The economy is in trouble. Inflation remains stubbornly high, hitting 8.2% in the month of September, with inflation now having officially soared to levels we haven’t seen in four decades. Thus, even for long-term investors in no-brainer stocks, it’s a difficult time to hold steady right now.
With the Federal Reserve appearing intent on raising rates further from here, this is certainly true. That said, there is some good news. The U.S. central bank has signaled smaller increases are likely to materialize moving forward. This may help offset concerns that higher terminal rates than initially suggested are now a distinct possibility.
The inflation fight appears to be far from over. Accordingly, investors, consumers, and all Americans should understand that the chances of something breaking in the economy are increasing. Indeed, many experts now suggest the chances of a recession in 2023 are higher than ever.
This dour outlook could continue to drive stocks lower next year. That said, there are plenty of no-brainer stocks investors may want to consider for 2023 and beyond.
| AAPL | Apple | $138.96 |
| ASML | ASML Holding | $483.38 |
| V | Visa | $200.10 |
| UNH | UnitedHealth Group | $545.40 |
| MSFT | Microsoft | $227.87 |
| DPZ | Domino’s Pizza | $347.61 |
| ORLY | O’Reilly Automotive | $830.20 |
Apple (AAPL)
It’s fair to assert that Apple (NASDAQ:AAPL) stock is the best of the big tech giants to invest in. That has been true in 2022, as shares have outperformed its famed FAANG peer group it is often compared against.
That said, Apple is down 23% year-to-date. This decline is meaningful, but it’s worth noting that this loss greatly outperforms that of the Nasdaq, which has fallen 33%. That matters, because the tech-heavy index is seen as a bellwether for how the broader technology sector is performing. Thus, it’s fair to argue that Apple is the best tech stock available, so for those who believe the sector will rebound, it may make sense to buy now.
Apple has proven over its long history that it can better weather tech slowdowns when they arise. Thus, many investors look at Apple as a relatively defensive option, compared to its peers. The company’s dividend is another attribute which prompts such discussion. While Apple’s dividend only pays a modest 23 cents, yielding 0.7%, that’s still a 0.7% buffer against losses investors won’t have with most other tech shares. If not looked at as a buffer, it’s certainly a dependable income stream.
Apple posted yet another record quarter. The naysayers continue to provide a negative outlook ,just as they have throughout this year. That said, I think now is the time to take advantage of the illogical sentiment that has pushed AAPL stock lower again. It will pay off.
ASML Holding (ASML)
ASML Holding (NASDAQ:ASML) is a semiconductor firm that has fallen precipitously throughout 2022. This company has been plagued by the same doubts that have followed chip companies everywhere. Namely, persistent inflation and slowing global growth imply a slowdown in chip sales. By extension, that means the large, expensive lithography machines ASML produces should see waning demand as well.
Thus, its share price should drop.
Here’s the thing – the company’s share price has dropped, but its Q3 earnings report shows that demand remains quite strong. The company announced it sold 80 advanced lithography systems in Q3, which represented a decline of 3 machines on a year-over-year basis. In terms of used machines, 6 systems were sold compared to 8 one year prior. Thus, demand is essentially the same. Additionally, rising prices led to a marginal sales increase of 6%, with revenue reaching EUR 5.778 billion.
ASML is a highly-profitable company that provides a product few others can. In other words, it has a moat that is somewhat unassailable. That said, many investors are afraid to buy this no-brainer stock. Those that do should see strong upside realized over the long-term, while receiving a modest dividend to boot.
Visa (V)
Visa (NYSE:V) stock has a lot going for it. The company has posted four straight quarterly earnings beats over the past year, the most recent of which came a few weeks ago.
The credit card giant’s revenues were up 19% year-over-year, reaching $7.8 billion. That figure was ahead of the $7.5 billion Wall Street was anticipating. Strong sales translated to earnings per share of $1.93, also above the Street’s projections.
It hasn’t much mattered. Visa’s stock price continues to be punished, and has recently fallen below the $200 threshold as recession fears mount.
Therein lies another tailwind for Visa. Boston Fed reserve research shows that in the Great Recession of ‘08-’09, reliance on credit cards increased as uncertainty grew. The job market remains tight right now, but it’s fair to say that recession fears are as strong as ever. Influential figures are increasingly calling for a recession in 2023. That could actually provide a boon for Visa, should historical patterns play out as expected.
