year.
- Dividend Yield: ~3.7%.
- Valuation Metrics: P/E ratio: ~20; P/B ratio: ~2; P/S ratio: ~3.
- Market Cap: ~$81.9 billion.
Duke Energy is one of the largest electric utility providers in the United States. The company serves more than 7.7 million energy customers and more than 1.6 million natural gas customers across six states.
There are three compelling reasons to consider investing in DUK in a bear market:
- Consumer Habits. When the economy takes a hit, consumers spend less, but they just about always pay their utility bills. That makes DUK a great investment in a recession.
- History. The company has historically outperformed the S&P in the face of multiple economic hardships.
- Stability Over Growth. The company has seen some impressive growth in recent years but management’s core focus is on the stability of the business, making it a low volatility play.
Truth be told, there’s not much to say about Duke Energy. It’s not a sexy business, it doesn’t have a ton of growth prospects, and it’s not likely to make you rich any time soon. But what it’s not doing only serves to outline what it is doing.
Duke Energy is continuing its mission to provide its customers with quality, fairly priced services. As it does, it gives its investors stable returns, consistently paid dividends, and an easier time going to bed at night regardless of the state of the economy or broader market.
Final Word
The stocks above are some of the best to stand behind as the declines in the market continue. Considering the state of the market, every one of them is a large-cap stock, and most follow a more reserved investment strategy.
Though these are my favorite picks for investors looking for different options, you have your own unique risk tolerance and investment goals. Never blindly invest in stock picks you read about online, not even the picks above. Do your own research and make educated investment decisions based on what you learn and how it relates to your unique situation.
Disclosure: The author currently has no positions in any stock mentioned herein but may purchase shares of Devon Energy (DVN), H&R Block (HRB), ASML Holdings (ASML), UGI Corp (UGI), and Duke Energy (DUK) within the next 72 hours. The views expressed are those of the author of the article and not necessarily those of other members of the Money Crashers team or Money Crashers as a whole. This article was written by Joshua Rodriguez, who shared his honest opinion of the companies mentioned. However, this article should not be viewed as a solicitation to purchase shares in any security and should only be used for entertainment and informational purposes. Investors should consult a financial advisor or do their own due diligence before making any investment decision.