Late 2023 painted a picture of a gradually cooling US economy, fueling optimism for a moderation of inflation and steadier growth. However, 2024 has taken an unexpected turn. The economy is experiencing a resurgence, with impressive job gains, yet stubbornly high inflation persists. This divergence from earlier projections has placed policymakers in a complex position as the Federal Reserve wrestles with its inflation-fighting objective without jeopardizing economic health. The once-anticipated path of rate cuts has become clouded, with rising speculation hinting at the potential need for hikes to address escalating price pressures. This dramatic shift has significantly altered the economic outlook for the near term.
Given the looming prospect of an economic slowdown, it becomes vital to seek investments that offer resilience and potential growth, regardless of market conditions. Snapping up these strategic stocks during market dips could prove exceptionally advantageous for building a profitable portfolio.
Lockheed Martin (LMT)
Lockheed Martin (NYSE:LMT) stands as a titan in the American defense and aerospace industry, famed for its cutting-edge aeronautical research and innovation. As the top contractor for the US Department of Defense, it garnered over 11% of total DoD spending in 2022.
The company closed out Q4 2023 on a high note, exceeding analyst forecasts with an EPS of $7.58 – a notable increase from Q4 2022’s $7.40 per share. Free cash flow also surged by a healthy 42% to $1.7 billion. Additionally, Lockheed Martin’s record order backlog of $160.6 billion and $67.6 billion in net sales for 2023 underscore its strength. Management anticipates continued revenue growth in 2024, with a projected boost in free cash flow per share.
The company strategically expands its satellite business through collaborative ventures with commercial entities, ensuring it maintains a competitive advantage. Lockheed Martin has a history of successful partnerships through investments in firms like ABL Space and Xona Space Systems, providing valuable launch, positioning, navigation, and timing capabilities. The recent $500 million offer to acquire smallsat manufacturer Terran Orbital further reinforces its commitment to expanding its space operations. These moves solidify Lockheed Martin’s position as a compelling stock to consider during future market downturns.
Alphabet (GOOG, GOOGL)
Tech behemoth Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), parent company of Google, boasts a staggering market capitalization of $1.78 trillion. With the global software market valued at $589.6 billion in 2022 and projected to reach roughly $1.78 trillion by 2032 (a CAGR of 11.74%), there is significant growth potential to be realized.
GOOG delivered solid growth in Q4 2023, reporting revenue of $86.31 billion, marking a 13.49% year-over-year increase. Net income and diluted EPS soared by over 50% year-over-year, reaching $20.69 billion and $1.64 billion respectively.
The recent announcement of Alphabet’s groundbreaking new AI service, Gemini, positions the company to pursue market dominance. Armed with an adaptable AI model and Gemini AI’s release, Alphabet stands ready to rival the revolutionary advancements from OpenAI. Furthermore, Alphabet’s countermeasures against ad blockers promise to bolster revenue across YouTube and its other platforms.
Block (SQ)
Block (NYSE:SQ) offers a two-pronged approach, with its Square and Cash App segments. Square caters to merchants with tools for payment processing and payroll management, while Cash App empowers users with diverse payment and wealth management solutions.
The global fintech market, driven by open banking and evolving consumer preferences, is anticipated to reach an impressive $1.15 trillion by 2032, representing a CAGR of 16.5%. Block’s management believes the company has tapped into less than 5% of its addressable market, highlighting immense potential for growth. In 2024, a gross profit of $8.65 billion is projected, signifying a year-over-year increase of more than 15%.
Block’s currently suppressed valuation provides an alluring entry point for investors seeking value during dips. Trading at 2.18 times sales, this is an uncommon scenario for a stock with such a high growth trajectory. While profitability concerns have weighed on Block’s share price, its positive net income for Q4 2023 reaffirms its potential for financial strength.
