2023-05-05 16:06:38 ET
Recession talk is increasingly in the air, leaving many investors unsure of what to do next. To help out, Seeking Alpha named three winners Friday in our “Best Investment Ideas for a Potential Recession” competition.
Here’s a look at our contributors’ top recession-friendly strategies, as judged by a panel of Seeking Alpha editors:
Third Place: The Energy Realist Likes Liberty Energy
Seeking Alpha contributor The Energy Realist recently gave a “Buy” rating to oilfield-services stock Liberty Energy ( NYSE: LBRT ), writing that the stock offers “opportunity [that’s] asymmetric to the upside.”
LBRT has fallen some 25% from its March 6 intraday peak, which The Energy Realist attributed to declining oil and natural-gas prices and the regional banking crisis stoking fears of a recession that could further tank energy demand:
However, that’s left LBRT with what The Energy Realist sees as a bargain-basement 3.6x forward price-to-earnings ratio.
“There is risk that the 3x P/E multiple compresses even further, but … to paraphrase Peter Lynch's know-what-you-own principle, if you can get Liberty Energy for 1x P/E, great for you, but even if you buy it at three times earnings, it's still pretty good,” he wrote.
Click here to read The Energy Realist’s full “Buy” case for LBRT.
Second Place: NJ Value Investor Backs Molina Healthcare
NJ Value Investor believes managed-care company Molina Healthcare ( NYSE: MOH ) is “highly resilient during recessions” because it primarily focuses on Medicaid patients, whose medical bills the government covers.
And while the stock is down some 9.5% year to date, NJ Value Investor recently wrote that that’s just due to “redetermination” – a federally mandated post-pandemic restart of eligibility requirements for state Medicaid programs.
Redetermination will likely remove millions of Americans from Medicaid’s roles. However, NJ Value Investor argued in his “Buy” thesis that under CEO Joe Zubretsky, Molina Healthcare ( MOH ) has “embarked on a growth plan that has so far been successful and provides a runway of at least three to five years of double-digit EPS growth.”
“We see potential upside of 25% to 50% over the next one to two years,” NJ Value Investor wrote. “Near-term downside is perhaps 15%, [but] five-year returns could be 15%+ annualized.”
Read all of NJ Value Investor’s “Buy” thesis for the stock here .
First Place: Dalius Taurus Lauds Digital Bridge
Contributor Dalius Taurus recently laid out a “Strong Buy” case for alternative-asset manager DigitalBridge Group ( NYSE: DBRG ), calling it “one of the most interesting value plays at the moment.”
DBRG is a $2B market-cap alternative-asset manager that primarily invests in digital-infrastructure assets like data centers, cell towers and fiber-optic networks.
However, the stock’s close Friday at $11.02 represented a nearly 90% drop from DigitalBridge’s $99.64 intraday peak in 2015. Shares have fallen 33% since just Feb. 2, but Dalius Taurus said that makes DBRG “cheap, with a clear catalyst to unlock the value.”
He wrote that the company should benefit from plans to soon divest its stakes in two data-center operators – Vantage SDC (a 13% share) and DataBank (an 11% holding).
Dalius Taurus argued that the sell-offs will make DBRG “a much leaner entity, as most of the company’s currently reported debt will simply disappear from the financial statements. … The move will [also] shine the light on the company’s asset-management business, which generates high-margin and stable long-term recurring revenues.”
All in, Dalius Taurus believes the stock offers a 60%+ upside to what he called a “conservative” estimate of DBRG’s sum-of-the-parts valuation.
To read more of Dalius Taurus’ bull case for the stock, click here .
For further details see:
Seeking Alpha authors’ best investment ideas for a potential recession