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3 Stocks to Play in the Face of Continued Economic Unclarity

Christopher Vargas

The global economic outlook continues to be a blurry picture with President Trump ordering US companies to search for alternatives to China, and Fed chairman Jerome Powell pledging to act appropriately to sustain the economic expansion. Powell acknowledged that the trade war tariffs are a factor in the deteriorating economic outlook but remained positive about the current state of the US economy.

The US weekly jobless claims fell more than expected last week, suggesting that the labor market has held firm despite public fears of an impending recession. Claims for state unemployment benefits dropped 12,000 to a seasonally adjusted 209,000 for the week ending August 17. The decline was sharper than expected as economists were anticipating 216,000 for the week.

While Wall Street has been uneasy about the economic outlook, the US economy seems to still be in an expansion period. Although the economy has slowed and there are economic indicators pointing towards a recession, current economic data suggests that the economy is still growing.

The purchasing managers index measured by the Institute of Supply Management hit 51.5% in July, marking the 35th consecutive month of manufacturing growth. The ISM’s non-manufacturing index touched 53.7% and marked the 114th consecutive month of growth in non-manufacturing activities. However, recession fears have sent many investors into sell-off frenzies, providing an opportunity for more bullish investors to enter stocks at discounted prices. Let’s take a look at what stocks can be solid investments in a time when the global economic outlook remains uncertain.

Verizon CommunicationsVZ is a good defensive move to make when faced with a dimmed global economic picture. Most of the company’s business is based in the US, making them less susceptible to global macroeconomic issues than other companies. The company’s beta ratio of 0.53 further cements the stock as a sound investment that can weather market volatility. Verizon also boasts a 4.24% dividend yield, more than double the average yield of the S&P 500. The stocks high dividend yield provides investors with an appealing perk during times of economic unclarity.

Estimate revisions have ticked upwards for Verizon, earning it a Zacks Rank #2 (Buy). Fiscal 2019 earnings are expected to rally 1.91% to $4.80 per share on the back of a slight sales spike to $131.37 billion. VZ has a solid history of beating bottom line estimates as it has an average EPS surprise of 2.58% over the past four quarters.

Coca-ColaKO is a classic defensive move to make during times of economic worries and unprecedented banter between the president and Fed chairman. Coca-Cola has a beta ratio of 0.48 and a dividend yield of 2.94%. The consumer staple stock is seen as a relatively safe investment to make as the demand for the company’s products doesn’t fluctuate with the broader market. KO is a solid move for investors feeling uneasy about the economy and it has the potential to trade higher as more panicked investors pour into the stock.

KO has been able to deliver positive organic sales growth over the past several quarters; organic sales increased 6% in Q2 for the company. Coca-Cola is a Zacks Rank #2 (Buy) and estimates are looking solid for the company. Earnings are expected to rise 0.96% to $2.10 per share and revenue is forecasted to surge 15.68% to $36.85 billion in fiscal 2019. The company has consistently surpassed estimates with an average EPS surprise of 2.85% over the past four quarters.

Jack in the BoxJACK is a company that is a leader in the fast-casual dining industry. It operates one of the nation’s largest hamburger chains and Qdoba Mexican Eats. Fast casual dining demand doesn’t typically decline during recessions making the stock a viable investment during times like these. Its beta ratio of 0.30 paired with its dividend yield of 1.85% further cement it as a safety stock that can bring returns if markets go haywire.

The stock has made a solid run in the past four weeks, up 15.8%. The company’s robust third quarter drove the stock’s run, beating top and bottom-line estimates. JACK’s reported EPS of $1.07 beat our estimate by 8.08% and revenue of $222.4 million beat estimates by 1.41%; earnings and revenue grew Y/Y by 7% and 18.3%, respectively.

The company’s recent initiative to expand its delivery channels bodes well for the company as it would bolster its transactions and sales. Estimates are looking solid for the current quarter with an anticipated 22.08% surge in earnings to $0.94 per share, and revenue is expected to climb 24.36% to $220.7 million. Estimates were revised upwards for JACK, earning it a Zacks Rank #2 (Buy).

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