Three Stocks to Watch for the Week of September 5th, 2022

Stocks finished last week lower heading into the holiday weekend as investors continued to process hawkish comments from Fed officials. The major indices logged their third consecutive negative week, with the Dow and the S&P 500 dropping 3% and 3.3%, respectively. Tech shares were hit the hardest as the Nasdaq (which has fallen nearly 11% over the past three weeks) plunged 4.2%.  

Equities rose in early August, but strength dwindled in the second half of the month after peaking on August 16th, two months after the mid-June bottom. Gains from earlier in the month were erased, leaving the S&P 500 4.2% lower, the Dow down 4.1%, and the Nasdaq Composite down 4.6% for the month. 

In the holiday-shortened week ahead, investors can expect quarterly reports from Asana, DocuSign, Kroger, Gamestop, and others. On Tuesday, the latest Purchasing Managers Index (PMI) reading will be released, followed by Wednesday’s release of the Fed’s Beige Book. Market watchers will also be tuned in for Apple’s annual product launch event on Wednesday.  

Our team has its eyes on three tickers this week. Continue reading for all of the details.

REITs offer a unique risk/reward profile that doesn’t always perfectly correlate with stocks or bonds because real estate is an asset class that’s not directly tied to traditional markets. In many situations, REITs can bolster your portfolio when markets take a plunge.

For example, during the dot-com recession,  REITs were up every single year from 2000 to 2002. By contrast, stocks were down every one of those years. Historical returns aren’t bad, either. Over the past 20 years, REIT total return performance has beaten the performance of the S&P 500 as well as the Russell 1000 (large-cap stocks), Russell 2000 (small-cap stocks), and Bloomberg Barclays (U.S. aggregate bond).

REITs are also not required to pay federal taxes so long as they distribute at least 90% of their profits as dividends, often leading to sizeable payouts, which makes an investment in a quality REIT a relatively steady source of income. According to NAREIT data, equity REIT dividend yields averaged approximately 2.6% in 2021, or more than twice the 1.2% yield of the S&P 500. 

W.P. Carey (WPC) is a leading net-lease REIT that invests in high-quality, single-tenant properties. Net-lease REITs reduce risk by passing property-specific expenses (usually maintenance, insurance, and taxes) directly to the tenant and embedding contractual rent increases in leases. That makes the REIT’s income more predictable and reliable.

W.P. Carey owns 1,216 properties across the U.S. and western Europe. Its properties are leased to 352 different tenants. The REIT boasts a well-diversified tenant base, with industrial, warehouse, and office properties representing nearly 70% of the portfolio and only 17% retail exposure, which has helped to reduce the effects of the pandemic on 2021 occupancies and rents.

A portfolio diversified by property type helped to keep rent collections strong during the first quarter, with 100% collection for self-storage, office, and retail, 99% for industrial, and 94% for warehouse. In Q1, the portfolio showed a 98.9% occupancy rate and an average remaining lease term of 10.7 years.   Adjusted FFO declined 11.5% on a per-share basis but exceeded analyst estimates. With over $1.9 billion of liquidity, W.P. Carey will be able to step up investments in new properties, which should fuel 2022 AFFO growth.  

In the second quarter, both its quarterly revenues and FFO per share witnessed year-over-year growth. The firm recently declared a quarterly $1.059 dividend representing a $4.24 dividend on an annualized basis and a dividend yield of 5.04%. 

Israel-based Nice Ltd. (NICE) is a provider of enterprise software with more than 27,000 customers (including 85% of the Fortune 100) from 150 countries. Its operating segments consist of Customer Interactions Solutions and Financial Crime & Compliance Solutions. Over the past year, the company generated $2.0 billion in revenue, and approximately $1.1 billion was cloud-based revenue. Over the past three years, the company’s revenue grew 22.3%, from $1.57 billion in 2019 to $1.92 billion in 2021.   In terms of profits, its operating profit rose 10.6% to $263.9 million from $238.7 million a year earlier.   

Building on the stellar growth, the company reiterated its ambitious targets when it unveiled its NICE3D strategic plan during its recent investor’s day event. The company outlined its updated financial goals through fiscal 2026, headlined by 30%+ operating margins and double-digit revenue growth. Nice currently trades at 6.74x sales, considerably less than its main competitor Five9  at 10.03x.

The current consensus among 12 polled analysts is to Buy NICE. A median price target of $265 represents an increase of 29% from Friday’s closing price. 

Palo Alto Network Inc. (PANW) is a top choice for customers looking to stay ahead of quickly evolving cybersecurity threats. For ten years straight, the company has been named a market leader in network firewalls by leading research and advisory company Gartner. In fact, it achieved the highest position for ability to execute and the furthest position for completeness of vision in Gartner’s Magic Quadrant for Network Firewalls for 2021. Still, they haven’t been letting the recognition go to their head. Over the past few years, Palo Alto has aggressively expanded its portfolio with big investments and acquisitions.    

The groundbreaking acquisition of Bridgecrew, a developer-first cloud security company, enabled Palo Alto’s Prisma Cloud to become the first cloud security platform to deliver security across the entire lifecycle of an application, from the building stage to deployment to run. This is the most recent in a string of additions to its portfolio of NGS (next-generation security) services.

In fiscal 2021, Palo Alto’s NGS services generated $1.18 billion in annual recurring revenue (ARR), representing roughly 28% of its top line and surpassing its prior ARR guidance of $1.15 billion. That segment’s accelerating growth complemented the stable growth of its on-site appliances and services, and its total revenue increased 25% for the full year. 

Palo Alto serves more than 85,000 customers today, compared to about 9,000 customers nine years ago. The company expects its revenue to rise 24%-25% in fiscal 2022, and its stock trades at about fifteen times that forecast. Down 15% from its April high, PANW may be a solid choice to add to your portfolio. 

Where to invest $1,000 right now...

Before you consider buying Palo Alto, you'll want to see this.

Investing legend, Keith Kohl just revealed his #1 stock for 2022...

And it's not Palo Alto.

Jeff Bezos, Peter Thiel, and the Rockefellers are betting a colossal nine figures on this tiny company that trades publicly for $5.

Keith say’s he thinks investors will be able to turn a small $50 stake into $150,000.

Find that to be extraordinary?

Click here to watch his presentation, and decide for yourself...

But you have to act now, because a catalyst coming in a few weeks is set to take this company mainstream... And by then, it could be too late.

Click here to find out the name and ticker of Keith's #1 pick...