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5 Top Stocks To Recession-Proof Your Portfolio


No one can predict the future. But nonetheless, the warnings coming from the Street sound particularly ominous right now. “Even as we have been revising our growth projections lower, we continue to highlight that the risks remain decidedly skewed to the downside,” Chetan Ahya, Morgan Stanley’s chief economist, recently cautioned. “We expect that if trade tensions escalate further... we will enter into a global recession (i.e., global growth below 2.5%Y) in three quarters.”

That’s why it’s best to get your portfolio in shape before trouble hits. Here are five stocks worth keeping an eye on. All five stocks score a ‘Strong Buy’ consensus from the Street thanks to their compelling outlook. The consensus is based on the last three months of ratings. A couple of these stocks are also top-notch dividend picks. Let’s take a closer look now:

1. Medtronic PLC (MDT)

Ireland based Medtronic is the world's largest medical device company. It has just announced that Geoff Martha will succeed Omar Ishrak as CEO. The news comes after the company reported impressively robust earnings reports. Every reported segment came in above consensus' expectations, with notable strength in Neurovascular, Spine, and Structural Heart.

“We don't think that the selection of Martha to succeed Ishrak comes as much of a surprise and we believe that investors think highly of Martha given his track record leading the Spine business and RTG after that” commented Needham’s Mike Matson on August 28.

If Martha can further improve upon MDT's execution, Matson believes its multiple could continue to narrow the gap to its large-cap med tech peer group average. Right now, MDT shares trade at a CY20E P/E of 19.4x a roughly 17% discount vs. its large-cap peer group.

Net-net: “We reiterate our Strong Buy rating given MDT's improving product cycle and revenue growth and its P/E discount to its large-cap peers”. Out of 17 analysts covering MDT, 14 rate the stock a buy. MDT also pays a 2% dividend yield, with a $2.16 annualized payout; the result of 41 years of consecutive dividend growth.

2. Clean Harbors Inc (CLH)

Clean Harbors is a leading provider of environmental, energy and industrial services. That includes everything from hazardous waste management to industrial cleaning and recycling services. The stock is on a tear so far this year, with shares up 50% year-to-date. And analysts are confident further growth lies ahead.

Four out of five analysts covering the stock rate CLH a buy. This includes a recent upgrade from top-rated Oppenheimer analyst Noah Kaye. He bumped the stock from hold to buy with an $88 price target (19% upside potential) following CLH’s beat-and-raise quarter.

“We believe Q2 results and commentary provide evidence that Clean Harbors can still generate healthy margin expansion in a low-growth environment, and that consistent execution along with potential catalysts can support another leg up for the shares,” he told investors on August 1.

3. KB Home (KBH)

KB Home- the first company to be traded on the NYSE as a home builder- is enjoying a wave of bullish sentiment from the Street right now. Over the last few months the company has received no less than 6 analyst upgrades. Given that analysts tend to reiterate their ratings, multiple upgrades speak volumes about the stock’s potential.

“In the midst of a homebuilding sector where individual stock returns are likely to be highly data-driven, we believe KBH is well positioned with its focus on the entry-level and its strong community count growth” cheers Evercore ISI analyst Stephen Kim.

This top-rated analyst upgraded KBH last month, writing “KBH should show some of the highest growth in the space this year, and if the company sustains its order momentum, it has the potential to produce order growth of 30%+ in 4Q.” Meanwhile SunTrust Robinson’s Rohit Seth describes KB Home as “an attractive turnaround story.”

4. McDonald’s Corp (MCD)

Fast food empire McDonald’s has just received its highest price target yet. On August 13 MKM Partners analyst Brett Levy initiated coverage with a buy rating and $250 price target (vs the $230 average analyst price target).

McDonald’s “valuations continue to test new highs,” Levy states “but the company has continued to produce strong and consistent results, outpacing much of the other highly franchised global concepts.” Indeed, MCD’s latest earnings report revealed stellar global same-restaurant sales growth of 6.5%, easily beating the 5% consensus estimate.

The analyst continued: “We believe the combination of strong domestic and international... sales growth are sustainable through its potential uptick in unit expansion and solid same-store sales generation (through a balanced menu approach and ongoing investments in its stores, systems, technology).”

And don’t forget, MCD is also an elite ‘Dividend Aristocrat’. That’s thanks to 42 years of consecutive dividend growth. Investors currently receive an annualized payout of $4.64 on a 2.13% dividend yield.

5. SilverCrest Metals Inc (SILV)

Last but not least we have SilverCrest Metals, an intriguing precious metals exploration company. According to the Street, its flagship Las Chispas project in northwestern Mexico has the potential be one of the highest return projects (+70% IRR at spot prices) in the precious metals space.

Indeed, in the last three months, five analysts have published back-to-back buy ratings on SILV. That’s with an average price target of $7.25. And most notably, RBC Capital’s Mark Mihaljevic has just singled out the stock for special praise. He places SILV on RBC Capital’s Q3/2019 list of Canadian Small Cap Conviction Stocks.

“We believe SilverCrest’s Las Chispas silver/gold (50%/50%) project has emerged as one of the most promising advanced exploration- stage assets given near-surface high grade mineralization, low capital intensity, and exploration potential” explains Mihaljevic.

He believes SilverCrest is a high potential takeover target, as Las Chispas “can add a high-grade, high- margin, high-return project and help fill out the pipeline for many of the [larger] producers.” So watch this space.

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