Investor Strategies Amid Market Volatility
Wolf Research suggests that during times of market turbulence, investors might want to consider stocks known for buybacks to help them navigate these challenges. With President Donald Trump’s deadline hanging over the reopening of the Strait of Hormuz, traders are preparing for potential shifts in the market. Trump has set a deadline for Iran to negotiate a deal with the U.S. by 8 PM ET on Tuesday, warning of severe consequences if they don’t comply, including threats to destroy bridges and power plants in Iran.
On Tuesday afternoon, stock prices slipped amid uncertainty regarding a possible agreement, while oil prices experienced a slow climb, with West Texas Intermediate crude oil futures surpassing $117 per barrel at one point. For investors seeking relative security, Wolf has highlighted a group of stocks known for their consistent buybacks. Chief investment strategist Chris Seniek mentioned in a note that in a slowing economy, one solid approach is for companies to continue to repurchase their shares. This particular set of stocks has historically performed well both leading up to and through recessions. These companies have managed to reduce their share count through buybacks for at least a decade, and many also pay dividends, including several Dividend Aristocrats that have a history of raising their payouts for 25 or more consecutive years.
One of the notable stocks in this group is Lowe’s Companies, which is now featured in Wolf’s baskets. Currently, its dividend yield is approximately 2.1%, although the stock has dropped more than 4% this year. Lowe’s is a Dividend Aristocrat, having increased its annual dividend for over 25 consecutive years. According to LSEG data, analysts are pretty split on Lowe’s, with 13 out of 27 recommending it as a “buy” or “strong buy,” and another 13 advising a “hold.” The general price target suggests a potential 23% upside. Mizuho, an investment bank, remains optimistic about Lowe’s, citing a pivotal position for the company as home improvement demand rebounds, anticipating significant revenue growth. They predict same-store sales will turn positive this year and believe Lowe’s is more reasonably priced compared to competitor Home Depot, with a price target implying a 25% upside from Monday’s closing prices.
Moreover, the list provided by Wolf also includes Automatic Data Processing (ADP), a payroll services company that has raised its cash dividend for 51 consecutive years and currently offers a dividend yield of 3.3%. However, ADP’s stock faced a decline of over 20% this year, mostly due to concerns about the impact of artificial intelligence. Stifel Financial noted that while AI is indeed transformative, the market may be mispricing the associated risks, not fully appreciating the unique advantages and budding opportunities available to established firms like ADP. They highlighted that although AI can streamline payroll processes, ADP’s strengths lie in its long-standing expertise in payroll, tax compliance, and a vast database of employment information. Despite some cautious views on ADP, consensus price targets suggest over a 31% potential upside.
Other companies identified by Wolf’s research for their regular stock repurchases include Colgate-Palmolive, Illinois Tool Works, AO Smith, and Mondelez.
