Ahead of November’s job report, market volatility is rife. According to CNBC’s Jim Cramer, “We need to see the unemployment rate go higher, while wages remain stable and we get meaningful layoffs in some industries.”
He added, “If that doesn’t happen, if the numbers are truly strong, then the Fed heads will come out of the woodwork and start talking about how we need more enormous rate hikes.”
On the other hand, The Conference Board’s latest index of U.S. consumer confidence fell to 98 in November from 102.5 in October. However, a reading of more than 90 reflects a healthy economy. Therefore, despite lingering macroeconomic hindrances, optimism remains.
Despite the uncertainties, quality stocks UnitedHealth Group Incorporated (UNH) and Bristol-Myers Squibb Company (BMY), possessing solid dividend-paying records, might be ideal buys now. However, fundamentally weak stocks Peloton Interactive, Inc. (PTON) and Mullen Automotive Inc. (MULN) might be best avoided.
Stocks to Buy:
UnitedHealth Group Incorporated (UNH)
UNH operates as a diversified healthcare company in the United States. It operates through four segments: UnitedHealthcare; OptumHealth; OptumInsight; and OptumRx.
On November 16, 2022, UNH and Life Time Group Holdings, Inc. (LTH), one of the leading healthy-living brands, expanded their partnership to allow more individuals to enhance their physical and mental health.
Members of UNH’s Medicare plans, including the Renew Active® fitness program, will now have access to all of LTH’s almost 160 athletic clubs in 29 states.
UNH has paid dividends for 19 consecutive years. Over the last three years, UNH’s dividend payouts have grown at 16.1% CAGR. While UNH’s four-year average dividend yield is 1.36%, its current dividend translates to a 1.24% yield.
UNH’s total revenue came in at $80.89 billion for the third quarter that ended September 30, 2022, up 11.8% year-over-year. Its net earnings increased 28.7% year-over-year to $5.26 billion. Also, its EPS came in at $5.55, up 29.7% year-over-year.
Analysts expect UNH’s revenue to increase 12.4% year-over-year to $323.31 billion in the current year. Its EPS is estimated to grow 15.8% year-over-year to $22.03 in 2022. It has surpassed EPS estimates in all four trailing quarters. Over the past year, the stock has gained 21% to close the last trading session at $532.27.
UNH’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.
UNH has a B for Growth, Stability, Sentiment, and Quality. In the A-rated Medical - Health Insurance industry, it is ranked #2 out of 11 stocks. Click here for the additional POWR Ratings for Value and Momentum for UNH.
Bristol-Myers Squibb Company (BMY)
BMY engages in the global discovery, development, licensing, manufacture, and sale of biopharmaceutical products. The Company’s offerings include products for hematology, oncology, cardiovascular, immunology, fibrotic, neuroscience, and COVID-19 diseases.
On November 10, 2022, Health Canada approved BMY’s CAMZYOS™ (mavacamten capsules) for treating adults with Symptomatic Obstructive Hypertrophic Cardiomyopathy, making it the first Canadian-approved allosteric and selective cardiac myosin inhibitor for said ailment. This breakthrough product is a red-letter achievement for BMY.
BMY has paid dividends for 33 consecutive years. Over the last three years, BMY’s dividend payouts have grown at 3% CAGR. While BMY’s four-year average dividend yield is 3.03%, its current dividend translates to a 2.73% yield.
BMY’s total expenses came in at $9.01 billion for the third quarter that ended September 30, 2022, down 4.8% year-over-year. Moreover, its net earnings came in at $1.61 billion, up 3.9% year-over-year. Its EPS came in at $0.75, up 8.7% year-over-year.
BMY’s revenue is expected to increase by 2.6% year-over-year to $47.11 billion in 2023. Its EPS is expected to grow 4.3% year-over-year to $7.94 in 2023. It surpassed EPS estimates in all four trailing quarters. Over the past year, the stock has gained 40% to close the last trading session at $79.14.
BMY has an overall A rating, equating to a Strong Buy in our POWR Ratings system. It has an A grade Value and a B for Quality, Stability, and Sentiment. It is ranked #3 out of 162 stocks in the Medical – Pharmaceuticals industry.
Beyond what is stated above, we’ve also rated BMY for Growth, Quality, and Momentum. Get all BMY ratings here.
Stocks to Avoid:
Peloton Interactive, Inc. (PTON)
PTON provides an interactive fitness platform and sells interactive fitness products in North America and internationally. The Company operates through two segments: Connected Fitness Products and Subscriptions.
PTON’s trailing-12-month EBIT Margin of negative 40.79% is lower than the 7.89% industry average. Its trailing-12-month EBITDA margin of negative 37.25% is lower than the 11.08% industry average.
PTON’s total revenues came in at $616.5 million for the first quarter that ended September 30, 2022, down 23.4% year-over-year. Its loss from operations came in at $374 million, up 4% year-over-year. Moreover, its net loss came in at $408.5 million, up 8.6% year-over-year.
PTON’s revenue is expected to decrease by 25.4% year-over-year to $2.67 billion in 2023. Its EPS is expected to remain negative in 2023 and 2024. It missed EPS estimates in all four trailing quarters. Over the past year, the stock has lost 78.2% to close the last trading session at $10.14.
PTON’s overall F rating equates to a Strong Sell in our POWR Ratings system. It has an F grade for Stability and Sentiment and a D for Value and Quality. The stock is ranked #57 out of 59 in the D-rated Consumer Goods industry.
We’ve also rated PTON for Growth and Momentum. Get all PTON ratings here.
Mullen Automotive Inc. (MULN)
MULN is an electric vehicle manufacturer and distributor. Additionally, it runs the digital platform CarHub, which uses AI to give a user-friendly way to buy, sell, and own a car. It sells battery technology and emergency point-of-care solutions.
MULN’s trailing-12-month ROTC of negative 618.14% is lower than the 6.62% industry average. Its trailing-12-month ROTA of negative 169.94% is lower than the 4.45% industry average.
MULN’s loss from operations came in at $18.22 million for the third quarter that ended June 30, 2022, up 184.5% year-over-year. Its net loss came in at $59.47 million, up 289.9% year-over-year. In addition, its general and administrative expenses came in at $10.90 million, up 121.2% year-over-year.
Over the past year, the stock has lost 97.7% to close the last trading session at $0.19.
MULN overall F rating equates to a Strong Sell in our POWR Ratings system. It also has an F grade for Value and Stability and a D for Sentiment and Quality. MULN is ranked #57 out of 64 stocks in the D-rated Auto & Vehicle Manufacturers industry.
Click here to access the additional POWR Ratings for MULN (Growth and Momentum).
UNH shares were trading at $528.02 per share on Tuesday afternoon, down $4.25 (-0.80%). Year-to-date, UNH has gained 6.17%, versus a -15.85% rise in the benchmark S&P 500 index during the same period.
About the Author: RashmiKumari
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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