7 Smart Stock Picks for Cautious Investors
With the latest on inflation and interest rates suggesting more challenges ahead for the economy and the markets, there’s renewed appeal for defensive plays. However, those are not the only stocks for cautious investors to consider.
That is to say, when it comes to “playing it safe” during times of market volatility, there’s no need to limit oneself to these safe harbors only. There are scores of stocks, plenty of which are more up-and-coming growth plays than established blued chips, that can offer stability, plus the opportunity for appreciation, during the current environment.
Namely, stocks in companies with high exposure to secular trends, and/or have strong company-specific catalysts in play. These stocks have the potential to make substantial moves higher, irrespective of the overall market’s direction.
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So, what are the best stocks for cautious investors today? Take a look at these seven. Each one earns an A rating in Portfolio Grader.
Altisource Asset Management
Ares Acquisition (AAC)
Source: Dmitry Demidovich/ShutterStock.com
As you can probably tell from its corporate name, Ares Acquisition (NYSE:AAC) is a special purpose acquisition company. Although SPACs have fallen out of favor over the past two years, this one is one worthy of consideration.
It all has to do with this SPAC’s acquisition target: X Energy Reactor Company. As I discussed back in January, X Energy develops small modular reactors or SMRs. Demand for these smaller, safer, and less expensive nuclear power generation facilities is poised to rise significantly in the coming years, as the world re-embraces nuclear power, due to its qualities as a scalable renewable energy source.
With its SPAC merger still pending, AAC stock will likely continue to hold steady, at prices not too far off its initial offering price of $10 per share. Now may be an opportune time to enter a position in this A-rated stock.
Altisource Asset Management (AAMC)
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Altisource Asset Management (NYSE:AAMC) has is in the past been involved in various areas of financial services.
More recently, the company has focused on becoming primarily a provider of specialty mortgage loans, such as debt service coverage ratio (or DSCR) and bridge loans, to real estate investors.
While this change in direction is still in the early stages, it has already been a boon for AAMC stock. Shares have more than doubled since January alone. Shares are up a total of 131.3% over the past twelve months.
Yet despite such a strong run, it’s not as if the market has fully priced in the upside from Altisource’s business transformation. As one online commentator argued back in November, once up and running, Altisource’s new business could eventually generate annual earnings of $10 per share. Not too shabby, given this A-rated stock trades for only $41.50 per share today.
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Like Altisource, Ardelyx (NASDAQ:ARDX) is another stock that has performed very well during a time that has been tough for stocks overall. Shares in this pharma firm are up more than fourfold over the past year, as investors wager on a label expansion for its tanapanor treatment.
Investors are not wrong for their high enthusiasm for ARDX stock. The company has made substantial progress towards getting approval to sell tanapanor, for now, a treatment for irritable bowel syndrome, as a treatment for kidney disease. According to analysts at Piper Sandler, achieving this could result in $800 million in potential sales within five years.
Shares are likely to hold up, as its label expansion efforts continue. There is a strong chance that the company’s key potential catalyst plays out. Taking this into account. consider A-rated ARDX one of the best stocks for cautious investors.
Catalyst Pharmaceuticals (CPRX)
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Catalyst Pharmaceuticals (NASDAQ:CPRX) is another biotech that has performed strongly over the past twelve months. During this timeframe, shares have nearly doubled in price.
However, while pulling back sharply last month, after Teva Pharmaceutical (NYSE:TEVA) announced plans to launch a generic version of this company’s key drug, Firdapse, cautious investors seeking growth should keep an eye on CPRX stock. Why? Living up to its name, Catalyst Pharmaceuticals has numerous catalysts on tap.
These include a possible label expansion of Firdapse (a treatment for a rare autoimmune disorder), as well as its purchase of the U.S. rights to Fycompa, an epilepsy treatment developed by Japan-based Eisai (OTCMKTS:ESAIY). There is much overlap between Fycompa and Firdapse.
Expected revenue synergies could make this acquisition accretive as soon as this year. With these two catalysts, this stock may continue to crush it. CPRX earns an A rating in Portfolio Grader.
Enphase Energy (ENPH)
Source: IgorGolovniov / Shutterstock.com
Given how Enphase Energy (NASDAQ:ENPH) shares have pulled back in recent months, I can understand why you may be skeptical about ENPH’s merits as one of the best stocks for cautious investors.
But while the market has exercised some caution, and is currently taking a “wait and see approach” with ENPH stock, if you’ve yet to enter a position in this solar energy play, this factor works to your advantage. At current prices, shares have a substantial runway.
Once the market realizes that its slowdown fears are an overreaction, this A-rated stock could make a stunning comeback.
PDD Holdings (PDD)
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PDD Holdings (NASDAQ:PDD) is the corporate parent of Pinduoduo. Sentiment for shares in the China-based e-commerce company has improved significantly since mid-2022, a result of the easing of numerous macro headwinds, including the U.S. crackdown on Chinese stocks, as well as China’s Covid lockdowns.
Since the start of the year, PDD stock has traded sideways. News of rival JD.com (NASDAQ:JD) launching a price war against the company’s main platform is putting pressure on shares at present. However, there’s still plenty in play that could not only keep the stock steady but push it to higher prices between now and year’s end.
For instance, success with the company’s efforts to crack the U.S. market, with its Temu platform, could help outweigh headwinds in its home market, allowing it to report growth ahead of expectations. This stock currently earns an A rating in Portfolio Grader.
Source: Postmodern Studio / Shutterstock
Transocean (NYSE:RIG) is one of the top names in the offshore contract drilling space. Admittedly, this is another name that at first glance may not sound like one of the best stocks for cautious investors.
Namely, because of the recent RIG stock selloff, which came about due to the company’s latest quarterly earnings release. Falling short of expectations on both revenue and earnings, investors are now more skeptical about RIG’s results over the next few quarters. However, there is much to suggest that this skepticism is an overreaction.
The oil driller’s comeback is only the early stages. As management stated in the earnings release, Transocean last year increased its contract backlog by $4 billion, not to mention upgraded its fleet. Even after the latest disappointment, sell-side forecasts still call for dramatic improvement in this A-rated energy stock’s operating performance over the next few years.
On the date of publication, Louis Navellier had a long position in CPRX and ENPH. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
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