Pressures on the financial sectors were in the spotlight last week as headlines took markets on a wild ride resulting in returns that varied widely across all asset classes. Despite a sell-off on Friday, the Nasdaq and the S&P 500 posted solid weekly gains while the Dow fell slightly.
The collapse of Signature Bank and Silicon Valley Bank has injected new uncertainty into this week’s Federal Reserve meeting. Policymakers are expected to announce the central bank’s next move on interest rates on Wednesday. Following the banking industry turmoil, expectations for another rate hike have been thrown into doubt. However, according to fed funds futures data, most traders still project a 25 basis point increase.
In light of the current conditions, our first recommendation for this week comes from a sector that is typically less reactive to Fed decisions. Bargain hunters will appreciate the value proposition this stock brings to the table, and so will anyone looking to pad their portfolio with reliable passive income.
Bunge (BG)
No matter what’s going on with the economy, civilizations need access to sustenance. Bunge Limited is an agribusiness and food company headquartered in Missouri, USA. In its Q4 earnings report (published in February 2022), the company announced revenue growth of over 32%.
Bargain hunters will appreciate the value proposition that Bunge brings to the table—currently, the market prices BG at a trailing multiple of 9.05. As a discount to earnings, Bunge ranks better than 76.36% of the competition. Further, BG trades at 8.04 times forward earnings, which sits well below the industry median of 16.97 times. The stock also provides some decent passive income with a forward yield of 2.63%, backed by a 22.1% payout ratio, indicating a highly sustainable yield.
BG has a consensus strong buy rating and an average price target of $125, implying over 35% upside potential.
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Taiwan Semiconductor’s (TSM)
For market participants looking to strengthen their portfolios through diversification or create new avenues to explosive growth, stocks with global exposure can be an excellent addition. Taiwan Semiconductor’s share price has been on the rise after hitting a two-year low in October due to a sharp slowdown in global chip demand. Still down more than 35% from its January 2021 peak, anyone on the sidelines might consider now an appropriate time to strike. “Only a small number of companies can amass the capital to deliver semiconductors, which are increasingly central to people’s lives,” said Tom Russo, a partner at Gardner, Russo & Quinn.
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General Motors (GM)
Fundamentally, GM is firing on all cylinders. Most notably, the company made substantial investments in the electric vehicle space. Further, by electrifying marquee models such as the Hummer, GM can feed nostalgia with current-generation technologies. The automaker represents an attractive proposition for bargain hunters. Right now, the market prices GM at a forward multiple of 6.39. As a discount to earnings, General Motors ranks better than 84.18% of its competition. Wall Street analysts peg GM as a consensus moderate buy with an average price target of $45.50, implying 38% upside potential.
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