June 16, 2022- Digital Realty Trust, Inc. (NYSE:DLR) and The Kraft Heinz Company (NASDAQ:KHC)
Two of the best stocks to buy now could be relatively more insulated from economic instability than others.
The Fed really did it. It hiked rates a full 75 basis points for the first time since 1994 as it attempts to rein in haywire inflation. Digital Realty Trust, Inc. (NYSE:DLR) and The Kraft Heinz Company (NASDAQ:KHC) are two of the best stocks to buy now in this tightening environment.
Digital Realty Trust is one of the best stocks to buy now because it’s a Real Estate Investment Trust (REIT). REITs are some of the best stocks to buy during inflation. They provide easy, efficient, and convenient exposure to real estate and offer some of the best dividends that mirror consistent cash flows from real estate assets.
After all, REITs must distribute 90% of their taxable income in the form of dividends just to be considered a REIT.
However, DLR is one of the best stocks to buy now for more than just its dividend. It trades over 27.5% below its highs, received a recent upgrade from Deutsche Bank, and boasts one of the world’s largest real estate portfolios of data centers.
Then there’s Kraft-Heinz. Since peaking in mid-May, KHC has fallen hard. But recent comments from Bank of America, solid fundamentals, and shrewd management depict a stock that’s relatively insulated from current headwinds. This stock is simply a deep-value turnaround story and one of the best stocks to buy now.
The market’s in a weird place. It was oddly relieved from the rate hike, with the Dow and S&P rising 1.00% (304 points) and 1.46%, respectively, and the Nasdaq gaining 2.50%.
Good days and bad days will persist until these issues smooth over. But always remember that opportunities are everywhere.
So without further ado, here is why Digital Realty Trust and Kraft Heinz could be the best stocks to buy now.
Digital Realty Trust, Inc. (NYSE:DLR)
27.66% below its highs, plus a recent upgrade from Deutsche Bank has this data storage REIT looking like a mouth-watering bargain.
We briefly explained in the intro why REITs are some of the best stocks to buy now. You own a basket of income-producing real estate assets that trade like stocks and receive consistent dividends as if you were receiving rent income.
In times of volatility and rising rates, investors benefit from these consistent cash flows without physically buying, managing, or financing a property.
You can find a REIT for almost every real estate sector. However, Digital Realty is one of a kind. It owns and operates data centers, a vital and growing real estate sector. With the advent of the internet and AI, data centers have become integral components of modern businesses.
Digital Realty has a full spectrum of data centers, colocation, and interconnection solutions. Most importantly, it owns and operates 284 facilities in 48 metros across 23 countries on six continents, one of the world’s largest data center footprints.
DLR has respectable margins, but investors are here for the dividend.
But the real reason many investors chase after REITs like DLR is the dividend.
REITs commonly offer the most attractive dividend yields because they are required to. Under the IRS tax code, to be considered a REIT, you have to pay at least 90% of your taxable income to shareholders.
Because this gets REITs out of paying corporate income taxes, that means mouth-watering, consistent, and potentially growing dividends for savvy investors.
Talk about hedging your bets.
DLR’s dividend yield is 3.9%, which is attractive in its own right. But it’s DLR’s consistent dividend growth that makes it that much more enticing. As a firm that’s increased its dividend for 17 straight years, it could increase it another 5.2% at a 5.7% 5-year CAGR.
DLR trades at a deep discount.
Based on its 14-day RSI of 43.32, the DLR stock is approaching oversold territory. It also currently has a 0.12 PEG ratio and sits 27.66% below its highs and around its 52-week low.
Perhaps that’s why analysts believe in buying DLR’s dip.
Deutsche Bank this week upgraded Digital Realty Trust from HOLD to BUY and tacked on a $144.00 price target. This represents a 128.93 upside from June 15, 2022’s close of $128.93.
But this could be conservative.
In the last 3 months, 10 Wall Street analysts offered a 12-month price target for DLR. It currently has an average price target of $159.80, representing a 23.94% upside from $128.93. DLR also has a high forecast of $172.00 and a low of $144.00.
DLR’s year-to-date low and high are $124.11 and $178.22, respectively.
The Kraft Heinz Company (NASDAQ:KHC)
With the potential for triple-digit gains in the next two years, Bank of America sees this consumer giant as “more insulated” from current conditions.
Supply chain and inflation fears could continue rattling consumer stocks. However, Kraft-Heinz could be more immune to these worries than others and may actually benefit from rising food prices.
Perhaps you’re familiar with some of their best-known brands.
KHC’s stock has had several ups and downs since 2020. The stock most recently fell hard following gloomy retail forecasts from Walmart and Target.
However, several indicators point towards Kraft-Heinz looking like one of the deepest value plays in this market and one that’s more protected from fears plaguing retailers.
Kraft-Heinz’s latest earnings point to a bullish turnaround story.
Kraft-Heinz actually increased its guidance and beat analyst estimates in its Q1 earnings report. However, the stock dipped anyway, mainly from guilt by association.
Kraft-Heinz has been a consumer staples giant since 1869, and it’s a juggernaut with significant brand equity and pricing power. Its earnings proved that. The Company first leveraged a 9% price increase to drive revenue to $6.05 billion and beat analyst estimates by 4.15%. The price increase also offset sales volume decreases in regions such as Canada, while sales in the U.S. increased 7.2%.
With shrewd management, Kraft-Heinz’s net income growth is projected to grow 224.9% according to Finbox and average 49.8% over the next five fiscal years.
This is a company that clearly knows how to navigate treacherous waters. CEO Miguel Patricio said it best on the earnings call. He emphasized Kraft-Heinz’s mission to build critical capabilities, improve corporate agility, and add financial flexibility to address short-term turmoil while achieving long-term objectives.
KHC has all you’re looking for from a value and fundamental perspective.
It’s also nearly oversold based on its 35.25 14-day RSI and positioning -18.55% below its 2022 highs.
You can’t discuss Kraft-Heinz’s value case without bringing up its dividend. Its 4.4% dividend yield is outstanding, more than double the consumer staples’ average, and is considerably higher than almost all of its top competitors.
Recent BoA comments on the stock point to significant analyst upside.
Despite Kraft-Heinz’s post-earnings decline, not everyone was convinced. A recent piece from MarketBeat said KHC is even more buyable now and could gain 20% in the near-term and triple-digits over the next 2 years.
Bank of America analyst Bryan Spillane echoes this and says Kraft-Heinz gets a worse rap than it deserves. In his view, KHC was the most “insulated” from poor retail data because they were ahead of the curve in raising prices.
In total, 10 Wall Street analysts offered 12-month price targets for Kraft-Heinz in the last 3 months. KHC’s average price target currently sits at $42.60, representing a 17.78% upside from June 15, 2022’s closing price of $36.17. The stock has a high forecast of $48.00 and a low of $30.00.
KHC’s year-to-date low and high are $33.38 and $44.42, respectively.