The 10 Best Stocks for a Bear Market

Bear markets are an inevitable if particularly unpleasant part of the market cycle. But investors who hold the best stocks to buy for bear markets can mitigate at least some of the damage.

No, the S&P 500 isn’t in a bear market – a 20% decline from its peak – just yet. It has, however, been flirting with one for some time. The Nasdaq Composite, for its part, fell into a bear market a while ago. 

Either way, 2022 has been a dismal year for equities with no clear end in sight. Bottoms are hard to call in real time anyway, and, besides, stocks can trade sideways for as long as they feel like it. 

And so if this is how things are going to continue, investors might want to arm themselves with the best stocks they can find. And right now, those stock picks should focus on resiliency during deep downturns.

The best bear market stocks tend to be found in defensive sectors, such as consumer staples, utilities, healthcare and even some real estate equities. Furthermore, companies with long histories of dividend growth can offer ballast when seemingly everything is selling off. And, of course, low-volatility stocks with relatively low correlations to the broader market often hold up better in down markets.

To find the best stocks to buy for bear markets, we screened the S&P 500 for stocks with the highest conviction consensus Buy recommendations from Wall Street industry analysts. We further limited ourselves to low-volatility stocks that reside in defensive sectors and offer reliable and rising dividends. Lastly, we eliminated any name that was underperforming the broader market during the current downturn.

That process left us the following 10 picks as our top candidates for the best stocks to buy for a bear market.

Share prices, price targets, analysts’ recommendations and other market data are as of May 17, courtesy of S&P Global Market Intelligence and YCharts, unless otherwise noted. Stocks are listed by conviction of analysts’ Buy calls, from weakest to strongest.

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10. Berkshire Hathaway

A Berkshire Hathaway (ticker: BRK.B) signA Berkshire Hathaway (ticker: BRK.B) sign
  • Market value: $694.1 billion
  • Dividend yield: N/A
  • Analysts’ consensus recommendation: 2.25 (Buy) 

Warren Buffett’s Berkshire Hathaway (BRK.B, $314.81) gets a consensus recommendation of Buy with only modest conviction, but then a mere four analysts cover the stock.

One pro rates it at Strong Buy, one says Buy and two have it at Hold, per S&P Global Market Intelligence, which means the latter two analysts believe Buffett’s conglomerate will only match the performance of the broader market over the next 12 months or so.

That’s a reasonable assumption if stocks do indeed avoid falling into bear-market territory. BRK.B, with its relatively low correlation to the S&P 500, tends to lag in up markets. 

By the same token, however, few names generate outperformance as reliably as Berkshire does when stocks are broadly struggling. That’s by design. And Buffett’s wisdom of forgoing some upside in bull markets to outperform in bears has proven to be an incomparably successful strategy when measured over decades. 

Indeed, Berkshire’s compound annual growth (CAGR) since 1965 stands at 20.1%, according to Argus Research. That’s more than twice the S&P 500’s CAGR of 10.5%.

As one would expect, BRK.B is beating the broader market by a wide margin in 2022, too. The stock gained 5.2% for the year-to-date through May 17, vs. a decline of 14.2% for the S&P 500. 

If we do find ourselves mired in a prolonged market slump, BRK.B will probably not go along for the ride. That makes it one of the best bear market stocks to buy.

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9. CVS Health

A standalone CVS Health (ticker: CVS) businessA standalone CVS Health (ticker: CVS) business
  • Market value: $130.3 billion
  • Dividend yield: 2.1%
  • Analysts’ consensus recommendation: 1.92 (Buy) 

The healthcare sector is a traditional safe haven when markets turn south. Where CVS Health (CVS, $99.60) stands out is that few sector picks possess its unique defensive profile.

CVS is probably best known as a pharmacy chain, but it’s also a pharmacy benefits manager and health insurance company. Analysts praise the company’s multi-faceted business model for both its defensive characteristics and long-term growth prospects.

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“We are bullish on CVS tied to its unique set of assets, robust clinical capabilities and expanding presence in the attractive Medicare business,” writes Truist analyst David MacDonald, who rates the stock at Buy. “We view CVS’ integrated pharmacy/medical benefits as well positioned. Significant scale across its business lines, a strong balance sheet and robust cash flow generation provide dry powder for ongoing capital deployment activities over time.”

MacDonald has plenty of company in the bull camp. Nine analysts rate CVS at Strong Buy, nine call it a Buy and seven have it at Hold. Meanwhile, their average target price of $118.82 gives the stock implied upside of about 27% in the next 12 months or so.

