2 Stocks That Give Downside Protection in Troubled Times

With inflation still hovering around the multi-decade high and the U.S. economy expanding in the third quarter, a further aggressive interest rate increase is on the cards this week. With the macro headwinds set to intensify further, investing in resilient stocks Walmart (WMT) and Oracle (ORCL) could give your portfolio solid downside protection. Read on.

With inflation still hovering near its highest level in 40 years and the U.S. economy expanding in the third quarter, the central bank is expected to raise interest rates by another 75 basis points this week.

While voices in favor of slower interest rate hikes after this week’s meeting have been growing louder, Jason Furman, a Harvard economist who served as a top adviser to former President Obama, sees the fed-funds rate ultimately reaching 5.25% next year, with a significant risk for topping out at an even higher level.

With the Fed determined to slow the economy down through tighter policy measures, markets are expected to witness heightened volatility in the upcoming months. Hence, stocks well-positioned to survive the volatility and deliver stable returns could be ideal investments now.

We think Walmart Inc. (WMT) and Oracle Corporation (ORCL) are two such stocks that can cushion your portfolio against the possible downside ahead. These stocks have survived the market pressure well and are fundamentally strong enough to stay resilient in the upcoming months.

Walmart Inc. (WMT)

As a world-renowned big box retailer, WMT offers opportunities to shop an assortment of merchandise and services at everyday low prices (EDLP) in retail stores and through e-commerce platforms. The company operates through three segments: Walmart U.S.; Walmart International; and Sam’s Club.

On October 27, 2022, WMT and Netflix (NFLX) announced an in-store expansion of the popular Netflix Hub in more than 2,400 stores. It would offer customers a brand-new streaming gift card, fan-favorite exclusives, and more.

On October 26, WMT announced the completion of the renovations made to the retrofitted regional distribution center in Texas, transforming it into a high-tech automation center. This investment is set to modernize Walmart’s vast supply chain network to increase the speed, efficiency, and safety of product distribution.

Also, on October 26, WMT and ANGI HomeServices Inc. (ANGI) announced the launch of a new product integration where customers who purchase nearly any Christmas lighting from Walmart can easily add installation by a pro on Angi. Since this bundling would provide additional value to customers, it is expected to impact the topline for both companies positively.

For the second quarter of the fiscal year 2023 ended July 2022, WMT’s total revenues increased 8.4% year-over-year to $152.86 billion. The company’s consolidated net income attributable to WMT increased 20.4% from the prior-year period to $5.15 billion or $1.88 per common share, up 23.7% year-over-year. WMT’s total assets stood at $247.20 billion as of July 31, 2022, compared to $238.55 billion a year ago.

WMT’s revenue and EPS for the fiscal year ending January 2024 are expected to increase 3.1% and 12.8% year-over-year to $613.68 billion and $6.60, respectively. The company has an impressive earnings surprise history since it surpassed consensus EPS estimates in three of the trailing four quarters.

The stock has gained 8.4% over the past month to close the last trading session at $142.51.

WMT’s POWR Ratings reflect solid prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

WMT has grade B for Growth, Stability, Sentiment, and Quality. It is ranked #5 of 38 stocks within the A-rated Grocery/Big Box Retailers industry

Click here to see the additional POWR Ratings of WMT for Value and Momentum.

Oracle Corporation (ORCL) 

ORCL offers products and services catered to the needs of enterprise IT environments. The company directly offers its cloud, license, hardware, support, and services offerings, including applications, platforms, and infrastructure, to businesses in various industries.

On October 20, ORCL announced its expanded partnership with NVIDIA Corp. (NVDA) to add tens of thousands of NVDA’s AI-processing graphics chips to its cloud and provide customers access to NVIDIA software tools that can extract even more performance from them. High-performance cloud computing services broaden access to self-learning, data-hungry AI systems, which were previously out of reach.

For the first quarter of the fiscal year 2023 ended August 31, 2022, ORCL’s total revenue increased 17.7% year-over-year to $11.45 billion. The company’s non-GAAP operating income increased 3.3% year-over-year to $4.48 billion. The company’s total assets stood at $130.31 billion as of August 31, 2022, compared to $109.30 billion as of May 31, 2022.

ORCL’s revenue and EPS for the fiscal year 2023 are expected to increase 16.5% and 1.5% year-over-year to $49.45 billion and $4.97, respectively. The stock gained 23.8% over the past month to close the last trading session at $77.36.  

ORCL’s strong fundamentals are reflected in its overall rating of B, translating to a Buy in our POWR Ratings system. It also has a grade B for Growth and Stability.

It is ranked #25 of 146 stocks in the Software – Application industry.

In addition to the above, additional POWR Ratings for ORCL for Value, Momentum, Sentiment, and Quality can be found here.

WMT shares were trading at $142.33 per share on Monday afternoon, down $0.18 (-0.13%). Year-to-date, WMT has declined -0.46%, versus a -17.74% rise in the benchmark S&P 500 index during the same period.

About the Author: Santanu Roy

Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant.

With a master’s degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities.

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