From initially going nowhere in late Feb. to suddenly dropping in March, investors still interested in staying in the market have inquired about the best stocks to buy under the challenging circumstances. Here, some of my colleagues have had fun with ChatGPT, asking the artificial intelligence platform all sorts of market-related questions.
Personally, I did something similar. But instead of AI, I decided to “ask” investment resource Gurufocus.com what it believes to be the most resilient enterprise. Fortunately, the platform features a stock filter called “Probability of Financial Distress (%).” Naturally, I entered t the lowest range possible: 0% to 5% risk of distress. If this platform is worth anything, it should capture at least some of the best stocks to buy now. Further, I entered no other filter aside from not including over-the-counter securities, trusts, and master limited partnerships (MLPs). Other than that, what you see is what you get. Below are the best stocks to buy for a sideways (or even declining) market.
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Unless you’ve frozen yourself for later resuscitation, you’re familiar with consumer technology giant Apple (NASDAQ:AAPL). While the discretionary space typically isn’t the arena to look for the best stocks to buy during a downturn, Gurufocus.com disagrees. Based on its distress probability indicator, Apple represents the public enterprise least likely to fail. Financially, it’s difficult to argue with the platform. Sure, it’s not the discounted deal it once was. Presently, the market price of AAPL is at a forward multiple of 26.32. As a premium to earnings, Apple ranks worse than 84.26% of the competition.
That said, it delivers the goods operationally. For example, the company’s three-year revenue growth rate stands at 20%, above 85.09% of the competition. Also, its free cash flow (FCF) growth rate during the same period is 29.2%. Finally, Wall Street analysts support AAPL, pegging it a consensus moderate buy. As well, their average price target stands at $170.40, implying over 9% upside potential.
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An all-around solid enterprise, I’m not shocked at all to see Microsoft (NASDAQ:MSFT) rank so highly for best stocks to buy. Sure, it’s a tech company and the underlying sector doesn’t always offer the greatest magnitude of safety. However, Microsoft has become so ingrained in everything that we do professionally and personally that it’s a prudent choice.
Financially, it’s also difficult to argue with MSFT as one of the best stocks to buy during troubled circumstances. Sure, it’s not a great deal anymore on an objective basis. For example, the market prices MSFT at a forward multiple of 25.52, which ranks a bit better than average.
However, the company comes alive operationally. Notably, its three-year revenue growth rate stands at 17.4%, ranking above 71.36% of its peers. Its FCF growth rate during the same period comes in at 20.5%, beating out 62% of the industry. Also, Microsoft’s a profitability machine, commanding a net margin of 33%. Lastly, covering analysts peg MSFT as a consensus strong buy. Further, their average price target stands at $292.07, implying nearly 6% upside potential.
Alphabet (GOOG, GOOGL)
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Once a domineering presence in the charts, Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) suffered some humbling recently. True, the Class C GOOG stock gained nearly 13% so far this year. However, in the past 365 days, GOOG gave up 25% of its equity value. Nevertheless, the underlying fundamentals of digitalized innovations may be too compelling to ignore. Further, the financials provide more than enough justification for Alphabet’s ranking among the best stocks to buy. Operationally, the tech giant features a three-year revenue growth rate of 22.9%, outpacing 74.35% of its peers. Further, its FCF growth rate during the same period pings at 27.2%, above 69.61% of the industry.
In addition, its operating and net margins come in at 26.46% and 21.2%. Both stats rate among the industry’s upper half. To boot, the company’s Altman Z-Score is 9.11, indicating very low bankruptcy risk. Turning to Wall Street, analysts peg GOOG as a unanimous strong buy. Moreover, their average price target stands at $123.78, implying over 22% upside potential.
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Synonymous with the mercurial growth in the e-commerce space, Amazon (NASDAQ:AMZN) is frequently ranked among the best stocks to buy. However, since the fallout that began in late 2021/early 2022, AMZN ate some humble pie. Yes, shares gained almost 17% of equity value since the Jan. opener. However, in the trailing year, they’re down more than 36%.