Investors can also take comfort in the stock’s low volatility. Shares have a five-year beta of 0.77. Beta, a volatility metric that serves as a sort of proxy for risk, measures how a stock has traded relative to the S&P 500. Low-beta stocks tend to lag in up markets, but hold up better in down ones.

That’s certainly been the case with CVS stock this year. Shares were off 3.7% for the year-to-date through May 17, but that beat the S&P 500 by nearly 11 percentage points. Such resilience makes the case for CVS as a top bear market stock to buy.

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8. Coca-Cola

Cans of Coca-Cola (ticker: KO) in iceCans of Coca-Cola (ticker: KO) in ice
  • Market value: $285.2 billion
  • Dividend yield: 2.6%
  • Analysts’ consensus recommendation: 1.88 (Buy) 

Few names in the defensive consumer staples sector can match Coca-Cola (KO, $65.79) when it comes to blue-chip pedigree, history of dividend growth and bullishness on the part of Wall Street analysts.

Coca-Cola’s blue-chip bona fides are confirmed by its membership in the Dow Jones Industrial Average. But the company also happens to be an S&P 500 Dividend Aristocrat, boasting a dividend growth streak of 60 years and counting.

Oh, and Coca-Cola also enjoys the imprimatur of no less an investing luminary than Warren Buffett, who has been a shareholder since 1988. At 6.8% of the Berkshire Hathaway equity portfolio, KO is Buffett’s fourth-largest holding. 

Coca-Cola’s more immediate prospects are bright too, analysts say. It’s an unusually low-beta stock, for one thing, and that has been very helpful during this dismal 2022. Shares in KO have gained more than 11% for the year-to-date through May 17, beating the broader market by more than 25 percentage points.

True, KO was hit hard by pandemic lockdowns, which shuttered restaurants, bars, cinemas and other live venues. But those sales are now bounding back. Analysts likewise praise Coca-Cola’s ability to offset input cost inflation with pricing power. 

“We think KO’s strong fourth-quarter results reflect its brand power and ability to thrive in an inflationary environment, as top line improvement was entirely driven by price and mix,” writes CFRA Research analyst Garrett Nelson (Buy). 

Most of the Street concurs with that assessment. Twelve analysts rate KO at Strong Buy, six say Buy, seven have it at Hold and one calls it a Sell. With a  consensus recommendation of Buy, KO looks to be one of the best bear market stocks to buy.

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7. AbbVie

A picture of an AbbVie (ticker: ABBV) buildingA picture of an AbbVie (ticker: ABBV) building
  • Market value: $273.5 billion
  • Dividend yield: 3.5%
  • Analysts’ consensus recommendation: 1.88 (Buy) 

Pharmaceutical giant AbbVie’s (ABBV, $155.30) defensive characteristics stem from it being part of the healthcare sector, as well as a low-volatility Dividend Aristocrat. 

But the Street is outright bullish on the name for other reasons as well. 

High on analysts’ list are ABBV’s growth prospects and its pipeline. AbbVie is best known for blockbuster drugs such as Humira and Imbruvica, but the Street is also optimistic about the potential for its cancer-fighting and immunology drugs.

“After the recent weakness in ABBV, we revisited the model, and we came away even more confident regarding the growth prospects and pipeline,” writes Wells Fargo Securities analyst Mohit Bansal, who rates AbbVie as his Top Pick. “We think the consensus forecast significantly underestimates post-2023 growth. There are multiple pipeline catalysts in the 2022 to 2023 timeframe which are not in consensus models.”

At Truist Securities, analyst Robyn Karnauskas (Buy) largely agrees with that view. Although ABBV is suffering with the expected erosion of sales of Humira, newer drugs such as Rinvoq and Skyrizi are rapidly gaining momentum, the analyst says.

The bottom line is that bulls outweigh bears on this name by a comfortable margin. Twelve analysts rate ABBV at Strong Buy, four say Buy, seven call it a Hold and one says Sell.

AbbVie also stands out as a top bear market stock to buy because of a half-century of annual dividend increases. Same goes for ABBV’s low beta. The latter indicates relatively low correlation to the S&P 500, and is evidenced by ABBV stock gaining 14% for the year-to-date through May 17. That beat the broader market by 28 percentage points.

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6. Medtronic

A Medtronic (ticker: MDT) glucose monitorA Medtronic (ticker: MDT) glucose monitor
  • Market value: $142.6 billion
  • Dividend yield: 2.4%
  • Analysts’ consensus recommendation: 1.85 (Buy) 

Medtronic (MDT, $106.39) is another low-volatility healthcare stock with a long history of dividend growth that analysts say remains poised for even more market-beating returns.

