5 High-Quality Stocks to Buy When There’s Blood on Wall Street

On Wednesday, the Federal Reserve raised interest rates by 75 basis points for the fourth consecutive time. However, a “step-down” in the pace of increases in the future seems plausible. Keith Lerner, co-chief investment officer at Truist Advisory Services, claimed, “The market is starting to believe that there is an endgame in sight for this huge global tightening cycle.”

On the other hand, according to a Bloomberg probability model, there’s a 100% chance of recession by October 2023. Moreover, earlier this month, the United Nations warned that the world is “on the edge of a recession,” and they fear the possible global slowdown could inflict worse damage than the financial crisis in 2008 and the Covid-19 shock in 2020.

Given the backdrop, investors could consider buying high-quality stocks PepsiCo, Inc. (PEP), United Parcel Service, Inc. (UPS), Altria Group, Inc. (MO), Waste Management, Inc. (WM), and Sprouts Farmers Market, Inc. (SFM).

PepsiCo, Inc. (PEP)

PEP manufactures, markets, distributes, and sells beverages and convenient foods worldwide. It has seven segments- Frito-Lay North America; Quaker Foods North America; PepsiCo Beverages North America; Latin America; Europe; Africa, Middle East, and South Asia; Asia Pacific, Australia and New Zealand; and China Region.

On September 14, 2022, PEP and agriculture company Archer Daniels Midland Co. (ADM) announced a 7.5-year strategic commercial partnership. This collaboration is a commendable step toward sustainable development because it aims to improve regenerative agriculture across the companies’ shared North American supply chains.

PEP has paid dividends for 49 consecutive years. Its dividend payouts have increased at a 7.4% CAGR over the past five years. Its current dividend yield is 2.58%, and its four-year average yield is 2.80%.

PEP’s net revenue came in at $21.97 billion for the third quarter that ended September 3, 2022, up 8.8% year-over-year. Its gross profit increased 8% year-over-year to $11.66 billion. Also, its operating profit came in at $3.53 billion, up 6.1% year-over-year.  

Analysts expect PEP’s revenue to increase 7.1% year-over-year to $85.1 billion in the current year. Its EPS is estimated to grow 8.1% year-over-year to $6.77 in 2022. It has surpassed EPS estimates in all four trailing quarters. Over the past year, the stock has gained 9.5% to close the last trading session at $178.24. 

PEP’s strong fundamentals are reflected in its POWR Ratings. The stock’s overall A rating indicates a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

PEP has an A grade for Quality and a B for Growth, Stability, and Sentiment. In the A-rated Beverages industry, it is ranked #9 out of 33 stocks. Click here for the additional POWR Ratings for Value and Momentum for PEP.

United Parcel Service, Inc. (UPS)

UPS offers letter and package delivery, transportation, logistics, and related services. It operates through two segments, U.S. Domestic Package and International Package.

On October 25, 2022, Carol Tomé, UPS’ CEO, said, “The macro environment is very dynamic, but we are on track to achieving our 2022 financial targets by executing our strategy and controlling what we can control.”

UPS has paid dividends for 21 consecutive years. Its dividend payouts have increased at an 11.3% CAGR over the past five years. Its current dividend yield is 3.69%, and its four-year average yield is 2.87%.

UPS’ revenue increased 4.2% year-over-year to $24.16 billion for the third quarter that ended September 30, 2022. Its operating profit came in at $3.11 billion, up 7.5% year-over-year. Moreover, Its EPS came in at $2.96, up 11.7% year-over-year.    

UPS’ revenue is expected to increase 4.3% year-over-year to $101.46 billion in 2022. Its EPS is estimated to grow 6.6% year-over-year to $12.93 in 2022. It surpassed EPS estimates in all four trailing quarters. Over the past month, the stock has gained marginally to close the last trading session at $164.58.

UPS’ overall B rating equates to a Buy in our POWR Ratings system. It has an A grade for Quality and a B for Stability. It is ranked #5 out of 17 stocks in the A-rated Air Freight & Shipping Services industry. Click here for the additional POWR Ratings for Growth, Momentum, Sentiment, and Value for UPS. 

Altria Group, Inc. (MO)

MO and its subsidiaries manufacture and sell smokable and oral tobacco products in the United States. The company offers cigarettes, primarily under the Marlboro brand. Its tobacco products are sold to wholesalers and large retail organizations.

On October 27, 2022, MO announced a strategic partnership with JT Group. This partnership is expected to enhance MO’s existing tobacco product portfolio. Billy Gifford, MO’s CEO, said, “We are excited to begin a new partnership with JT Group, a leading international tobacco company.”

