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.
The company currently pays out a 1.7% dividend yield (management plans to increase the dividend by at least 12.0% per year). The stock’s 12.5 earnings multiple is reasonable when considering the potential earnings growth and dividend yield.
Safety in consumer goods
The Procter & Gamble Company (NYSE:PG) believes that it can grow its revenue while cutting back on costs. The growth in revenue will be driven by international expansion. The company owns a valuable portfolio of products that could have appeal in any market in the world. I mean it’s really hard to deny the practicality of having a tooth brush, toilet paper, and shaving cream, right? The company sells some of the most practical necessities and because of this The Procter & Gamble Company (NYSE:PG) is considered non-cyclical.
The company plans to double its earnings by cutting back costs by $10 billion between 2012 and 2016. If the company is successful at this, the stock could be heavily undervalued. The stock currently trades at a 19.4 earnings multiple, which is reasonable for a growth investment. The stock also compensated investors with a 3.1% dividend yield.
The bond market has been a very unforgiving place for an investor’s portfolio lately. This list was put together thinking strictly about capital preservation while hoping to accomplish growth at the same time. Pinnacle West Capital Corporation (NYSE:PNW), The Kroger Co. (NYSE:KR), and The Procter & Gamble Company (NYSE:PG) all have very effective economic moats, giving the average investor the greatest margin of safety that is available in the stock market. The stocks aren’t as safe as Uncle Sam, but they get close to it.
Alexander Cho has no position in any stocks mentioned. The Motley Fool recommends The Procter & Gamble Company (NYSE:PG).
The article Here Is How You Make a Buck off a Sell-Off originally appeared on Fool.com.
Alexander is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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