Shares in one of the world’s largest manufacturers of medical devices gained nearly 3% for the year-to-date through May 17, a period in which the S&P 500 shed more than 14%. Even better, with an average price target of $123.18, the Street gives MDT implied upside of 17% in the next 12 months or so.

That’s why analysts’ consensus recommendation stands at Buy, with fairly high conviction. Of the 26 analysts surveyed by S&P Global Market Intelligence covering MDT, 13 rate it at Strong Buy, four say Buy and nine call it a Hold.

Part of MDT’s appeal stems from its reasonable valuation. Shares change hands at 18.8 times analysts’ 2022 earnings per share (EPS) estimate. And yet MDT is forecast to generate average annual EPS growth of nearly 10% over the next three to five years.

“We see this as an attractive valuation,” notes Argus Research analyst David Toung (Buy), adding the company “has solid post-pandemic growth opportunities from both current and soon-to-be-launched products.”

Indeed, the Street singles out MDT’s strong portfolio of existing products, as well as promising new ones under development.

“We believe Medtronic’s deep product pipeline should drive improving revenue growth and enable margin improvement resulting in high single-digit EPS growth and multiple expansion,” writes Needham analyst Mike Matson (Buy).

The best stocks to buy for bear markets often return cash to shareholders, too. And MDT’s history in that regard is as solid as they come. This Dividend Aristocrat has increased its payout annually for 44 years and counting.

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5. General Dynamics

An F-16 Fighting Falcon, made by General Dynamics (ticker: GD)An F-16 Fighting Falcon, made by General Dynamics (ticker: GD)
  • Market value: $64.3 billion
  • Dividend yield: 2.1%
  • Analysts’ consensus recommendation: 1.81 (Buy) 

Shares in defense contractor General Dynamics (GD, $232.02) benefit in down markets both from their relatively low volatility and dependable dividends. That alone makes GD worth considering as one of the better bear market stocks to buy.

What puts General Dynamics over the top, however, is its robust long-term growth forecast and potential for high share-price appreciation, analysts say.

GD’s defensive characteristics have certainly been well documented so far in 2022. Shares gained 11% for the year-to-date through May 17, a period in which the S&P 500 fell more than 14%. 

And the Street sees more outperformance ahead. Of the 16 analysts issuing opinions on the stock tracked by S&P Global Market Intelligence, nine call it a Strong Buy, two say Buy, four have it at Hold and one calls it a Sell.

Analysts forecast General Dynamics to generate average annual EPS growth of 11.6% over the next three to five years. And, notably, their average target price of $266.07 gives GD implied upside of about 15% in the next 12 months or so.

“Over the long term, GD management is focused on driving growth through modest sales increases, margin improvement, and share buybacks,” writes Argus Research analyst John Eade (Buy). “The company also aggressively returns cash to shareholders through increased dividends (most recently with a hike of 6%).”

If we do find ourselves slogging through a bear market – or just a sideways market – 15% price upside would be outstanding. And as a Dividend Aristocrat with 31 consecutive years of payout increases to its name, shareholders can at the very least count on GD for equity income.

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4. Iron Mountain

An Iron Mountain (ticker: IRM) datacenter against a white backgroundAn Iron Mountain (ticker: IRM) datacenter against a white background
  • Market value: $15.6 billion
  • Dividend yield: 4.6%
  • Analysts’ consensus recommendation: 1.71 (Buy) 

Iron Mountain (IRM, $53.99) is a real estate investment trust (REIT) with a twist. While the company is growing out a more modern datacenter arm, its legacy business is to store, protect and manage documents. In some cases that means it merely shreds them. The good news is that when corporate customers do indeed store paper documents, they tend to do so for very long periods of time.

That sort of predictability not only helps Iron Mountain maintain a generous dividend, but it allows IRM stock to trade with relatively low volatility. No wonder analysts particularly like Iron Mountain as one of the best bear market stocks to buy. 

“We view IRM as a defensive stock in the current environment, with significant valuation discounts to more traditional REITs (storage and data centers), an improving organic revenue growth story, and the very strong likelihood that the dividend will start to be raised at a 5% to 7% annual pace starting in 2023,” writes Stifel analyst Shlomo Rosenbaum (Buy).

Only seven analysts cover the stock, per S&P Global Market Intelligence, but their consensus recommendation comes to Buy with fairly high conviction. Four pros rate IRM at Strong Buy, two say Buy and one has it at Sell. Meanwhile, their average target price of $61.67 gives IRM implied upside of nearly 20% in the next year or so. 