On October 19, MO announced its agreement with a subsidiary of Philip Morris International Inc. (PM), under which MO will receive cash payments of around $2.70 billion for allotting exclusive U.S. commercialization rights to the IQOS Tobacco Heating System.

“We believe that this agreement provides us with fair compensation and greater flexibility to allocate resources toward Moving Beyond Smoking,” said Billy Gifford, Altria’s Chief Executive Officer.

MO has paid dividends for 52 consecutive years. Its dividend payouts have increased at a 7.9% CAGR over the past five years. Its current dividend yield is 8.39%, and its four-year average yield is 7.29%.

MO’s gross profit came in at $3.70 billion for the third quarter that ended September 30, 2022, up marginally year-over-year. Its operating income came in at $3.11 billion, up 5.5% year-over-year, while its EPS came in at $0.12, compared to a loss per share of $1.48 in the year-ago period.

Street expects MO’s revenue to increase marginally year-over-year to $21.06 billion in 2023. Its EPS is estimated to grow 4.5% year-over-year to $5.06 in 2023. It surpassed EPS estimates in three of four trailing quarters. Over the past year, the stock has gained marginally to close the last trading session at $44.84.

MO has an overall rating of B, which equates to a Buy in our POWR Ratings system. It has an A grade for Quality. MO is ranked #2 out of 10 stocks in the A-rated Tobacco industry. Click here for the additional POWR Ratings for MO (Growth, Value, Stability, Sentiment, and Momentum).

Waste Management, Inc. (WM)

WM and its subsidiaries provide waste collection, transfer, disposal services, recycling, and resource recovery and own landfill gas-to-energy facilities in the United States. The company serves residential, commercial, industrial, and municipal customers throughout North America.

On September 13, 2022, WM announced its agreement to acquire a controlling interest in Avangard Innovative’s U.S. business, which will operate as Natura PCR. Natura PCR is expected to scale and grow its recycling capacity to produce an estimated 400 million pounds per year of post-consumer resin in five years, thereby improving WM’s productivity.

WM has paid dividends for 20 consecutive years. Its dividend payouts have increased at an 8.4% CAGR over the past five years. Its current dividend yield is 1.68%, and its four-year average yield is 1.73%.

WM’s operating revenues came in at $5.08 billion for the third quarter that ended September 10, 2022, up 8.8% year-over-year. Its net income came in at $639 million, up 18.8% year-over-year, while its EPS came in at $1.54, up 20.3% year-over-year.

WM’s revenue is expected to increase by 10.1% year-over-year to $19.74 billion in 2022. Its EPS is expected to grow 18.2% year-over-year to $5.72 in 2022. It surpassed EPS estimates in three of four trailing quarters. Over the past nine months, the stock has gained 4.8% to close the last trading session at $155.22.

WM’s overall B rating indicates a Buy in our proprietary rating system. It also has a B grade for Stability and Quality. In the A-rated Waste Disposal industry, it is ranked #4 out of 15 stocks. Click here for WM’s additional POWR Ratings for Growth, Value, Sentiment, and Momentum.

Sprouts Farmers Market, Inc. (SFM)

SFM operates as a food retailer and grocery store. The company’s offerings include fresh, natural, organic food like fresh produce, bulk foods, vitamins and supplements, packaged groceries, meat and seafood, deli, baked goods, dairy products, frozen foods, body care, and natural household items.

On November 2, SFM announced its partnership with DoorDash Inc. (DASH) in the cities of Phoenix and Arizona for on-demand grocery delivery. Customers can order fresh, natural, organic products from SFM by visiting the DASH mobile app or website. The companies are expected to garner significant revenues from this new collaboration.

SFM’s net sales came in at $1.60 billion for the second quarter that ended July 3, 2022, up 4.8% year-over-year. Moreover, its gross profit came in at $580.36 million, up 5.5% year-over-year. Its EPS came in at $0.57, up 9.6% year-over-year.

SFM’s revenue is expected to increase by 6.1% year-over-year to $6.75 billion in 2023. Its EPS is expected to grow 5% year-over-year to $2.31 in 2023. It surpassed EPS estimates in all four trailing quarters. Over the past year, the stock has gained 29.7% to close the last trading session at $28.79.

SFM has an overall B rating, equating to a Buy in our POWR Ratings system. It has an A for Quality. It is ranked #23 out of 38 stocks in the A-rated Grocery/Big Box Retailers industry. We have also rated SFM for Growth, Value, Stability, Sentiment, and Momentum. Get all SFM ratings here.

PEP shares were trading at $177.69 per share on Thursday afternoon, down $0.55 (-0.31%). Year-to-date, PEP has gained 4.38%, versus a -20.72% rise in the benchmark S&P 500 index during the same period.

Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.

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