Best Stocks To Buy Now May 18th, 2022

Today, May 18, 2022, Dow Jones is trading at ~31,500, the S&P 500 at ~4,000, and Nasdaq at ~11,700.

The markets rebounded last Friday, but they’re still very volatile. Some analysts believe that we may be near an attractive entry point based on a long-term perspective.

Specifically, Scott Chronert, a Citi analyst, said that  “the S&P 500 is quickly approaching a level that, historically, has indicated that future growth concerns are priced in.”

Nevertheless, it’s still early to know for sure if we’re approaching the end of such high market volatility. And during uncertain times undervalued, profitable, and stable businesses can still be found.

In this post, we will provide you with 4 stock ideas that could give your portfolio a chance to overperform the market.

PVH Corp. (NYSE: PVH), founded in 1881 and based in New York City, operates an international apparel business in ~40 countries.

PVH Corp. has 6 segments: Tommy Hilfiger North America, Tommy Hilfiger International, Calvin Klein North America, Calvin Klein International, Heritage Brands Wholesale, and Heritage Brands Retail. 

It designs, markets, and retails apparel and accessories for men, women, and children. Some examples of the products they sell are dress shirts, sleepwear, underwear, neckwear, handbags, swimwear, and footwear.

The company also generates revenue through licensing its own brands and products.

Forecast

Based on the 18 analysts’ 12-month average price target of $99.5 and the stock’s current price of $67.95, the stock has a 46.4% upside. The highest forecast price is $156 and the lowest is $81.

This is a great short-term return if it materializes. Further, based on the very low price the stock is trading right now relative to its performance it’s a very sensible prediction too.

We also think that the lowest price target is conservative and the highest is unlikely to be reached within a year (but definitely possible if the company can maintain such performance).

But let’s take a look at some numbers and you’ll understand why…

Fundamentals

PVH had a very good performance last year. It generated an 18% return on its equity and grew revenue by 28% (Y/Y).

Wall Street would obviously look unjustifiably optimistic if that was the end of the matter. After all, there are far more profitable companies out there. But this stock’s current valuation puts things into a more bullish perspective.

Its price is trading at only 5.1 times its EPS and 1.1 times its book value. This is a ridiculously undervalued stock if you consider its performance. And its current price may be the reason Wall Street is so optimistic here.

But if you’re looking to hold for the long term, its current liquidity levels are also adequate in our opinion. The company’s current assets are 1.3 times its current liabilities and its income before interest is 9.9 times its interest expense.

All in all, this looks like an excellent opportunity for both traders and investors. But long-term holders are advised to reevaluate the profitability and price level of the company after a year.

Source: PVH Annual Report

PulteGroup Inc, (NYSE: PHM) founded in 1950 and headquartered in Atlanta, Georgia, is the 3rd largest US homebuilder (based on the number of homes closed), operating in 23 states. 

PulteGroup Inc also generated revenue through: 

• • • Acquiring and developing land and constructing houses on such land
      

• • • Offering home designs, such as townhomes, duplexes, single-family detached, condominiums, etc.
      

• • • Originating and selling mortgage loans,
      

• • • Offering title insurance policies, and
      

• • • Providing examination and closing services to homebuyers

Forecast

Based on the 13 analysts’ 12-month average price target of $55 and the stock’s current price of $42.54, it has a 29.3% upside. The highest forecast price is $76 and the lowest is $46.

The upside based on the median price target is a sensible prediction if you take into account the very low valuation of the company and its recent growth.

We believe that the highest price target will be reached, but not within a year as the stock has long been trading at a low earnings multiple. And the lowest forecast price is way too conservative for such performance.

Let’s dive into some specifics…

Fundamentals

The recent 26% Y/Y revenue growth of PulteGroup was exceptional for such a large business.

Also, its return on equity was 25%, which is great if you consider the size of the company’s equity. As for its earnings per share, it was 26% higher on a year-after-year basis.

Now, the interesting part is the current price you can buy the stock at. It’s trading at 5.7 times the EPS and 1.5 times the book value. That’s a great margin of safety and we think it is the catalyst for the median price target set by analysts to be realized.

PulteGroup has something for long-term investors too. We were glad to find a conservative capital structure (D/E: 0.8x) and outstanding liquidity levels (current ratio: 3.4x, interest coverage: 5,000x).

No doubt, it must be difficult to permanently lose money with such high stability and low valuation; even during hard times. But the numbers promise great future returns…

Source: PMH Annual Report

FedEx Corp (NYSE: FDX) founded in 1971 and based in Memphis, Tennessee, is a US multinational conglomerate holding company that provides transportation, e-commerce, and business services both in the US and internationally.

It operates through 5 segments:

• • • FedEx Express (transportation, freight, small-package ground delivery services, etc)

       

    • FedEx Ground (day-certain delivery services to both residences and businesses)
      

• • • FedEx Freight (less-than-truckload freight transportation services)
      

• • • FedEx Services (sales, information technology, marketing, communications, technical support, customer service services, etc.)

       

    • Corporate, Other, and Eliminations (specialty transportation, integrated supply chain management solutions, global ocean/air freight forwarding, customs brokerage services, etc.)

Forecast

Based on the 26 analysts’ 12-month average price target of $292.5 and its current price of $211, FDX has a 38.5% upside. The highest estimated price is $333 and the lowest is $230.

We think that the stock can reach the median price target, but not within a year. The lowest price target is too conservative, while the highest is too optimistic. A return somewhere between the ones the median price target and the lowest price target suggest is definitely plausible though.

Let’s see how…

Fundamentals

First of all, the company grew its EPS by a remarkable 296% on a year-after-year basis. Its revenue Y/Y growth was 21.3% and it generated a 21.6% on its equity.

This great performance comes with a very good price tag too. The stock price of FDX is currently trading at 10.8 times the EPS and 2.7 times the book value.

As for liquidity, the company seems to have plenty of it as well. Its current assets were 1.5 times its current liabilities and its income before interest was 7.3 times its interest expense last year.

The financials and the profitable business of FedEx definitely present an excellent opportunity for those who are looking to add something promising to their portfolio or replace an under-performer.

Source: FDX Annual Report

CBRE Inc. (NYSE:CBRE) founded in 1906 and headquartered in Dallas, Texas, is a commercial real estate advisor and investment manager operating world wide. 

The company does business through 3 segments:

• • • Advisory services (mainly leasing-related strategic advice/execution to investors, owners, and occupiers of real estate),

       

    • Global workplace solutions (facilities, project, and transaction management services), and

       

    • Real estate investments (mainly investment management services to insurance companies, pension funds, foundations, sovereign wealth funds, etc.

Forecast

Based on the 7 analysts’ 12-month price target of $105 and the current price of $80.83, the stock has a 29.9% upside. The highest forecast price is $122 and the lowest is $95.

Based on the company’s financials, the upside suggested by the median price target is likely but not in a short-term time frame. The highest is very optimistic and the lowest is what we think is the most fitting here.

Let’s dive in…

Fundamentals

The latest annual report by CBRE suggests a profitable business. The company grew its revenue by 16.4% and its EPS by 143.7% on a Y/Y basis. Furthermore, it generated a 21.5% return on its equity.

Built into this opportunity is the current price of the stock, trading at 14.9 times the EPS and 3.2 times its book value.

And though this stock has promising short-term prospects right now, it can safely remain a part of your portfolio for the long term if the profitability is preserved. Its current ratio is 1.2x and its interest coverage ratio is 48.8x.

All in all, CBRE is a large stable company whose price will experience a correction as soon as the market realizes its value here.

Source: CBRE Annual Report