Such returns would be extraordinary in a bear market, but then, IRM has been holding up its end of the bargain on defense so far. Shares have improved by 2.3% for the year-to-date through May 17 to beat the S&P 500 by about 12 percentage points.

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3. Mondelez International

A stock of Oreo cookies made by Mondelez International (ticker: MDLZ)A stock of Oreo cookies made by Mondelez International (ticker: MDLZ)
  • Market value: $91.0 billion
  • Dividend yield: 2.1%
  • Analysts’ consensus recommendation: 1.67 (Buy) 

Consumer staples giant Mondelez International (MDLZ, $65.45) is one of the best stocks for a bear market for many of the same reasons that it’s one of the best stocks to stave off sizzling inflation. 

The company’s vast portfolio of snacks and foods include Oreo cookies, Milka chocolates and Philadelphia cream cheese, to name a few. Sales of such consumer favorites tend to hold up well amid rising prices thanks to fickle palates and brand loyalty. 

Where MDLZ stands out among analysts, however, is in its ability to handle higher input costs thanks to a longstanding hedging program. The company also has been successful in passing higher costs on to consumers.

“We hold a strong growth outlook for Mondelez as its sales growth continues to outperform our expectations driven by strong market share performances and strong category growth rates,” writes Stifel analyst Christopher Growe (Buy). 

Nine consecutive years of dividend increases and a stock that trades with much lower volatility than the S&P 500 should also serve investors well in a tough market. Indeed, MDLZ was essentially flat for the year-to-date through May 17, vs. a decline of more than 14% for the broader market. 

Stifel is in the majority on the Street, which gives MDLZ a consensus recommendation of Buy, with high conviction. Twelve analysts rate it at Strong Buy, eight say Buy and four have it a Hold. 

Pricing power, market share gains and low volatility all help make the case for MDLZ as one of the best bear market stocks to buy.

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2. UnitedHealth Group

UnitedHealth Group (ticker: UNH) signUnitedHealth Group (ticker: UNH) sign
  • Market value: $462.1 billion
  • Dividend yield: 1.2%
  • Analysts’ consensus recommendation: 1.63 (Buy) 

Blue-chip stocks in defensive sectors such as healthcare tend to hold up better in bear markets, which is why it’s no surprise to see UnitedHealth Group (UNH, $492.93) make the cut.

This Dow Jones stock is the market’s largest health insurer by both market value and revenue – and by wide margins at that. But UNH’s sheer size alone is hardly a reason to hold it through a market downturn.

Shareholders can also take comfort in 13 consecutive years of dividend increases, a stock that’s historically been much less volatile than the broader market, and an outsized profit-growth forecast.

Analysts praise UNH on a number of fronts, with contributions from the Optum pharmacy benefits manager business being a regular highlight. A steep decline in hospitalizations due to COVID-19 is also a welcome relief.

“We maintain our Strong Buy rating on UNH as we believe shares continue to offer an attractive risk-reward tradeoff, and expect management to execute on its mid-teens EPS growth target,” writes Raymond James analyst John Ransom. 

The Street, which gives the stock a consensus recommendation of Buy with high conviction, expects the company to generate annual EPS growth of nearly 14% over the next three to five years. 

Lastly, this low-vol stock is performing as expected in 2022. It is off less than 2% for the year-to-date through May 17. That’s better than the S&P 500 by 12 percentage points.

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1. T-Mobile US

T-Mobile (ticker: TMUS) storeT-Mobile (ticker: TMUS) store
  • Market value: $161.2 billion
  • Dividend yield: N/A
  • Analysts’ consensus recommendation: 1.55 (Buy) 

Telecommunications stocks have always been favored for dividends and defense, and those are good attributes to have in a bear market. Where T-Mobile US (TMUS, $129.00) stands out is that shares in the wireless carrier have tremendous price upside too, analysts say.

You can chalk TMUS’s bright future up to the company’s $30 billion merger with Sprint. The deal closed two years ago, but the benefits have been escalating ever since. 

That’s because the “trove” of mid-band spectrum Sprint brought to TMUS allowed the telco to rapidly build out its next-generation 5G mobile wireless network, notes Argus Research analyst Joseph Bonner (Buy). The high-speed network, in turn, gave the company a competitive advantage over Verizon (VZ) and AT&T (T).

“The success of the company’s service plan innovations has been evident in its robust subscriber acquisition metrics,” Bonner writes. “T-Mobile remains the best positioned of the national carriers to take market share.”

