2022 will remain in investors’ minds as a very volatile year where daily swings were the norm rather than an exception. With a few percentage points of drops or gains, sometimes even double-digit ones, investors could have been given solid opportunities to buy the dip of the stocks they’ve kept on their watchlists.
Meanwhile, Morningstar, an American financial services firm, offered two fairly valued stocks to keep on a watchlist. Despite their fair valuation, possible dips or volatility should be used to pick up these companies, as per Susan Dziubinski, the Director of Content at Morningstar.
Colgate-Palmolive Company (NYSE: CL)
The New-York based consumer products corporation, on April 29, reported its latest earnings revenue of $4.4 billion, an increase of 1.4% year-on-year (YoY), which was in line with expectations. On the other hand, earnings per share (EPS) were $0.74, representing a miss of $0.01.
Meanwhile, Dziubinski summed up Colgate:
“Inflation and supply chain bottlenecks have taken a bite out of Colgate’s profits this year, but Morningstar’s analyst thinks the company has significant competitive and cost advantages, and it’s taking a sound approach to boosting profits over time. We think the stock is a great watchlist candidate with a fair value estimate of $75.”
Comparably, YTD shares are down over 12%, now trading well below all daily Simple Moving Averages (SMAs). Higher trading volumes have been noted in the last few trading sessions, which helped the stock bounce off the $74 support line.
Similarly, analysts rate the shares a moderate buy, predicting that in the next 12 months, the average price could reach $82.14, which is 10.96% higher than the current trading price of $74.03.
PepsiCo Inc. (NASDAQ: PEP)
Unlike CL, PEP beat EPS and revenue expectations in their latest earnings. Namely, revenue came in at $16.2 billion, a 9.3% YoY increase, and a beat of $660 million. Equally, EPS were at $1.29, representing a beat of $0.06, with a total cash return to shareholders of $7.7 billion.
In addition, Dziubinski explained the investment thesis for PEP:
“Pepsi is the top operator globally when it comes to savory snacks and the second-largest name in the carbonated soft drink market. Pepsi’s leading brands and cost edge provide the company with significant competitive advantages. Morningstar’s analyst thinks Pepsi has the pricing power and negotiating leverage with suppliers to successfully navigate today’s inflationary environment. It’s our second watchlist idea with a fair value estimate of $164.”
In essence, shares of the company are down slightly over 9% YTD; however, in the last session, there was a tussle between the bears and bulls, with the shares actually closing in the green. It seems as if the trading range has been established between the $155 and $175 levels.
Meanwhile, analysts on Wall Street rate the shares a moderate buy, predicting that in the next 12 months, the average price may reach $178.64, which is 13.69% higher than the current trading price of $157.13.
Finally, analysts usually look to consumer discretionaries during times of volatility since cutting back spending during downturns should affect the discretionary items last.
The above two mentioned companies have solid earnings and fundamentals and could help investors ride out the waves of volatility.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.