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The market is currently experiencing turbulence, but certain stocks are managing to thrive amidst the chaos.
August has started off negatively for investors, with a significant downturn prompted by disappointing economic indicators and an unexpected interest rate hike in Japan, which has led to a retreat from the carry trade strategy. This shift has resulted in a remarkable 6% decline in the S&P 500 index within just the first three days of the month.
Such a scenario has intensified investor anxiety regarding an impending recession and raised concerns that the Federal Reserve may have delayed necessary interest rate cuts.
Despite these unsettling trends, not all stocks have been adversely impacted. Here, we spotlight three stocks that are not only performing well but also present attractive buying opportunities at this juncture.
1. MercadoLibre
MercadoLibre (MELI 0.97%) has emerged as a standout performer in the stock market. This prominent player in the Latin American e-commerce sector has consistently demonstrated robust growth even during volatile times, such as the pandemic, the subsequent slowdown in online retail, and the ongoing economic challenges in Argentina.
The company has successfully fended off competition from major players like Amazon and Sea Limited, while diversifying its portfolio through the introduction of new services, including Mercado Pago (its fintech division), MercadoEnvios (a logistics service), a credit arm, and advertising initiatives.
Such strategic expansions have propelled impressive increases in both revenue and earnings. Following its recent quarterly earnings announcement, MercadoLibre’s stock surged by 11% on August 2, defying the broader market’s downward trend. The company maintained its resilience even as the Japanese Nikkei index fell by 12% the next day.
Focusing on Latin America affords MercadoLibre a degree of insulation from the fluctuations of the U.S. market, making it a compelling option for investors seeking geographic diversification. Over the past decade, the stock has skyrocketed nearly 2,000%, with the latest quarterly report showcasing a remarkable 42% revenue growth—marking five consecutive years of quarterly growth rates surpassing 35%.
2. Deckers
Deckers (DECK 3.15%) is an often-overlooked gem in the consumer discretionary sector. The company, recognized for its leading footwear brands like Ugg, Teva, and Hoka, has seen significant momentum in recent years, largely fueled by the popularity of its Hoka brand, known for its distinctive thick-soled running shoes, which are renowned for their comfort and fashionable appeal.
In its recently reported fiscal first quarter, Deckers witnessed a 22% revenue increase, totaling $825 million, largely driven by a 30% growth in Hoka sales, which reached $545.2 million.
The company’s margins experienced remarkable improvement, with gross margins rising from 51.3% to 56.9%, attributed in part to the premium prices that Hoka products command. Operating income also saw an impressive boost, nearly doubling from $70.7 million to $132.8 million.
As industry leaders like Nike and Adidas face challenges, Deckers’ relatively smaller footprint allows Hoka the potential for substantial future growth, should it maintain its current popularity. Over the past five years, the stock has soared by 500%, indicating further potential gains on the horizon.
3. Realty Income
Amidst the general decline of tech stocks and the broader S&P 500 index since their peak in July, Realty Income (O -0.43%) has charted a different course, gaining approximately 15% during this turbulent period.
Realty Income epitomizes a stable investment, focusing on triple-net retail properties with tenants largely comprising recession-resistant businesses such as Walgreens and 7-Eleven. Its unique triple-net leasing structure—where the tenant covers property taxes, maintenance, and insurance—provides a layer of financial protection for the asset manager.
This REIT is particularly appealing to dividend-focused investors, offering a current yield of 5.2%. As interest rates are projected to decline, there may be a shift in investor preference back to dividend-paying stocks as bond yields fall. Realty Income’s strategy of providing monthly dividends enhances its attractiveness for income-seeking investors.
Additionally, as lower interest rates facilitate borrowing for property acquisitions, Realty Income stands to benefit, positioning itself well in a potentially favorable environment for growth.
Overall, Realty Income appears strategically poised to deliver consistent returns for those seeking reliable dividend stocks during this current market turbulence.
Note: John Mackey, former CEO of Whole Foods Market, serves on The Motley Fool’s board, and Jeremy Bowman holds positions in Amazon, MercadoLibre, Nike, and Sea Limited. The Motley Fool recommends multiple companies, including MercadoLibre and Realty Income, among others.
Source
www.fool.com