T-Mobile’s clear advantages over peers is key to the Street’s consensus recommendation on the stock, which stands at Buy, with high conviction. It also factors into analysts’ average price target, which, at $167.55, gives TMUS implied upside of 30% in the next year or so.

With a five-year beta of 0.51, TMUS can kind of be thought of as being half as volatile as the S&P 500. That low-vol character has paid off handsomely so far this year. TMUS is up nearly 11% for the year-to-date through May 17, a period in which the broader market has fallen more than 14%. 

If the recent past is prologue, TMUS will prove itself as one of the best bear market stocks to buy.

Source: kiplinger.com

Is Recession Coming? Watch These Signs

recession market scare crash downturn stock business men
By Andrey Burmakin / Shutterstock.com

There’s no time stamp on when recessions pop up, or how long they last. Our last recession was two months long at the onset of the COVID-19 pandemic in 2020, making it the shortest on record.

The one before that was the Great Recession starting in 2007 and lasting 18 months, the longest downturn since World War II.

If the stock market and economy are keeping you on the edge of your seat, you can look for signs of a recession before it hits. That can help you determine whether you should start preparing for a recession, and the act of getting your finances ready for a possible downturn should give you some peace of mind.

An inexact science

work worry
Stock-Asso / Shutterstock.com

Before we dive into the possible warning signs of a recession, it’s worth noting that predicting a recession is not an exact science.

So, while the following warning signs historically have served as indicators that a recession might be on the horizon, that doesn’t mean they are foolproof. The economy is dynamic, and there is no list of indicators that have preceded every past recession.

Still, the following indicators tend to be a good place to start looking if you’re worried about whether a recession lies ahead.

Sign No. 1: The yield curve inverts

Positive yield curve
hafakot / Shutterstock.com

Typically, long-term bonds pay more than short-term bonds, as illustrated above. This makes sense: If you agree to tie up your money for longer periods, you should be paid more for your trouble. This is why a five-year certificate of deposit (CD) pays more than a one-year CD.

Rarely, however, the reverse is true: Long-term bonds start paying less than short-term bonds. When that happens, a recession often follows. In fact, this situation, known as an inverted or negative yield curve, has proven a highly accurate recession predictor.

Why would long-term bonds ever pay less than short-term bonds? The nation’s central bank, the Federal Reserve — or “the Fed” for short — controls short-term rates, but the market controls the rates on longer-term securities.

The Fed can raise short-term rates, which is exactly what they started doing in March 2022, for the first time since 2018. But if investors start thinking things don’t look so good in the economy, they keep their powder dry by buying long-term bonds. The more they buy and bid up the price, the lower the rates on these securities go.

The yield curve did dip into negative territory in late March 2022. It quickly recovered, but it’s worth noting that it was the first time the yield curve turned negative since 2019 and, before that, 2006.

What to watch: You can find Treasury yields on the U.S. Treasury Department’s website. CNBC also tracks in real time the spread, or difference, between the yields on two-year and 10-year Treasurys.

Sign No. 2: The Leading Economic Index slips

Jenga game at risk of slipping
88studio / Shutterstock.com

The Conference Board’s Leading Economic Index (LEI) is one predictor of global economic health. The Conference Board, a nonprofit research group, describes the index as one of “the key elements in an early warning system to signal peaks and troughs in the global business cycle,” with the LEI specifically anticipating turning points in the business cycle.

Monthly dips in the Leading Economic Index aren’t alarming. However, year-over-year drops in the benchmark have been followed by recessions in the past.

The LEI increased by 0.3% from February to March, and by 1.9% over the six months leading up to March, so there’s no reason for concern based on this indicator right now.

What to watch: Keep an eye on Conference Board press releases or media coverage of the index.

Sign No. 3: Interest rates rise

Federal Reserve
Orhan Cam / Shutterstock.com

Government monetary policy can be another economic bellwether. We’ll explain what to watch, but first, a quick refresher on how it works.

The Federal Reserve influences the economy by using a couple of tools. One of those tools is control over short-term interest rates via the target federal funds rate. If the economy is in the doldrums, it can lower the federal funds rate to encourage consumers and businesses to borrow, buy and invest, which stimulates the economy. That’s why this rate was kept near zero for years following the Great Recession that began in December 2007.

On the other hand, if the economy is growing too fast, that can lead to rising prices, otherwise known as inflation. To cool things down, the Fed raises the federal funds rate, which serves to put the brakes on the economy by discouraging both consumers and businesses from borrowing and spending as much.

