With Americans being an optimistic bunch, the general assumption that the equities sector will rise following the ugly year in 2022 fundamentally bolsters several stocks to buy. However, it’s important to be selective. You see, not every company might make it out of the long and dark tunnel we find ourselves in. And that’s largely “thanks” to the Federal Reserve.
Here’s the monetary backdrop that I mentioned in an earlier InvestorPlace article. “In the trailing five years since September 2022, the real M2 money stock expanded over 30%. Put another way, money was “cheap” (or inflationary), so it incentivized business growth. However, in the trailing year, M2 declined over 5%, making money “expensive” (deflationary).”
Stated differently, the best stocks to buy will presently have enough fiscal resilience to overcome deflationary forces. Therefore, they will be in a better position to rise should circumstances improve next year.
To find some of the most compelling market ideas, I used Gurufocus.com to extract financially robust stocks to buy. The journey took some unexpected turns off the beaten path. Nevertheless, I just let the facts speak for themselves.
| BHP | BHP Group | $54.04 |
| STM | STMicroelectronics | $36.34 |
| UFPI | UFP Industries | $77.76 |
| SNDR | Schneider Electric | $23.00 |
| REX | REX American Resources | $30.06 |
| ANIK | Anika Therapeutics | $31.18 |
| CRWS | Crown Crafts | $5.87 |
BHP Group (BHP)
Founded in 1851, BHP Group (NYSE:BHP) hails from Australia. A mining specialist, BHP represents a significant component of global infrastructure thanks to its critical commodities. For instance, its copper and potash production are incredibly relevant for current needs along with the industries of tomorrow such as electric vehicles. On a year-to-date basis, BHP is down only a little more than 3%, reflecting resilience relative to benchmark indices.
Financially, investors should consider BHP as one of the stocks to buy due to its income-statement performance metrics. For instance, the company’s three-year revenue growth rate stands at 14.2%, beating out 68% of the competition. On the bottom line, BHP’s net margin is 47.6%, exceeding 93.5% of its rivals.
To be fair, a forward deflationary environment may pose challenges to commodities-based businesses. However, because BHP undergirds so many relevant industries, I don’t see this factor being that horrendous of a headwind.
To offer a more convincing take, BHP is also comparatively undervalued. It’s priced at 4.8-times trailing-12-month (TTM) earnings. In contrast, the industry median price-earnings ratio is 11.3 times.
STMicroelectronics (STM)
Based in Switzerland, STMicroelectronics (NYSE:STM) is a technology firm. Per its website, the company creates and delivers advanced microchips, undergirding multiple innovations that we take for granted. Since the start of the year, STM shares dropped almost 35% of equity value. Some of this stems from broader macroeconomic headwinds. As well, tech-specific supply chain disruptions hurt the semiconductor industry.
Still, contrarians may want to consider adding STM to their list of intriguing stocks to buy. On a fundamental level, outside obstacles such as supply chain-related woes should eventually ease. In addition, societies tend to move forward, not backward. Therefore, microchip demand should accelerate as normalization trends further materialize.
On the financial front, STM brings a mixture of both stability and profitability. For the former, the company features an Altman Z-Score of nearly 4.9, reflecting low bankruptcy risk. Regarding the latter, its net margin stands at 23%, beating out almost 81% of the industry. Thus, it’s well worth consideration for stocks to buy.
UFP Industries (UFPI)
Founded in 1955, UFP Industries (NASDAQ:UFPI) calls Grand Rapids, Michigan home. Per its corporate profile, UFP is a supplier of lumber to the manufactured housing industry. Since the start of the year, UFPI dropped over 21% of equity value. Also, the nearer-term framework isn’t particularly pleasant, with shares declining 4.4% in the trailing month.
Fundamentally, UFPI presents a mixed bag. Obviously, with the Fed driving up the benchmark interest rate, the previously booming housing sector suffered significantly. Basically, you can have higher rates or higher prices but not at the same time. However, UFP’s specialty in manufactured homes may be intriguing. As NPR noted last month, demand for this subsegment rose conspicuously. Clearly, manufactured homes are cheaper than their traditional “site-built” counterparts.
Financially, UFP manages to bring it all together despite its industry challenges. Its balance sheet is stable, particularly with a solid cash balance. For revenue, its beating out most of its peers, while the same can be said about profit margins (to a lesser extent). Finally, its price-earnings-growth (PEG) ratio is 0.22 times, making it undervalued.
