Bob Doll, Crossmark’s Chief Investment Officer and former BlackRock stock chief, predicts that the US economy will experience a mild recession in the near-to-mid future. However, he believes there are still opportunities to be found in the market, particularly in value stocks. Doll recommends five stocks that he likes: Cigna (CI), McKesson (MCK), Valero (VLO), Phillips 66 (PSX), and Adobe (ADBE). While Doll is cautious about the broader stock market’s upside potential, he sees potential in these specific sectors and stocks.
Bob Doll Predicts Mild Recession, But Sees Opportunities in Value Stocks
Doll believes that leading economic gauges, such as the Treasury yield curve and The Conference Board’s Leading Economic Index, indicate that a mild recession is on the horizon for the US economy. As a result, he expects the S&P 500 to decline from its current levels to a range of 3,800-4,200. However, Doll remains optimistic about finding opportunities in the market, particularly in stocks with low valuations and consistent earnings. Despite his cautious outlook, he believes that value stocks still have potential for growth.
Five Stocks Recommended by Bob Doll: CI, MCK, VLO, PSX, ADBE
Doll recommends five stocks that he believes have potential for investors. These stocks are Cigna (CI) and McKesson (MCK) in the health maintenance organizations (HMOs) sector, Valero (VLO) and Phillips 66 (PSX) in the energy sector, and Adobe (ADBE) in the technology sector. Doll highlights the low valuations of these stocks compared to the broader market, making them attractive investment opportunities. These stocks offer quality, predictable, and consistent earnings, which Doll considers important in the current market environment.
Doll Favors Defensive HMO Stocks in a Recessionary Market
In anticipation of a mild recession, Doll suggests that investors consider the health maintenance organizations (HMOs) sector. He believes that these stocks would behave more defensively compared to other areas of the market and are well-positioned to improve profitability. Doll specifically recommends Cigna (CI) and McKesson (MCK) in this sector. Both companies have low forward price-to-earnings ratios compared to the S&P 500, making them attractive investments for investors seeking defensive options.
Energy Stocks, Particularly Refiners, are Among Doll’s Top Picks
Doll is bullish on energy stocks, especially refiners, given the recent rise in oil prices. He suggests that investors consider stocks like Valero (VLO) and Phillips 66 (PSX) in this sector. Doll attributes his positive outlook to the capital discipline exhibited by these companies. Refiners have become more cautious in deploying their profits to drill for more oil, leading to improved supply and prices. Doll also emphasizes the low valuations of these stocks, making the energy sector an attractive investment opportunity.
Tech Stocks Present Opportunities, But Beware of High Valuations
While Doll recognizes the recent strength of tech stocks, he urges investors to be cautious about the high valuations in this sector. However, he does see value in certain tech stocks, including Adobe (ADBE), a cloud computing software firm. Doll believes that Adobe is reasonably priced with a forward price-to-earnings ratio in line with the tech sector’s average. He advises investors to have exposure to tech stocks but warns them to carefully consider the valuations before making investment decisions.
Bob Doll’s outlook for the US economy is cautious, as he predicts a mild recession in the near-to-mid future. Despite this, he sees opportunities in the market, particularly in value stocks. Doll recommends certain stocks in the HMOs, energy, and tech sectors, highlighting their low valuations and quality earnings. However, he advises investors to exercise caution given the potential for high valuations in the tech sector. Doll also suggests considering Treasury bonds as a relatively attractive option within the bond market. Overall, Doll presents a cautious yet optimistic perspective on the current market landscape.
Analyst comment
Neutral.
As an analyst, the market is likely to experience a decline in the near-to-mid future, with the S&P 500 potentially reaching a range of 3,800-4,200. However, there are still opportunities for investors, particularly in value stocks recommended by Bob Doll such as CI, MCK, VLO, PSX, and ADBE. These stocks have low valuations and consistent earnings, making them attractive options in the current market environment. Investors should exercise caution with high valuations in the tech sector but consider exposure to tech stocks with reasonable valuations.
