When I think of investing, and see major pullbacks in valuations, it feels like I’m jumping off a 10-floor building with a jumper cord attached to me. It’s tough at times to see the potential of a bright tomorrow. But that’s pretty much what I’m asking you to do when considering these three investment opportunities.
Hot summers make for excellent investment opportunities
Pinnacle West Capital Corporation (NYSE:PNW) is an electric utility that runs the second- largest utility in Arizona, which is APS. I live in Arizona, and it’s going to be a really hot summer, at least according to Reuters. We have a heat wave coming, and the cost of keeping homes cool will go up drastically. Because of this, perhaps Pinnacle West Capital Corporation (NYSE:PNW) will be able to beat analyst estimates this quarter.
Analysts on a consensus basis anticipate the company to grow sales by 0.7% in the next quarter. If sales can grow by more than 1%, this could be considered somewhat of a beat on earnings and the stock could rally. The stock is around 10.9% below its 52-week high, so it could be a bargain at these lower levels.
Analysts on a consensus basis anticipate the company to grow earnings by 6% on average over the next five years. The stock compensates investors with a 4% dividend yield. The stock trades at a 14.5 earnings multiple. The stock’s earnings multiple is reasonable when considering the fact that electric utilities on average trade at a 23 earnings multiple.
The stock pays a large dividend, has a bit of an upside catalyst due to weather, and is slightly undervalued.
Who will be bagging your groceries?
The Kroger Co. (NYSE:KR) is a compelling add-on to any investment portfolio. The management team came out and stated that it will continue to grow earnings per share at a long-term growth rate of 8% to 11%. The growth rate can be sustained through a mix of store openings, cost cutting, and share buybacks.
The company operates 3,600 super markets across the United States. The Kroger Co. (NYSE:KR), Fry’s, Fred Meyer, Ralphs, Dillons, Food 4 less, are the primary grocery stores that the company currently operates. Groceries are resistant to economic uncertainty because of the subsidies provided by the government through food stamps. This helps to keep a floor underneath the company’s performance going forward because it acts as an effective bulwark against economic volatility.