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If I’m being completely honest, I personally hoped to receive an assignment about stocks to buy this week. The reason? Quite simply, the rumblings in the market practically write novels by themselves. And the central theme for this week and perhaps for the next few months is resilience.
Let’s start with perhaps the biggest market-shifting development, the crude oil production cuts. Last week, the Organization of the Petroleum Exporting Countries and its non-member allies — a cartel known as OPEC+ — agreed to cut production by two million barrels per day (BPD). Inherently, this move will likely bolster hydrocarbon energy prices, reflecting a pivot in stocks to buy this week. Basically, inflation is back on the range.
Speaking of inflation, another topic had Wall Street’s hair on fire: a stronger-than-expected jobs report for September. Usually, a robust labor force represents good tidings for the underlying economy. But in the post-pandemic new normal, it means interest rate hikes to bring higher prices under control. And the now hawkish Federal Reserve could decide to increase its aggression.
Again, this will impact stocks to buy this week. So, grab something sturdy, and let’s get started.
Stocks to Buy This Week: Sempra Energy (SRE)
Source: Michael Vi / Shutterstock.comA utility company, the strength of Sempra Energy (NYSE:SRE) really centers on its fundamentals. By that, I’m not talking about fiscal statistics per se. Rather, outside factors help bolster SRE. Primarily, I believe geographic location presents a significant tailwind. Covering much of Southern California, the region is a goldmine of generally well-off individuals. Thus, whatever happens, Sempra’s going to get its paychecks.
On the fiscal front, it’s an okay opportunity on paper. For instance, Gurufocus labels SRE as “fairly valued.” I’m not going to argue with that. It has so-so stability on the balance sheet relative to other utility providers. On the income side of things, it’s middle-of-the-road in terms of revenue trajectory; as in, not terrible, not nearly what you would call great.
It does make up some ground in the profitability department, with gross and operating margins coming in at least in the top one-third of the utilities industry. But I go back to the SoCal angle – people in this region will pay up. And that’s a major reason why SRE is up 11.4% on a year-to-date basis, making it one of the long-term stocks to buy this week.
Kroger (KR)
Source: Eric Glenn / Shutterstock.comA grocery store giant, Kroger (NYSE:KR) is an investment that writes for itself when justifying a position within stocks to buy this week. It comes down to inelastic demand. This term refers to a circumstance where demand remains stable irrespective of pricing shifts.
Of course, economic circumstances generally change consumption behaviors and groceries are no different. However, at the baseline, humans need a minimum intake of calories. Therefore, KR deserves consideration for stocks to buy this week because the underlying company offers a balance between quality products and reasonable prices.
Financially, Gurufocus labels KR as “fairly valued.” In this case, I will gently disagree. For starters, Kroger features strong revenue stats. As an example, its three-year free cash flow (or FCF) growth rate stands at 35.5%, better than 74% of the industry. In addition, it also features robust profitability metrics. Its return on equity stands at 25.6%, beating out 85% of competitors.
Yet with all these encouraging data, Kroger features a forward price-earnings ratio of 10.4 times, ranked lower than most of its peers. Yeah, KR is definitely one of the stocks to buy this week.
Stocks to Buy This Week: Coca-Cola (KO)
Source: Mehaniq / Shutterstock.comFor soft drink giant Coca-Cola (NYSE:KO), I’m electing this as a candidate for stocks to buy under the escapism thesis. Sugary beverages are not only addictive but they stimulate pleasure centers in the brain. When you turn on the news and you’re seemingly inundated 24/7 with discouraging developments, you need a respite. Cynically, that’s what Coca-Cola provides.
And let’s be real. Since the aforementioned discouraging developments involve economic (financial) matters, cost becomes key. Since Coca-Cola products offer cheap escapism, demand will likely rise. It’s not a feel-good framework and I totally understand this. However, investors probably need to start accepting realities at this juncture.
Another avenue that helps KO as one of the stocks to buy this week is the value proposition. Per Gurufocus, Coca-Cola represents a “modestly undervalued” business. While investors have many details to be encouraged about, for me, it’s got to be profitability. For instance, its net margin of 23% rates better than over 93% of the competition.