While interest rates don’t directly affect the stock market, if businesses have to pay more in interest, that hurts their profits, which will ultimately be reflected in a lower stock price.

Also, as rates rise, investors often sell stocks, driving prices lower. Why do they sell? Think about it: If you can earn high interest from insured bank accounts or guaranteed Treasury bonds, why take a chance on stocks?

Again, the Fed resumed raising the federal funds rate in March 2022, marking the first rate hike since 2018. The hike in May — a half-point — was the largest increase since 2000.

What to watch: The Federal Reserve’s Federal Open Market Committee posts statements, which include any votes to change the federal funds rate, after each of its regularly scheduled meetings. The meetings are also widely covered by the financial media.

Sign No. 4: Consumer sentiment falls

Upset shopper at a grocery store
C.Snooprock / Shutterstock.com

Another economic indicator published by the Conference Board, the Consumer Confidence Survey, monitors everything from Americans’ buying intentions and vacation plans to their expectations for inflation, stock prices and interest rates.

After an uptick in March, consumer confidence fell slightly in April. The Consumer Confidence Index was at 107.3 for the month, down from 107.6. During the recession at the beginning of the COVID-19 pandemic, the index was less than 90.

Fluctuation is normal, especially as economic conditions shift. The pandemic, the rising costs of products and the war in Ukraine can change how people feel about the economy from month to month. But if consumer confidence continues to drop, that could be a sign of a looming recession.

What to watch: The Consumer Confidence Survey is updated monthly. Track press releases for it on the Conference Board’s website. The survey is also widely covered in the media.

Sign No. 5: Business confidence cools

Upset businessman holding his head at his computer
Rido / Shutterstock.com

Like consumer confidence, business confidence can shed light on the direction of the economy.

The Conference Board’s Measure of CEO Confidence remained in positive territory — 57 — in the first quarter of 2022. (The board considers measures of more than 50 points as positive, and lower readings as negative.) But this measure marked the third consecutive quarter of decline.

CEOs’ assessment of the current general economic conditions, and their expectations for the near future, also declined.

The outlook of small-business owners isn’t any rosier, according to the National Federation of Independent Business’ Small Business Optimism Index.

In March, inflation overtook labor quality as the top problem among small businesses. In fact, the share of owners raising their average selling prices reached its highest level in the survey’s 48-year history.

Moreover, the share of owners who expect better business conditions over the next six months fell to its lowest level in the survey’s history.

What to watch: Business confidence gauges like the Measure of CEO Confidence and CFO Survey are updated quarterly. The Small Business Optimism Index is updated monthly.

Sign No. 6: Vanguard’s risk forecast worsens

Vangaurd
Casimiro PT / Shutterstock.com

Vanguard is one of the biggest asset management firms in the world, so its economic outlooks can help paint a picture of how to monitor fluctuation in the economy.

Before the recession that started in late 2007, Vanguard’s six-month forecast had said the probability of a recession in six months was greater than 40%, according to The New York Times.

The firm’s forecast for 2022 — subtitled “Striking a better balance” — was overall optimistic, if cautiously so:

“While the economic recovery is expected to continue through 2022, the easy gains in growth from rebounding activity are behind us. We expect growth in both the U.S. and the euro area to slow down to 4% in 2022.”

In March, however, Vanguard downgraded its 2022 estimated growth for the U.S. from 4% to 3.5% — which is where it remained going into May.

What to watch: Vanguard posts its monthly market perspectives on its “Our Insights” webpage and issues press releases about its annual outlooks.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Source: moneytalksnews.com

Corporate Social Responsibility (CSR), Explained

Corporate social responsibility, or CSR, is a type of self-regulation that a business uses to enhance the well-being of communities and society through ethical, environmental, and social measures.

By investing in companies that practice CSR, investors have the opportunity to use their own wealth-building strategies to make a positive impact on the world.

What is Corporate Social Responsibility?

Corporate social responsibility (CSR) refers to a company’s dedication to establishing business decisions that positively impact society. Usually, these business decisions support socially responsible movements, like environmental sustainability, ethical labor practices, and social justice initiatives.

Ideally, CSR strategies work in tandem with the traditional business objectives of hitting revenue and profit goals, and other metrics investors may find on a financial statement.

There is no codified set of standards that explain corporate social responsibility. Companies choose to enact CSR policies on their own initiative. It can take many forms depending on a company or an industry, but generally, CSR policies promote economic, social, and environmental sustainability.

