Forget the Bear Market, Hold Your Nose and Buy These 3 “On Sale” Stocks

The stock market has fallen into bearish territory this year, falling more than 20% from its recent peak. This makes investing more difficult as it is unclear if the stock market has bottomed out. For this reason, many investors are likely sitting on the sidelines, waiting for the green light to buy stocks again.

However, the wait could cause them to miss what appear to be attractive prices for certain stocks. Some of our contributors think investors should consider taking the plunge and buying shares of Stanley Black & Decker (SWK -0.04%), Brookfield Infrastructure (BIPC 0.14%) (BEEP -0.31%)and US State Water (AWR 0.92%)as they look like excellent long-term investments at these lower prices.

Time should fix these problems

Ruben Gregg Brewer (Stanley Black & Decker): Industrialists like Stanley Black & Decker operate in a highly cyclical space. In this case, the company makes the tools, equipment and fasteners that are used during economic upturns to build everything from houses to cars. During downturns, demand for these products tends to decline, which is bad news for sales and bottom lines. Right now, central banks are pushing interest rates up, raising fears of a recession. On top of that, the company faces the effect of inflation and supply chain constraints.

Investors reacted by selling stocks, sending them down around 50% from their 2021 highs. This pushed the stock’s yield to around 3%, well above the five-year average of around 2% and the highest return in a decade, aside from a brief spike during the pandemic-induced bear market in 2020. Looks like Stanley Black & Decker is on sale today.

That said, things could get tougher before they get better. In the first quarter of 2022, price increases led to a 6% volume decline, a fact overshadowed by an acquisition. Gross margin decreased by 6.1 percentage points year-over-year. These numbers will continue to be low in a recession. But recessions eventually end, supply chains recover, price increases are accepted by consumers, and margins eventually improve. It’s just going to take time. However, Wall Street is not thinking long term. You might want to accept the bad news here and buy this Dividend King while you can still get a decent price.

A quality company at a reduced price

Matt DiLallo (Brookfield Infrastructure): Shares of Brookfield Infrastructure have fallen nearly 20% in the past three months. This has the global infrastructure operator trading at a much more attractive price while pushing its dividend yield up to 3.4%.

The main issue weighing on Brookfield Infrastructure is fears that the global economy may begin to slow as central banks raise interest rates to fight inflation. This would have some effect on Brookfield’s volumes. Around 35% of its business benefits from volume growth linked to an expanding global economy. If the economy were to experience a downturn, it would be a headwind for some of Brookfield’s businesses.

However, the company is also benefiting from several tailwinds that should mitigate the effect of a slowing global economy. For example, 70% of Brookfield’s cash flow will benefit from contractual or regulated inflation adjustments. With inflation on the rise, Brookfield will benefit from a significant increase in inflation. At the same time, it will also benefit from higher commodity prices in its mid-tier segment.

Another notable growth driver for the company is its investments to expand its operations. It has projects underway in all four of its business segments, which should drive growth over the next two years as these expansions come online. In addition, the company continues to make accretive acquisitions. Brookfield completed four transactions this year, the most recent agree to invest in a European leader in the operation of towers. These transactions will also increase its income.

Although Brookfield’s share price could fall further if economic conditions deteriorate, the company is in an excellent position to continue growing during a downturn. For this reason, the recent sell-off looks like a great opportunity to buy shares of this high-quality, long-term infrastructure company.

Lock in dividends even in a bear market

Neha Chamaria (US State Water): With soaring inflation forcing the Federal Reserve to raise interest rates at an aggressive pace, many believe the US economy is on the verge of a recession, or at least a slowdown, or even a recession all of its own. whole. The threat is real, and when looking to invest in stocks under such circumstances, you might want to bet on stocks that could help you sleep well at night no matter what. One of those fantastic stocks that is also on sale right now is American States Water.

American States Water stock has lost nearly 21% in value so far this year, largely on concerns about how rising interest rates could increase the borrowing costs of the company while making its dividends less attractive relative to bonds. All of these fears, however, could fade into the background if the economy slows.

The fact is that American States Water provides water and water management services, the demand for which is expected to remain stable regardless of the economic situation. Although the company primarily provides water services to individual consumers, it also distributes electricity and provides comprehensive water and wastewater management services at military bases. Overall, it serves more than one million customers in nine states and derives nearly 90% of its revenue from residential and business customers. And because it’s a regulated utility, its earnings and cash flow are stable even in the toughest years.

This last part is also perhaps the most important reason why you would want to own American States Water. Steady cash flow can support steady dividends, which means with a stock like this you can expect to earn a decent passive income even in a stock market crash. To put this into context, consider that American States Water has increased its dividends every year for the past 67 consecutive years, with dividends growing at a compound annual growth rate (CAGR) of nearly 10% over the last decade.

Yes, its dividend growth could slow in the event of an economic downturn, but the company is confident that its dividends will grow at a CAGR of at least 7% over the long term. Adding a dividend growth stock to your portfolio is certainly a smart move in these uncertain times, and American States Water, with its recent price drop, is a solid bet at current prices.

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