UnitedHealth Group (UNH)
UnitedHealth Group (NYSE:UNH) is one of a select group of stocks that are likely to be recommended, no matter the prevailing economy. As its name suggests, UnitedHealth is a leading healthcare stock, meaning it belongs to a sector with relatively inelastic demand. People need access to doctors and medical care, recession or not.
The firm’s recent Q3 earnings showed that to be true, with the company’s revenues climbing 12%. That led the company’s CEO Andrew Witty to reiterate previous 2022 projection, and suggest that earnings near the top end of its initial earnings outlook range were likely. Looking further out, UnitedHealth expects earnings growth in the range of 13-16% annually.
Thus, UnitedHealth tends to fare in any macro environment, mostly because its industry is relatively predictable. But it’s also a stock that includes a dividend that hasn’t been reduced since 1990. That’s another form of security that investors can rely on from UnitedHealth. All in all, these factors make UNH stock the type of equity that is perfect for the investor with a long-term horizon.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) stock looks like a pretty safe bet right now. That might seem like a strange statement, given that MSFT stock continues to fall and is approaching its 52-week low.
However, I tend to zoom out and take a more holsitic view of Microsoft in this market. Prior to the pandemic, MSFT stock traded around the $185 level. While the stock is nearing this mark, it still remains above pre-pandemic levels. That said, growth has surged (in part as a result of the pandemic), making the company’s valuation multiple more attractive right now.
It’s certainly possible MSFT stock could fall further, but I don’t see it. One of the reasons why is the company’s stronger-than anticipated results for its third quarter. Microsoft’s Azure cloud results were slightly weaker than expected, but the overall numbers came in strong. Weaker-than-expected guidance led to a dropping Microsoft’s stock price, but I think investors are being too near-sighted on this company.
Microsoft projects it will record between $52.4 and $53.4 billion in revenues next quarter. The company posted $51.73 billion in 2021 during the same period and $43 billion in 2020 (certainly, 2021 was an aberration in many senses). Microsoft will be fine, just as long as investors don’t expect it to grow like it did between 2020 and 2021 indefinitely.
Domino’s Pizza (DPZ)
Domino’s Pizza (NYSE:DPZ) will contend with many of the same issues facing all retail operators across the economy into 2023. That means the company’s costs are likely to continue to run higher, negatively impacting its bottom line. For investors who look past those uncontrollable factors, what emerges is a strong opportunity.
Domino’s Pizza saw its net income slip in the most recent quarter. Net income fell to $100.5 million in Q3 from $120.4 million a year earlier. That’s rarely a positive sign. However, Domino’s did see supply chain costs increase by more than $62 million in the quarter. So, a $20 million decrease in the bottom line isn’t as bad as it could have been. This strongly implies that Domino’s management team is steering the company through a rough period well, via passing on costs to consumers.
Zooming out, it also appears that the broader picture of demand for Domino’s remains high. Sales increased by $70 million this past quarter, reaching $1.068 billion.
Should we be headed into a recession in 2023, I think Domino’s will perform well, for obvious reasons. This is a company that sells cheap pizza, replace more expensive out-of-home meal alternatives. For those looking to eat out on a budget, this company will likely be the way to go.
O’Reilly (ORLY)
O’Reilly (NASDAQ:ORLY) stock is on of the best options for investor stocks consider as we head into 2023. The auto parts retailer had a strong 2022, partly driven by wild swings in the car market, and in particular, surging demand for used cars. Semiconductor shortages meant fewer new cars were built, which sent buyers searching for used alternatives.
That dynamic has cooled, and used car prices are starting to break. That is probably a strong sign for O’Reilly moving forward. Demand for used cars is likely to increase the worse the economy gets. And in a recession, most consumers are less-likely to have the money for a new car purchase. Accordingly, with older cars requiring more maintenance, there are clear tailwinds building for O’Reilly.
Additionally, a recession is likely to lead consumers to hold on to their vehicles for longer. Thus, more demand for vehicle parts in times of distress could be the boon investors in ORLY stock are looking for.
The good news is that most investors aren’t fully sold on ORLY stock, compared to competitors like AutoZone (NYSE:AZO). Upside remains baked into O’Reilly’s target stock price, whereas AutoZone is trading above its consensus target price.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.