However, the International Organization for Standardization (ISO) released guidelines for corporate social responsibility in 2010. Known as ISO 26000:2010 , these guidelines are suggestions, not requirements, that can help put companies on track to further CSR principles.

Why CSR Is Important

Corporate social responsibility is important because companies can use their financial position and operations to build more ethical business models and a better world. When the companies enact socially responsible policies prosper, those practices become more commonplace and widespread.

Additionally, investors increasingly focus on more than traditional business valuation methods when making investment decisions. Investors want to put money into companies that support socially responsible movements, so they may be attracted to companies with CSR policies.

In other words, investing in companies that practice corporate social responsibility gives investors the chance to vote with their wallets on how they want the companies around them to behave.

Recommended: What is ESG Investing?

4 Types of Corporate Social Responsibility

Corporate social responsibility is an umbrella term that captures a wide array of policies that a company can enact. CSR-focused companies may target their efforts on one or more specific social, economic, or environmental areas of concern. The following are some of the most common areas of CSR:

1. Environmental Sustainability

Companies are increasingly focusing on environmental sustainability when making business decisions. With climate change threatening to cause severe impacts worldwide, companies are committing to creating sustainable production methods, distribution, and overall business practices to reduce carbon footprints.

For investors, sustainable investing could mean seeking out companies that promise to hold to sustainable business practices—and doing the research to ensure they’re keeping that promise in real life. Additionally, it could mean focusing on companies that are specifically involved in creating the products that allow for environmental sustainability in the long term, such as renewable energy, biofuels, or hybrid cars.

Recommended: How to Invest in EV Stocks

2. Philanthropy

One of the ways large companies might align themselves with CSR values is by supporting philanthropic efforts. By donating money, products, or services to nonprofit organizations and social causes, a company can show the public what it values and how its furthering causes.

Recommended: How to Make End-of-Year Donations

3. Ethical Labor Practices

Corporations that commit to ethical labor practices, such as focusing on diversity and inclusion or having a zero-tolerance policy on sexual harassment, may garner more favor among investors looking to support a socially responsible company.

Recommended: How to Combine Financial Well-Being and Diversity and Inclusion Initiatives

4. Volunteering

Another way almost any business can get in on CSR might be to support local volunteering efforts by sending out their representatives or fundraising for other volunteering organizations and movements.

Companies might also support volunteerism by offering their employees paid time off specifically for that activity. Some companies provide employees several days off per year, which they can use to participate in any volunteering effort they choose.

Recommended: 34 Charities To Support This Year

Examples of CSR

Many companies have enacted corporate social responsibility initiatives, and the trend is growing. According to one study, 92% of companies in the S&P 500 published sustainability in 2020, up from 20% in 2011. Here are a few examples of CSR policies at large corporations:

•   Starbucks (SBUX): The coffee giant has committed to hiring a diversified workforce, including hiring thousands of veterans, refugees, and disadvantaged youth.

•   Levi Strauss (LEVI): The apparel maker launched the Levi’s® Music Project, an initiative that looks to provide young people with music education and community resources.

•   Ford Motor Company (F): The carmaker is pushing to have 50% of its global sales be electric vehicles (EV) by 2030 to help address climate change.

•   Salesforce (CRM): The software company says it has given about $240 million in grants, 3.5 million hours of community service, and provided donations to more than 39,000 nonprofits and education institutions.

•   The Coca-Cola Company (KO): The beverage company is focusing on water conservation, saying it will push to responsibly use water in its production process and advocate for smart water policies.

Benefits of Corporate Social Responsibility

There are many reasons for a company to adopt and execute corporate social responsibility policies. First and foremost, CSR practices help promote a relatively better society and environment. By following socially responsible protocols, companies could have the opportunity to make significant social, economic, and ecological changes. As noted above, investors are increasingly looking to put money into companies that adhere to CSR.

Beyond these direct positives, CSR policies can also boost a company’s competitiveness by benefiting the firm in the following ways:

•   Stronger brand image: Corporate social responsibility policies can help create a positive image for a company, attracting consumers, employees, and other stakeholders.

•   Employee retention: Talented employees may stay with a company longer when they feel they are working for a business that has strong CSR policies. Additionally, this reputation can help attract new employees.

•   Reduced regulatory burden: A comprehensive CSR policy can help a company navigate relationships with regulatory bodies, especially as governments establish more rules around sustainability.

The Takeaway

Corporate social responsibility is one of several business models companies are using to navigate a changing world. By investing in companies that support those practices, investors could have the opportunity to positively impact the world while also potentially building their nest eggs.

