It’s looking increasingly likely that the U.S. will fall into a recession sometime in the next 12 months. If that makes you anxious, consider the following perspective from our hypergrowth expert Luke Lango: During every recession, a certain group of stocks tends to outperform in a big way. And they make a lot of money for those prescient investors who buy them during economic downturns. So, which group of stocks will outperform if the recession forecasts are accurate? You’ll find out today. Best of all, Luke walks through the logic behind his beliefs – it’s not just “trust me.” Luke makes his case by referencing GDP, earnings per share, the relationship between bond yields and the P/E multiple…and far more. You’ll finish today’s Digest more informed about upcoming market conditions, and more knowledgeable about investing in general. I’ll let Luke take it from here. Have a good weekend, Jeff Remsburg | ADVERTISEMENT Buy This Stock BEFORE This Apple Project Goes Live Apple is about to unveil its biggest project yet… and the analyst who was ranked as America’s #1 Stock Picker in 2020 by TipRanks has found a backdoor Apple play that could give early investors a shot at 40X gains. The best part is all you need is $5 to get started! Click here for more details. | |
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Secular Growth Stocks Will Power Through a Recession It increasingly looks like the U.S. economy is about to fall into a recession. That may sound like scary news. But luckily, we’ve compiled a portfolio of the top 10 growth stocks to buy to power through this incoming recession. Over the past week, it’s become clear the U.S. economy is slowing and that a recession is almost inevitable. Home sales are falling off a cliff. Manufacturing activity has dropped to a two-year low. Services activity has dropped to a five-month low, and jobless claims are on the rise. Moreover, throughout his Congressional testimony this week, Fed chair Jerome Powell said his current top priority is to kill inflation. And that’s even if it means pushing the economy into a recession. Folks, a downturn is coming. It’s not a lock. But at this point, it certainly looks very likely. The stock market has been struggling to digest this news. The broader markets have been in anguish. But our Top 10 stocks portfolio in our flagship Innovation Investor research service has risen 10% this week alone! Why have our stocks been soaring? Well, we’ve built a portfolio of growth stocks that we believe won’t succumb to an economic recession. Rather, they’ll power right through one. These are companies that are so fundamentally strong that they’ll sustain huge revenue and earnings growth despite a slowing economy. In other words, they’ll keep growing while everything else shrinks. Therefore, we think these are the top 10 stocks to buy to drive positive returns in a struggling market. Let’s take a deeper look. ADVERTISEMENT This Stock Could Soar 10x â Buy Now Three unique market catalysts are about to kick-start a new American energy age – are you ready? Buy this stock now to bolster your portfolio. | |
Economic Independence Is Key For a moment, let’s recall how a stock price is derived. It’s calculated by taking the company’s underlying earnings (EPS) and attaching a multiple to them (price-to-earnings multiple). In other words — EPS (x) P/E (=) Stock Price. Therefore, we can understand how a recession impacts stock prices by understanding how it impacts these two values. First, let’s talk about EPS. Corporate EPS has a direct correlation to GDP growth, as shown below. When GDP is rising, EPS rises. And when GDP is falling, so is EPS. Recessions are defined by prolonged periods of negative GDP growth. Therefore, recessions are also characterized by negative EPS growth. If we see a recession over the next 12 months, then that means most stocks will experience negative EPS growth. That will weigh on their stock prices, per the valuation calculus outlined above. But not all stocks experience negative EPS growth during recessions. Instead, some stocks are “economically independent.” That is, they’re powered by such powerful secular growth drivers that their growth trajectories are largely independent of the state of the economy. These companies can sustain positive EPS growth during recessions. And as a result, their stocks are not negatively impacted by falling EPS. These are stocks you want to buy during recessions — secular growth stocks that can grow right through the storm. Our Top 10 Stocks to Buy portfolio is full of nothing but these secular growth stocks. In fact, their average revenue growth rate is above 200%! These are the fastest-growing companies in the world. And they’re well-positioned to expand right through the incoming recession. Lower Yields Provide a Boost Now, let’s talk about the other side of the valuation equation: the P/E multiple. As seen below, the stocks’ P/E multiple is inversely correlated to bond yields — specifically, the 10-year Treasury yield. Typically, the higher the 10-year, the lower the P/E multiple. And the lower the 10-year, the higher the P/E multiple. Recessions tend to pull yields down. In each of the past five U.S. recessions, the 10-year yield dropped more than 200 basis points. In some instances, it fell as much as 500. Typically, this is accompanied by P/E multiple expansion. To that end, stocks actually get a small tailwind from economic recessions through multiple expansion. However, for the average stock, the magnitude of multiple expansion is much smaller than that of EPS declines. Therefore, the EPS decline far outweighs the multiple expansion, and stocks typically fall during recessions… But not secular growth stocks. Recall: Secular growth stocks don’t see EPS declines during recessions, so they’re only getting a boost from multiple expansion. Simultaneously, when yields collapse during a recession, they tend to see massive multiple expansion. That’s because secular growth stocks are long-duration assets that are particularly sensitive to yields. In other words, secular growth stocks are the best stocks to buy to power through recessions. They can grow right through economic downturns and benefit in a big way from the lower yields that accompany recessions. And our Top 10 Stocks to Buy portfolio represents the best secular growth stocks in the market. Consequently, it also represents the best stocks to buy today to power through a recession. ADVERTISEMENT Appleâs Next Trillion-Dollar Product? Silicon Valley venture capitalist says it could be 10X bigger than the iPhone, MacBook, and iPad COMBINED! Here’s what investors should do right now. | |
The Final Word on the Incoming Recession The U.S. economy looks like it will spiral into a recession over the next few months. In fact, we may already be in one. Before you go and hit the panic button, please understand one thing. During every recession, a certain group of stocks tends to outperform in a big way. And they make a lot of money for those prescient investors who buy them during economic downturns. Those are secular growth stocks — stocks with such powerful growth drivers that they can grow right through an economic downturn. In our flagship research service Innovation Investor, we own the best secular growth stocks in the market. Unsurprisingly, as recession fears have escalated, our Top 10 stocks portfolio in that service is up 10% this week. We think this is just the beginning of their flight, even while the rest of the market struggles. Investors will increasingly seek solace from the coming economic storm. And we think a lot of money will find shelter in our unstoppable secular growth stocks. Sincerely, |