With the equities off to a shaky start to the year, it’s more important than ever for investors to focus on the strongest areas of the market for buying opportunities. There are still plenty of intriguing companies to consider adding to your investment plans but choose poorly and your portfolio could be subject to heavy downside risk. Just look at what’s happening in the growth space, with many of these stocks essentially losing half of their value or more over the last several months. Given the complicated factors at play in the economy and looming interest rate hikes from the Federal Reserve, value and cyclical stocks have been outperforming to begin the trading year. This is a trend that is likely to continue, which means it makes sense to look at areas of the market like energy, banks, and industrials for buying opportunities. Here are 3 stocks to buy in strong areas of the market:
Exxon Mobil Corporation (NYSE: XOM)
Currently, one of the strongest trends in the market is located in the energy sector. A lot of this has to do with the fact that oil prices are surging and recently hit $90 a barrel for the first time since 2014. While many of these stocks have already rallied considerably, adding shares of a company like Exxon Mobil Corporation on pullbacks could be a wise decision. It’s the world’s largest publicly traded integrated oil company with a global refining capacity of 4.8 million barrels of oil per day. Exxon Mobil struggled in 2020 but has come out of the pandemic a leaner and meaner company, evident in the company’s recent earnings. The company generated $48 billion of cash flow from operating activities in 2021, which was the highest level since 2012, and strengthened its balance sheet to pre-pandemic levels by paying down $20 billion in debt. This is good news as it means the company has plenty of room to cover its attractive dividend payout, which stands at 4.42% at this time. Exxon should also benefit from new oil and gas field projects in the Permian Basin and Africa over the long term, making it a top pick in the strongest market sector at this time.
The financial sector is another area to look for buying opportunities at this time since banks tend to outperform during periods of rate increases. Bank of America stands out as one of the highest quality names in the sector, as its one of the largest financial institutions in the United States and a company that plays a key role in the overall economy. With segments including consumer banking, global wealth and investment management, global banking, and global markets, Bank of America serves a variety of different customers and has a massive scale that has helped it become one of the strongest franchises in the country. It’s worth mentioning that Bank of America is particularly sensitive to higher interest rates thanks to all of the net interest income the company generates. Loan activity should continue picking up as the economy recovers from the pandemic, which is another strong reason to consider adding shares. With a reasonable forward P/E ratio of 14.25 and a decent dividend of 1.81%, Bank of America is a great example of the types of companies to be looking at in the current market environment.
Lockheed Martin Corp (NYSE: LMT)
Finally, the industrial sector stands out as another place to look for solid investment opportunities at this time, and Lockheed Martin could be one of the best stocks to consider there. It’s the world’s largest developer and producer of defense, security, and intelligence products, primarily serving the U.S. and allied militaries. Spending by the Department of Defense is fairly consistent, and more defense funding has received bipartisan support in recent months. There aren’t too many stocks out there trading above all of the short-term moving averages, but Lockheed Martin has been trending nicely to start the year. The stock could be gearing up for a move to new 52-week highs in the coming sessions, especially after the company’s Q4 earnings beat by $0.31 with EPS of $7.47 for the quarter. Lockheed also offers investors a 2.87% dividend yield and is trading below its five-year forward P/E average, which are additional reasons to consider adding shares at this time.