Nevertheless, Gurufocus.com has confidence that AMZN will turn out to be one of the best stocks to buy. It’s a system oddity because the platform also considers AMZN to be a possible value trap. Besides that, Amazon’s three-year revenue growth rate stands at 21.9%, boxing out 84.24% of the competition. Also, its book growth rate during the same period is 31.8%, above 87.54% of sector rivals. If there’s one major knock against AMZN at the moment, it’s the valuation. At a forward multiple of 60.11, it’s a pricey affair.
Still, covering analysts love AMZN, pegging it a consensus strong buy. Additionally, they anticipate shares hitting $136.86, implying nearly 37% upside potential.
Berkshire Hathaway (BRK.B)
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I believe it’s my InvestorPlace colleague Dana Blankenhorn that remarked something to the effect of if you’re facing unknown circumstances, it’s wise to place your bets across a wide canvas. That way, at least one of your wagers should rise higher. Fundamentally, that could be the selling point of Berkshire Hathaway (NYSE:BRK-B). The industrial conglomerate under legendary investor Warren Buffett bets on practically everything viable. Thus, it’s difficult to lose.
As one of the most popular investments, I’m not shocked in the slightest that Gurufocus.com identified it as a candidate for best stocks to buy. To be fair, Berkshire doesn’t feature the runaway financial metrics that some of the star enterprise competitors do. However, it does hold its own on certain metrics, such as a three-year book growth rate of 7.4% outpacing 62.58% of the competition. Primarily, I believe Berkshire got onto this list because of the proven wisdom and guidance of Warren Buffett. Few other investors can claim this man’s extraordinary breadth of knowledge.
As well, analysts peg BRK.B as a moderate buy. Their average price target stands at $353, implying nearly 17% upside potential.
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For the last two ideas for best stocks to buy, we have some controversial ideas, beginning with Nvidia (NASDAQ:NVDA). Fundamentally, I can appreciate Nvidia’s myriad strengths. Of course, most folks are familiar with the company’s graphics processing units (GPUs) for the gaming industry. Over the years, however, Nvidia also invested heavily in relevant segments such as AI and machine learning.
Still, it’s a controversial idea for the best stocks to buy because again, tech firms tend to be cyclical. Plus, it wouldn’t necessarily be one of my top choices for investors seeking stability. That said, Nvidia offers attractive financial metrics. Its three-year revenue growth rate pings at 34.5%, soaring above most of the competition. Also, its book growth rate during the same period came out to 21.6%, a robust figure. In addition, the enterprise features a profitable framework. For example, its net margin is 16.19%, ranked better than 67% of semiconductor companies.
Looking to the Street, covering analysts peg NVDA as a consensus moderate buy. However, their average price target is $257.88, implying only 1% upside potential.
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To be honest, the inclusion of Tesla (NASDAQ:TSLA) as one of the best stocks to buy at this juncture surprised me. While Tesla represents the king of electric vehicles – and may hold onto this status for years to come – the segment also aligns with the consumer economy. Unfortunately, consumers just aren’t feeling much motivation to buy pricey EVs, especially with the banking sector’s fallout.
Still, the operational stats may attract contrarian investors. For instance, Tesla’s three-year revenue growth rate stands at 36.4%, which is simply monstrous. Its FCF growth rate during the same period came out to 81.4%, also a ridiculously high figure. In terms of profitability, the company’s net margin is 15.45%, outpacing nearly 94% of its rivals. If that wasn’t enough, the EV maker also enjoys a stout balance sheet. Along with a cash-rich account, Tesla’s Altman Z-Score hits 11.38, indicating extremely low bankruptcy risk.
Finally, analysts peg TSLA as a consensus moderate buy. Their average price target stands at $212.89, implying nearly 16% upside potential.
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.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.