Amid the Fed’s persistent monetary policy tightening, market volatility is rife, as is evident from the CBOE Volatility Index’s more than 70% increase year-to-date. The major stock indices have lost significantly since the Fed’s 75-basis-point interest rate hike for the third consecutive time.
According to Guggenheim’s chief investment officer Scott Minerd, the S&P 500 could plunge 20% by mid-October 2022. However, he believes that a supportive Fed amid falling stock prices should lead to a year-end recovery that could last into early 2023.
Moreover, despite widespread market turmoil, Fed officials are hopeful of a soft landing. Given that the job market is tight enough, Fed officials are optimistic about controlling inflation without tipping the economy into a deep recession.
So, we think fundamentally strong stocks Microsoft Corporation (MSFT) and Visa Inc. (V), which are currently hovering near their 52-week highs, could be ideal buys to take advantage of the potential market rebound.
Microsoft Corporation (MSFT)
Tech giant MSFT develops, licenses, and supports software, services, devices, and solutions worldwide. The company operates in three segments: Productivity and Business Processes; Intelligent Cloud; and More Personal Computing.
On September 26, 2022, MSFT and Ontario Power Generation announced a Canada-first strategic partnership to manage climate change and drive sustainable growth. With this agreement, MSFT aims to achieve its 100/100/0 by 2030 goal, whereby MSFT is dedicated to powering its data centers worldwide with carbon-free energy.
MSFT’s total revenue came in at $51.87 billion for the fiscal 2022 fourth quarter ended June 30, 2022, up 12.4% year-over-year. Its net income came in at $16.74 billion, up marginally year-over-year, while its EPS came in at $2.23, up 2.8% year-over-year.
Analysts expect MSFT’s revenue to increase 11.3% year-over-year to $220.75 billion in 2023. Its EPS is estimated to grow 15.4% per annum for the next five years. It surpassed the EPS estimates in three of the trailing four quarters.
The stock has lost 26% year-to-date to close the last trading session at $248.88, just 4.7% above its 52-week low of $232.73.
MSFT’s strong fundamentals are reflected in its POWR Ratings. It has an overall B rating, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Stability and Quality. Within the Software – Business industry, it is ranked #11 out of 54 stocks. Click here for MSFT’s additional POWR Ratings for Growth, Value, Momentum, and Sentiment.
Visa Inc. (V)
V is a payments technology company worldwide. The company facilitates digital payments among consumers, merchants, financial institutions, businesses, strategic partners, and government entities.
On September 21, 2022, V and GM Sectec, the global leader in cybersecurity, announced their partnership to facilitate fraud prevention, cyber defense, and cybersecurity best practices in Latin America and the Caribbean. This agreement aims to offer customers seamless and protected digital payment solutions with advanced mechanics.
V’s net revenues increased 18.7% year-over-year to $7.28 billion for the third quarter ended June 30, 2022. Its non-GAAP net income came in at $4.21 billion, up 29.2% year-over-year. Also, its non-GAAP EPS came in at $1.98, up 32.9% year-over-year. Moreover, its operating income came in at $4.15 billion, up 2.1% year-over-year.
Analysts expect V’s revenue to be $29.10 billion in 2022, representing a 20.7% year-over-year rise. The company’s EPS is expected to increase 25.5% year-over-year to $7.42 in 2022. It surpassed EPS estimates in all four trailing quarters.
The stock has lost 14.3% year-to-date to close the last trading session at $185.65, just 6.2% above its 52-week low of $174.83.
V has an overall B rating, equating to a Buy in our POWR Ratings system.
Also, the stock has a B grade for Stability and Sentiment and an A for Quality. Within the Consumer Financial Services industry, it is ranked #9 out of 49 stocks. Click here for the additional POWR Ratings for Growth, Value, and Momentum for V.
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MSFT shares fell $2.97 (-1.19%) in premarket trading Wednesday. Year-to-date, MSFT has declined -26.47%, versus a -20.46% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
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