Now that Memorial Day is in the rearview mirror, investors are thinking about summer. This is historically a quieter time for markets. That may be the case in 2023. But first, the markets have to digest news on inflation and interest rates. And that’s a reason to look for some bargain stocks to buy for the summer season.
A month ago, the Federal Reserve was widely expected to pause (or “skip”) interest rate hikes in June. But after a hot headline number on the jobs report, some analysts are increasing the odds that the Fed will raise interest rates by 25 basis points at least one more time.
Overall, that would be bearish for the broader market. But, as has been the case for the last year, there will be some pockets of opportunity. And what if the Fed does pause? That would likely bring a lot of money off the sideline which would be bullish for the entire market.
What you’re looking for are stocks that have a bullish outlook that doesn’t depend on the direction of interest rates and a potential recession. Here are three stocks that fit that criterion.
Generac (GNRC)
Generac (NYSE:GNRC) was one of the big winners during the pandemic. The top and bottom lines both surged higher as demand for the company’s energy storage solutions surged. The company’s signature product is its whole home generator that keeps your home’s power on during weather emergencies.
That benefit coincides with the arrival of hurricane season. It’s true that a generator is a “big ticket” purchase. This simply means that once a consumer owns one, they won’t need to replace it for some time. That was a reason for the company’s inventory overstock in 2022. It’s also fair to say that GNRC stock grew to be overvalued.
Nevertheless, the way I see it, some areas of the country that are prone to hurricanes are also the areas benefiting from the nation’s population shift. And although this is expected to be an “average” hurricane season, all it takes is one event to get consumers thinking about their home’s protection.
If you think that’s merely an anecdotal reason to buy the stock, here’s more substance. Elven with the stock up nearly 20% since April 2023, it’s still down over 58% in the last 12 months. And it’s down 76% from its all-time closing high from October 2021. Furthermore, with a forward P/E ratio of around 19x earnings, GNRC stock is starting to have a more attractive valuation.
Canadian Solar (CSIQ)
Canadian Solar (NASDAQ:CSIQ) makes this list of bargain stocks to buy despite being up over 9% in the last month. The immediate catalyst is rising oil prices. Saudi Arabia’s decision to unilaterally cut its oil output by another one million barrels beginning in July 2023 is shining a light on the solar sector. Higher oil prices will eventually raise the price that consumers pay to drive their cars and heat their homes.
This is coming at a time when the Biden administration, via the Inflation Reduction Act, is looking to reward companies that manufacture solar panels in the United States. Canadian Solar currently has two manufacturing facilities in the United States and may add more. The company is also expecting to benefit from Canada’s six-year investment tax credit.
Canadian Solar has an attractive price-to-earnings (P/E) ratio of around 8x earnings. The company delivered a mixed, but mostly solid, earnings report. That has led the analyst firm Oppenheimer to increase its price target from $60 to $68. That’s well above the consensus price target of around $53.
Johnson & Johnson (JNJ)
Can a defensive stock be considered one of the bargain stocks to buy this summer? It can if it’s undervalued as I believe Johnson & Johnson (NYSE:JNJ) is. The stock is trading at around 15x forward earnings per share and is down over 10% in the past year.
JNJ stock was expected to get a bump after wrapping up its long-running talc lawsuit. That hasn’t been the case. The stock is down 10% in the past year and 3% in just the last month.
It seems investors are more concerned about the patent cliff for its blockbuster drug Stelara. However, in the first quarter, Johnson & Johnson booked $2.4 billion in Stelara sales. That puts it on track, for now, to repeat the $9 billion it recorded for Stelara in 2022. Plus, JNJ does have a patent thicket around Stelara which means that the product is protected for some indications for many years to come.
This means you should take a closer look at JNJ stock no matter what happens to the market this summer. In addition to the potential for some stock price growth, the company pays a safe dividend that currently has a yield of 3.02%.
On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
