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The 3 Best Stocks to Start Your Portfolio off With

Despite the Fed’s hawkish stance, the U.S. economy grew in the fiscal third quarter of 2022, along with a resilient labor market. Moreover, an expected slowdown in future rate hikes has raised investors’ sentiment. Therefore, fundamentally sound stocks Coca-Cola Company (KO), Hershey Company (HSY), and Mosaic Company (MOS) could be solid additions to your portfolio. Read on…

Despite persistent inflation and high borrowing costs, the U.S. economy grew at an annual rate of 2.9% in the fiscal third quarter of 2022. The November jobs report also came in much better than expected, with non-farm payrolls increasing by 2,63,000 for the month against the Dow Jones estimate of 2,00,000. Steady hiring and low unemployment are showing signs of a resilient economy.

Additionally, the Fed’s signals to move into a new phase of policy tightening by stepping down from its consecutive series of four 0.75-point rate rises has boosted investors’ sentiments. According to Conference Board CEO Steve Odland, any potential downturn is expected to be mild.

“It’s really an employee’s market here. Wages are rising quite rapidly. This could be a much less painful experience with the Fed trying to tame inflation than it has been in the past,” he said.

Amid this scenario, fundamentally sound stocks The Coca-Cola Company (KO), The Hershey Company (HSY), and The Mosaic Company (MOS) could be steady additions to your portfolio.

The Coca-Cola Company (KO)

KO is a popular beverage company that manufactures, markets, and sells various non-alcoholic beverages worldwide. The company offers sparkling soft drinks, flavored and enhanced water, sports drinks, juice, dairy, plant-based beverages, and energy drinks.

On September 29, KO and Molson Coors Beverage Company (TAP) entered into an exclusive agreement to develop and commercialize Topo Chico Spirited, a line of spirit-based, ready-to-drink cocktails inspired by the bright and refreshing taste of tequila and vodka-based beverages. The new product will be launched in more than 20 markets across the country in 2023 and should bolster the company’s revenue stream.

On October 20, KO announced its regular quarterly dividend of $0.44 per common share, payable on December 15. The company pays $1.76 per share dividends annually, which translates to a 2.74% yield at the current price. It has a four-year average dividend yield of 3.08%. The company has raised its dividend for the past 60 years.

For the fiscal third quarter ended September 30, KO’s non-GAAP net operating revenue came in at $11.05 billion, up 10% year-over-year. The company’s non-GAAP gross profit increased 6.5% year-over-year to $6.54 billion. Moreover, its non-GAAP net income per share increased 6.2% year-over-year to $0.69

KO’s EPS is estimated to improve by 7.4% year-over-year to $2.49 for the fiscal year ending December 2022. Similarly, its revenue estimate of $42.70 billion represents a 10.5% growth from the prior year. Moreover, KO has surpassed EPS estimates in all four trailing quarters.

The stock has gained 21.3% over the past year to close its last trading session at $64.35.

KO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

KO is rated a B in Stability, Sentiment, and Quality. Within the A–rated Beverages industry, it is ranked #16 out of 33 stocks.

Beyond what we’ve stated above, we have also given KO grades for Value, Momentum, and Growth. Get all KO ratings here.

The Hershey Company (HSY)

HSY manufactures and sells snacks, chocolate, and non-chocolate confectionery globally. The company operates through three segments, North America Confectionery; North America Salty Snacks; and International.

On November 2, the Board of Directors announced a quarterly dividend of $1.04, payable on December 15, 2022, to stockholders of record as of November 18, 2022. The company pays a $4.14 per share dividend annually, which translates to a 1.77% yield on the current price. HSY has raised its dividends for 13 consecutive years.

For the fiscal 2022 third quarter ended October 2, 2022, HSY’s non-GAAP gross profit increased 10.8% year-over-year to $1.16 billion, while its non-GAAP operating profit increased 9.3% from the year-ago value to $615.29 million. Its non-GAAP net income grew 2.8% year-over-year to $447.07 million. In addition, the company’s non-GAAP EPS came in at $2.17, a 3.3% from the year-ago value.

The consensus EPS estimate of $8.24 for the current fiscal year ending December 2022 indicates a 14.6% year-over-year improvement. Likewise, the consensus revenue estimate of $10.33 billion for the same period reflects a rise of 15.2% from the prior year.

The stock has gained 32.9% over the past year to close the last trading session at $231.71.

HSY’s POWR Ratings reflect its strong outlook. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.

It also has a B grade for Quality. Within the B-rated Food Makers industry, it is ranked #24 of 82 stocks.

To see additional POWR Ratings for Growth, Stability, Sentiment, Momentum, and Value for HSY, click here.

The Mosaic Company (MOS)

MOS produces and markets concentrated phosphate and potash crop nutrients in North America and internationally. The company operates through three segments: Phosphates; Potash; and Mosaic Fertilizantes.

Over the last three years, MOS’ dividend payouts have grown at a 47.6% CAGR. Its four-year average dividend yield is 0.81%, and its forward annual dividend of $0.60 per share translates to a 1.22% yield. The company is expected to pay a quarterly dividend of $0.15 per share on December 15, 2022.

MOS’ gross margin for the third quarter ended September 30, 2022, increased 73.7% year-over-year to $1.50 billion. The company’s operating earnings increased 64.6% from the year-ago period to $1.15 billion. Net earnings attributable to MOS increased 126.3% year-over-year to $841.70 million, while its adjusted EPS increased 138.5% year-over-year to $3.22.

MOS’ EPS and revenue for the fiscal year ending December 2022 are expected to increase 136.9% and 55.2% year-over-year to $11.94 and $19.18 billion, respectively. The stock has gained 42.4% over the past year to close the last trading session at $50.40.

MOS’ solid prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.

It has an A grade in Value and a B in Growth and Quality. MOS is ranked #7 of 28 stocks in the Agriculture industry.

Click here to access additional ratings for MOS for Momentum, Stability, and Sentiment.

KO shares were trading at $63.47 per share on Monday afternoon, down $0.88 (-1.37%). Year-to-date, KO has gained 10.37%, versus a -14.89% rise in the benchmark S&P 500 index during the same period.

About the Author: Komal Bhattar

Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.


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