ConocoPhillips (COP)
Source: JHVEPhoto / Shutterstock.comWe can’t talk about OPEC+ and not mention a hydrocarbon specialist or two. Therefore, I’m sticking ConocoPhillips (NYSE:COP) on this list of stocks to buy this week. Really quickly, ConocoPhillips represents one of the world’s largest independent exploration and production (upstream) companies based on production and proved reserves.
Fundamentally, the OPEC+ news represents a major shocker because of global supply implications. As you know, Russia cut critical hydrocarbon supplies to Europe in retaliation for the region’s support of Ukraine. Therefore, with the oil cartel getting involved, the inventory situation is only going to worsen, all other things being equal. Cynically, that’s pure upside for investments like COP stock.
Now, Gurufocus labels COP as “fairly valued.” It might be a little bit of an ungenerous rating as ConocoPhillips features — relative to the industry — solid revenue and profitability metrics. However, the strength of COP really comes down to global fundamentals, not cute arithmetic on financial numbers. Thus, it’s one of the stocks to buy this week.
Stocks to Buy This Week: Murphy USA (MUSA)
Source: Lawrence Glass / Shutterstock.comA downstream specialist in the hydrocarbon industry, Murphy USA (NYSE:MUSA) operates a chain of retail gas stations. Strategically, Murphy USA primarily places its gasoline stations near Walmart (NYSE:WMT) stores, thereby grabbing the lower to the middle-income crowd. Better yet, this strategy should pay dividends (literally and figuratively) under the current energy paradigm shift.
As with grocery stores, Murphy effectively benefits from inelastic demand from the fossil fuel angle. In the modern age, humans need to get to point A to point B. And should the return-to-office debate favor employers, there will be more people needing to traverse this journey. Therefore, an upside should be coming to MUSA.
Similar to other stocks to buy this week, Gurufocus labels MUSA as “fairly valued.” In this instance, it’s understandable. While Murphy levers strong growth and profitability metrics, investors pay a premium for MUSA stock. Still, with the OPEC+ cuts, more investors will likely acquire shares.
Costco (COST)
Source: ilzesgimene / Shutterstock.comMembership-only warehouse retailer Costco (NASDAQ:COST) features myriad arguments for why it’s one of the stocks to buy this week. Thus, it too is one of the investments that writes its own bullish justification. Primarily, Costco represents a practical means for consumers to fight inflation through bulk purchases.
True, the Fed aggressively targets rising prices. With the recent hotter-than-expected jobs data, more people have more money. Any economist will tell you that this framework offers a classic case for inflation. So, while the central bank will (hopefully) get prices under control, it might take a while. In the meantime, consumers on the ground floor can mitigate these high prices by buying in bulk.
Let’s not forget too that with energy prices going up because of the OPEC+ cuts, that will impact consumer goods. Obviously, this is due to higher shipping costs.
Let’s move a step further. Even if the Fed gets costs under control, Costco commands a consumer base that’s wealthier than the average household. Therefore, even under deflationary circumstances, COST will likely be a winner.
Stocks to Buy This Week: Progressive (PGR)
Source: ShutterstockIf I had to summarize the narrative for insurance giant Progressive (NYSE:PGR), I would say two words: hostage audience. As you know, Progressive specializes in car insurance. And virtually all states require car insurance. The lone exception is New Hampshire. However, drivers there must demonstrate financial responsibility requirements in case they incur an accident. Practically speaking, it’s just better to have coverage.
Necessarily then, Progressive benefits from inelastic demand. Irrespective of economic conditions and pricing changes, drivers must have a minimum amount of protection. Therefore, it explains why boring old PGR stock gained almost 20% while the benchmark equity indices gasp for air.
Now, here’s the tricky part when it comes to PGR’s inclusion on this list of stocks to buy this week. Gurufocus labels PGR as “modestly overvalued.” The company features decent financial stability, strong profitability and excellent growth metrics relative to the underlying industry. However, investors pay a premium for this performance.
But with so much stuff going wrong these days, that’s arguably a worthwhile premium.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
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