Schneider National (SNDR)
Headquartered in Green Bay, Wisconsin, Schneider National (NYSE:SNDR) is a provider of truckload, intermodal and logistics services. Per its public profile, Schneider’s services include regional, long-haul, expedited, dedicated, bulk, intermodal, brokerage, cross-dock logistics, pool point distribution, supply chain management and port logistics.
At the moment, SNDR stock gave up 17% of equity value since the year’s start. While problematic as far as stocks to buy are concerned, SNDR did gain 5% in the trailing month. To be fair, the company still presents many risks because of global recession fears. Still, if the Fed manages to pull off a soft landing regarding its rate hikes, a stable road to full normalization may materialize. In that case, SNDR may turn out to be a steal.
Enticingly, Schneider trades at 9.2-times forward earnings. In contrast, the industry median for forward PE is 11.9 times. Also worth pointing out is that the company’s price-to-sales ratio is 0.6 times, lower than 63.5% of the industry. Most impressively, Schneider features a stable balance sheet. First, its cash-to-debt ratio is 1.9 times, better than 79% of its peers. Second, its Altman Z-Score pings at 4.13, reflecting low bankruptcy risk.
REX American Resources (REX)
Founded in 1980, REX American Resources (NYSE:REX) calls Dayton, Ohio home. The company is a producer and retailer of ethanol, distillers grains and natural gas as well as a holding company in energy entities. Since the beginning of this year, REX declined a little more than 16%. Although not a great sign, it’s still better than the benchmark S&P 500, which dropped 22% during the same period.
Fundamentally, REX may rise from cynical geopolitical catalysts. With Russia blackmailing Europe in terms of hydrocarbon outflows, global supply has been artificially limited. I don’t want to think this way but this undercurrent might bolster REX’s profitability margins. Currently, its margins are rather middling. However, further disruptions in the global energy arena might shift this framework in the positive direction.
Arguably, REX makes its most important case for stocks to buy via its balance sheet. Per Gurufocus.com, the company features a cash-to-debt ratio of 19.2 times, beating out more than 84% of the competition. As well, the enterprise’s Altman Z-Score is 9.46, indicating very low bankruptcy risk.
Anika Therapeutics (ANIK)
Based in Massachusetts, Anika Therapeutics (NASDAQ:ANIK) is, per its website, a global joint preservation company committed to delivering meaningful advancements in early intervention orthopedic care, including osteoarthritis pain management, regenerative solutions, soft tissue repair and bone preserving joint technologies. Since the beginning of the year, ANIK gave up 19% of equity value. However, near-term momentum makes for a tempting case among stocks to buy. Over the trailing month, ANIK shot up 22.5%. And in the trailing half-year period, it’s gained over 39%.
Two factors stand out regarding Anika’s financial narrative. First, the company enjoys a robust balance sheet. Its equity-to-asset ratio stands at 0.81 times. In contrast, the ratio for the medical devices and instruments segment is 0.67 times. Also, it features an Altman Z-Score of 5.16, indicating low bankruptcy risk.
Second, Anika brings an attractive value proposition in the context of stocks to buy. Primarily, its Shiller PE ratio is 20 times, lower than over 70% of its peers. Also, its price-to-sales ratio is 2.87 times, favorably lower than the industry median’s 3.84 times.
Crown Crafts (CRWS)
Based in Louisiana, Crown Crafts (NASDAQ:CRWS) designs, markets and distributes infant, toddler and juvenile consumer products. Since the start of this year, Crown Crafts shares gave up nearly 21% of equity value. However, it appears that the worst of the volatility may be behind the enterprise. Over the trailing month, for instance, CRWS lost only 2.2% of market value.
Nevertheless, the main driving factor for CRWS as one of the stocks to buy centers on its financials. As with the other names on this list, Crown Crafts enjoys a strong balance sheet. For example, its cash-to-debt ratio is 1.8 times, better than nearly 64% of its peers. Also, it features an equity-to-asset ratio of 0.75 times, superior to more than 83% of the industry.
The other factor moving in Crown Crafts’ favor is profitability margins. Primarily, its operating and net margins stand at 12.8% and 10.3%, respectively. These figures rank better than at least 80% of the competition.
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.