After the midterm elections, it is clear that voters on both sides are rejecting extremist candidates, while moderates and independents are on the rise. This article reviews some takeaways from the election and 3 stocks that should thrive – Walmart (WMT), Expedia (EXPE), and Northrop Grumman (NOC).
Interestingly, even as the world becomes more connected, it seems to become more unpredictable. We have had a series of recent elections with results that have gone against expectations, and the latest midterm elections are no exception.
Essentially, there were expectations of a massive “red wave” that would lead Republicans to take control of the House and Senate. Instead, it looks more like a “red wrinkle,” as Republicans are likely to gain control of the House by a slim majority, but not win the Senate. They also made gains in states like Florida and the Northeast Corridor thanks to gains among non-white voters and the increasing focus on issues like crime and inflation.
However, the Democrats also have cause for optimism. They fared much better, especially relative to the bleak expectations retained by the Senate. In fact, it was the best showing by a sitting party in the midterm elections since 2002. There was also a clear trend of voters rejecting far-right candidates engaged in election denial. They also took control of states like Colorado and Michigan at multiple levels of government.
The ultimate conclusion is that it was a loss for the extreme wings of both sides and a victory for moderates who turned to more mainstream and bread and butter. As a result, we are likely to see continued support for the war in Ukraine, increased fiscal discipline and a focus on areas of dual support such as infrastructure and crackdown on China.
Here are 3 stocks that will thrive in this new political reality:
EXPE is one of the largest online booking companies in the world. It operates through multiple segments, including Expedia, Vrbo, Hotels.com, Orbitz, Travelocity and Wotif. In addition, it offers a range of travel and non-travel industries, including for corporate travel management, airlines, travel agencies, online retailers and financial institutions.
Like many travel stocks, EXPE is seeing a huge surge in revenue and bookings due to pent-up demand for people’s travel. However, the share price has shrunk amid market concerns about a slowdown and a possible recession.
Thus, EXPE’s stock is down more than 50% from its all-time high in February this year. Despite this, the stock’s earnings outlook remains strong. This year, analysts expect the company to earn $7 a share, rising to $9 a share by 2023.
This combination of growth and value makes the stock quite attractive. It is an important reason why EXPE has a B, which corresponds to a buy recommendation. The POWR ratings are calculated by taking into account 118 different factors, with each factor being optimally weighted. B-rated stocks have posted an average annual performance of 21.1%, which compares favorably with the S&P 500’s 8.0% average annual gain.
Click here to see EXPE’s full POWR ratings.
Northrop Grumman (NOC)
NOC is a defense contractor with segments in aerospace, mission systems, defense services and space systems. Like LMT, NOC has underperformed in recent years. Since 2018, stocks are up 4%, while the S&P 500 is up 58%.
This is despite interest rates falling and the NOC continuing to rise at an impressive pace. Given that its business continues to improve, NOC shares should be bought as it is quite attractive with a price-to-earnings ratio of 14 and an above-average dividend yield of 1.7%. Furthermore, defense spending is expected to grow marginally in 2021 and 2022, despite concerns that a democratic government would choose other priorities.
Like LMT, NOC has a growth component given its exposure to the aerospace industry. Its subsidiary, SpaceLogistics LLC, has completed pairing the Mission Extension Vehicle-2 with the Intelsat 10-02 commercial communications satellite to provide life-extending services. And NOC is one of the leading companies in expanding and maintaining satellites in orbit.
The latest earnings report shows that the underlying business continues to grow and expand as it exceeded expectations and raised its full-year forecast. It delivered $6.42 per share in earnings, surpassing expectations of $5.75 per share. This was the fourth consecutive quarter to beat earnings estimates. Revenue of $9.2 billion also exceeded expectations of $8.9 billion. It also raised its full-year earnings forecast to $24.80 a share, from $24 a share earlier.
The combination of growth and value of NOC is certainly enticing. So it’s not surprising that NOC has an overall B rating, which represents a buy. The POWR Ratings are calculated taking into account 118 different factors, with each factor being optimally weighted. B-rated stocks have an average annual performance of 19.7%, which compares favorably with the S&P 500’s annual performance of 7.1%. To see more of NOC’s POWR Ratings, click here.
WMT is a retail giant that accounts for 3.1% of all consumer spending in the US. The company was an innovator in discounts and building a logistics and fulfillment giant that disrupted the entire industry.
These efforts have continued to this day, as evidenced by its burgeoning e-commerce business and the launch of Walmart Plus, which aims to keep the company competitive with Amazon (AMZN) and other upstarts. It has also successfully expanded into grocery, one of the fastest-growing segments of his business. The recent supply chain disruptions caused by the pandemic have also brought their own challenges, with many retailers unable to fully stock their inventory, leaving revenues lagging behind targets. Walmart was able to avoid this problem because the company chartered its own ships from Asia and placed orders well in advance to ensure it could meet its customers’ needs during the holiday season.
Walmart is also a great defensive stock. During periods of inflation, consumers prioritize value and bulk, meaning they see more foot traffic. Likewise, it also sees increased activity in periods when the economy is slowing due to their low prices.
As a result, the company has consistently grown its revenues, earnings, free cash flow, margins and dividends over many years and has successfully overcome numerous challenges such as the Great Recession, the tariff war and recent pandemic-related challenges such as the supply chain. disruptions and labor shortages.
In 2022, Wall Street forecasts a 17% increase in earnings per share to $6.41, which corresponds to a future P/E of 21.6. Currently, Wall Street analysts have a price target of $172 for the stock, representing a 19% gain.
WMT has an overall A rating, which translates to Strong Buy in our POWR Rating system. The stock has strong numbers in multiple categories, including growth and value. It is also the third share in the supermarket/big box retailer sector. Click here to see WMT’s full POWR ratings.
What makes them”MUST OWN“?
All 9 picks have strong fundamentals and experience tremendous momentum. They also contain a winning mix of growth and value attributes that are a catalyst for serious outperformance.
More importantly, they have all recently earned a Buy rating from our coveted POWR Ratings system, with A-rated stocks rising +31.10% per year.
Click below now to check out these top-performing stocks with exciting growth prospects:
WMT shares closed at $142.58 on Friday, up $0.22 (+0.15%). Year-to-date, the WMT is down -0.29%, compared to a -15.12% increase in the benchmark S&P 500 index over the same period.
About the author: Jaimini Desai
Jaimini Desai has been a financial writer and reporter for nearly a decade. His goal is to help readers identify risks and opportunities in the markets. He is the Chief Growth Strategist for StockNews.com and the editor of the POWR growth and POWR Shares Below $10 newsletters. Read more about Jaimini’s background, along with links to his most recent articles.
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