Each week we’ll bring you five stocks that are on our radar but this week is a little different.
Given the market’s volatility and selling pressure, the goal of this week’s report will seek to offer suggestions for more defensive stock ideas for investors’ portfolios as we head into what is likely to be a rough second quarter.
Stay tuned to the commentary and strategies that will be finding their way to your email box over the next few weeks as we strive to help all investors cope with the most difficult market conditions seen in years.
Let’s take a look at this week’s Five Stock Watchlist.
What is the one thing that we are not likely to do over the next year regardless of whether stocks fall into a bear market or not?
The answer is you’re not likely to conduct fewer transactions without credit/debit cards, that’s where Visa comes in.
Visa is considered one of the original fintech companies. Their network of credit card and debit card processing machines handle 234 billion total transactions in 2024. That comes to approximately 639 million tractions every day, each of them paying money to visas top line revenue.
While consumer discretionary transactions may slow during an economic slowdown, consumers are now using Visa’s network to pay for everything from their groceries to utility bills and even loan payments.
That baseline business now makes Visa less susceptible to bear market trends. During the last bear market in 2022, Visa shares lost roughly 24% compared to the Nasdaq 100’s losses of nearly 40%. It all comes down to the regularity of the company’s business.
Despite a massive slowdown in revenue across the technology sector, Visa was able to maintain double digit earnings growth through 2022 and 2023. The company’s latest earnings report, released on January 30th, showed 10.1% year-over-year growth in revenue and earnings that beat analyst estimates by $0.09 at $2.75 EPS.
From a technical perspective, Visa shares have been able to buck the selling trend in stocks over the last month.
Shares are 6% lower than their all-time highs set in March while the Nasdaq 100 has traded roughly 12% lower. That relative strength has Visa trading above its bullish 50-day moving average, a claim that only five other stocks in the Technology ETF (XLK) can claim. All five are listed in the table below.
Visa’s bullish bias is likely to see more pressure this week as investors are now jettisoning stocks from their portfolio at a rapid pace due to uncertainty with the economy and stock market.
Given that, investors should consider buying the dip at Visa’s $330 level as this price should see support. Visa’s next level of support from that price lies at $300 though the stock endured a long-term consolidation at $310 late last year adding potential strength to the $300-$310 Range.
Visa shares remain in a long-term bull market trend with a high probability of its short-term correction resulting in a $300 price target.
In general, financial stocks suffer through economic slowdowns just as much as the technology sector, but that really applies more to the banking stocks. The other side of the financials – insurance companies – tend to perform more resiliently during slowdown in the economy and stocks.
The reason is like those pointed out above with Visa. Insurance companies’ revenue relies on payments that are part of our monthly budgets and required on most large items we own like homes, cars and boats. The consumer must continue those payments regardless of the economic conditions.
Insurance companies do carry risks with their investments in the bond market. This became a problem for these stocks during the great recession as the bond market experiences a sharp crash over a two-month period. This is not the case today.
Allstate shares are trading 3% lower than their all-time highs which were posted last month. The company’s revenue and earnings have maintained steady growth over the last two years, despite the natural disasters that have affected the company’s payouts.
Shares are trading above their bullish 50- and 200-day moving averages, signaling a rare short- and long-term bullish trend for the stock.
While shares remain a strong performer, Allstate is likely to see some panic selling because of the continued drop in investor confidence and sentiment. Allstate’s chart currently suggests that the stock would see significant buying support as shares approach the $200 price level.
Shares of Allstate maintain a long-term bull market trend with a price target of $225.
We covered this stock last week, but it is literally the only stock in the $10 universe that is still flashing bullish signs.
Paramount’s library is drawn from the volumes of movie catalogs and deep production projects specific to the platform. As a result of the vast offerings, Paramount has been posting consistent growth to its subscribers, just over 70 million active, while Apple, Disney and other smaller streamers struggle. Last week it was announced that Apple’s streaming services were on track to lose more than $1 billion displaying the struggles in the industry.
Paramount’s price has carved out what appears to be a long-term bottom at $40. The stock has been fighting to stay above that psychologically significant price for more than a year as it traded in a relatively tight range.
In February, the stock’s 50-day moving average turned bullish ahead of a rally to its current price of $12. Two weeks ago, Paramount shares successfully drew a “Golden Cross” pattern as the stock’s 50-da moving average crossed above its 200-day moving average. This pattern forecasts higher prices for the next 3–6-month period.
Shares of Paramount are also shifting into a long-term bull market trend as the stock is now above its 20-month moving average. That trendline is currently priced at $11.20 and should be considered support for Paramount shares.
A shift in sentiment towards stocks with resilient consumer activity puts AT&T (T) on the list of healthy income stocks to own in 2024. At their current price, the stock pays a dividend yield of 3.9% that is back with strong cash flow and steady product demand.
Shares of AT&T had a banner year as the stock rallied more than 50% to new all-time highs. The stock benefitted from the Fed’s shift in interest rate policy which sent investors looking for high dividend yielding stocks to replace high yield bank accounts and other interest rate sensitive accounts.
That rally has continued as the company is now improving their revenue growth and earnings performance.
Last quarter, AT&T posted positive earnings growth for the first time in four quarters, despite the lackluster rollout of the latest Apple iPhone. The shift in revenue originated from a consolidation in AT&T business and other expense control measures.
Positive earnings reports through the second half of 2024 have fortified the stock’s long-term bull market trend which should grow stronger through 2024 as AT&T is considered somewhat of a utility stocks for most investors during periods of market uncertainty.
Market by a strong bullish trend in the stock’s 50-day moving average, AT&T shares are one of just 20% of stocks in the S&P 500 that remain in both short- and long-term bull market trends.
Overall, the stock remains bullish with a price target of $35.
Shares of Best Buy are set to break critical support as they head to a target price of $60, a 18% decline from Friday’s close. The stock is one of the growing lists of companies that are going to feel direct pressures from new tariffs this week.
Earlier in the month, Best Buy stock hit its worst levels since May 2024 as investors reacted to the company’s quarterly earnings report and negative guidance.
Shares fell more than 16% to their lows following the report on an extremely heavy volume day, shifting the stock into a new long-term bear market trend.
Earnings results for the latest quarter came in better than analysts’ expectations. Best Buy beat its earnings per share target of $2.40 by $0.18, the company’s best EPS numbers since the same quarter last year.
Revenue for the quarter also came in ahead of Wall Street’s expectations but reflected negative growth on a year-over-year basis as consumers continue to move to discounted and online retailers for their electronic purchases.
Investors’ disappointment surrounded the company’s outlook, including comments on the impact on tariffs. The tariffs come just as Best Buy was experiencing a long-awaited recovery in the computing and mobile phone categories, which account for approximately 44% of its total sales.
Best Buy imports more than 95% of its products sold from China and Mexico. The newly enacted tariffs – and those expected to follow in retaliation – which will have an almost immediate effect on the company’s profitability.
Best Buy’s management expects earnings for the next quarter to return to negative territory, being "slightly down versus last year".
Earlier this month, Best Buy shares closed below their 20-month moving average for the first since May of 2024. The move resembles a similar pattern seen when the stock shifted into a bear market in early 2022. That bear market resulted in a drop of 38% from Best Buy stock over a ten-month period.
Best Buy shares are likely to break below the $70 level this week as investors exhibit further reaction to the announcements of tariffs as well as the declining outlooks for the economy. That move below $70 will target a move to $60 with a fast and aggressive drop.
At minimum, investors should avoid holding Best Buy stock. Those with the education and experience in trading options may consider using put options on Best Buy to profit from the targeted move to $60.
