After a September loss for the S&P 500 and yesterday’s major selloff, investors are concerned. And I believe investors should be cautious as we head into the election, amid rising coronavirus infection rates. However, I have four stocks that I rigorously analyzed that should withstand any long-term market bearishness…
Not long ago, I was bullish about the market in Q4 2020 and Q1 2021, but after yesterday’s session, you can count me in the cautious crowd. The Dow dropped 943 points, or 3.4%. What makes the sell-off so concerning is that it wasn’t just 1 sector in the market that fell yesterday. All of the major stock indices dropped, gold prices fell $35 per ounce, crude oil prices were down nearly 6%, and even Bitcoin was down. Nobel-winning economist Robert Shiller said in a NY Times op-ed that not only is investor confidence down, but stock prices are “trading at very high levels.”
While this may not turn into a significant downturn, as stocks are trading up today, it is good to be prepared for the worst. That’s why I put on my analyst cap and looked for companies I believe are best suited for a market crash. These companies have strong balance sheets and pass a strict selection of criteria, including a Piotroski F Score over 7. The Piotroski score, which was named after Chicago Accounting Professor Joseph Piotroski, is a score between 0-9 that reflects nine criteria used to determine the strength of a firm’s financial health.
The following four stocks not only had a Piotroski F Score of 8 or 9 but also met my proprietary list of profitability and debt measurements, including net profit margin and long term debt to total capital: Adobe Inc. (ADBE), Procter & Gamble Co (PG), SolarEdge Technologies (SEDG), and ITT Inc. (ITT).
Adobe Inc. (ADBE)
You wouldn’t think a technology company would fit my strict criteria due to the sector’s high-flying growth model’s nature, but ADBE fits the bill. The company has a Piotroski F Score of 8, a current ratio of 1.4, long-term debt to total capital ratio of 0.3, and a net profit margin of 31.3%. In addition to its sound financials, it’s a strong growth stock that reported year over year revenue growth of 13.8% and earnings growth of 22.4% last month.
ADBE has benefited from the mass digitization wave that started this year and is likely to continue for the foreseeable future. The company has gained from strong demand for its creative products, which are driving revenue growth. It also sees rising subscription revenues across its mobile apps, growth in emerging markets, and online video creation.
Plus, ADBE should continue to grow over the next few quarters due to a rebound in discretionary enterprise spending as consumer behavior and economic activity normalize. The stock is rated a “Buy” in our POWR Ratings system. It has grades of “B” for Trade Grade, Buy & Hold Grade, and Industry Rank, which are three out of the four components that make up the POWR Ratings. The company is also ranked #11 out of 96 stocks in the Software – Application industry.
Procter & Gamble Co (PG)
Here is a stock that you would probably think would be in a list such as this. PG has given investors consistent growth, income, and returns for a very long time. Its products were in high demand at the beginning of the pandemic, as consumers cleared the shelves of paper towels, toilet paper, and cleaning supplies. Since the pandemic doesn’t seem to be going anywhere as cases are on the rise, these products will be in high demand once again.
PG has a Piotroski F Score of 8, debt to equity ratio of 0.7, long-term debt to total capital ratio of 0.3, and a return on equity of 27.9%. The company reported its latest earnings results last week and posted revenue of $19.32 billion, which beat the consensus analyst expectation of $18.38 billion. Earnings per share came in at $1.63, which also beat analyst estimates. Its home care sales, which include home cleaning products, grew 30% in the quarter.
The company also issued…
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