However, it can take a lot of work for investors to determine what companies have the best CSR policies and what companies are truly adhering to their initiatives. So if you want to invest in companies that support CSR policies, it may be best to start small rather than build a whole portfolio around CSR stocks.

SoFi Invest® allows you to start investing today and build a portfolio with whatever strategy you desire. With active investing, you can trade stocks of brands you know and believe in and discover new opportunities based on your interests along the way.

Get started today with SoFi Invest.


SoFi Invest®
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For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or pre-qualification for any loan product offered by SoFi Lending Corp and/or its affiliates.
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Source: sofi.com

Conventional Mortgage Loan – What It Is & Different Types for Your Home

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Additional Resources

The mortgage industry is rife with jargon and acronyms, from LTV to DTI ratios. One term you’ll hear sooner or later is “conventional mortgage loan.”

It sounds boring, but it couldn’t be more important. Unless you’re a veteran, live in a rural area, or have poor credit, there’s a good chance you’ll need to apply for a conventional mortgage loan when buying your next house.

Which means you should know how conventional mortgages differ from other loan types.


What Is a Conventional Mortgage Loan?

A conventional loan is any mortgage loan not issued or guaranteed by the Federal Housing Administration (FHA), Department of Veterans’ Affairs (VA), or U.S. Department of Agriculture (USDA). 


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Most conventional loans are backed by the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac). These government-sponsored enterprises guarantee the loans against default, which lowers the cost for borrowers by lowering the risk for lenders.

As a general rule, stronger borrowers tend to use these private conventional loans rather than FHA loans. The exception concerns well-qualified borrowers who qualify for subsidized VA or USDA loans due to prior military service or rural location.


How a Conventional Mortgage Loan Works

In a typical conventional loan scenario, you call up your local bank or credit union to take out a mortgage. After asking you some basic questions, the loan officer proposes a few different loan programs that fit your credit history, income, loan amount, and other borrowing needs. 

These loan programs come from Fannie Mae or Freddie Mac. Each has specific underwriting requirements.

After choosing a loan option, you provide the lender with a filing cabinet’s worth of documents. Your file gets passed from the loan officer to a loan processor and then on to an underwriter who reviews the file. 

After many additional requests for information and documents, the underwriter signs off on the file and clears it to close. You then spend hours signing a mountain of paperwork at closing. When you’re finished, you own a new home and a massive hand cramp.  

But just because the quasi-governmental entities Fannie Mae and Freddie Mac back the loans doesn’t mean they issue them. Private lenders issue conventional loans, and usually sell them on the secondary market right after the loan closes. So even though you borrowed your loan from Friendly Neighborhood Bank, it immediately transfers to a giant corporation like Wells Fargo or Chase. You pay them for the next 15 to 30 years, not your neighborhood bank. 

Most banks aren’t in the business of holding loans long-term because they don’t have the money to do so. They just want to earn the points and fees they charge for originating loans — then sell them off, rinse, and repeat. 

That’s why lenders all follow the same loan programs from Fannie and Freddie: so they can sell predictable, guaranteed loans on the secondary market. 


Conventional Loan Requirements

Conventional loans come in many loan programs, and each has its own specific requirements.

Still, all loan programs measure those requirements with a handful of the same criteria. You should understand these concepts before shopping around for a mortgage loan. 

Credit Score

Each loan program comes with a minimum credit score. Generally speaking, you need a credit score of at least 620 to qualify for a conventional loan. But even if your score exceeds the loan program minimum, weaker credit scores mean more scrutiny from underwriters and greater odds that they decline your loan. 

Mortgage lenders use the middle of the scores from the three main credit bureaus. The higher your credit score, the more — and better — loan programs you qualify for. That means lower interest rates, fees, down payments, and loan requirements. 

So as you save up a down payment and prepare to take out a mortgage, work on improving your credit rating too.  

Down Payment

If you have excellent credit, you can qualify for a conventional loan with a down payment as low as 3% of the purchase price. If you have weaker credit, or you’re buying a second home or investment property, plan on putting down 20% or more when buying a home.

In lender lingo, bankers talk about loan-to-value ratios (LTV) when describing loans and down payments. That’s the percentage of the property’s value that the lender approves you to borrow.

Each loan program comes with its own maximum LTV. For example, Fannie Mae’s HomeReady program offers up to 97% LTV for qualified borrowers. The remaining 3% comes from your down payment. 

Debt-to-Income Ratio (DTI)

Your income also determines how much you can borrow. 

Lenders allow you to borrow up to a maximum debt-to-income ratio: the percentage of your income that goes toward your mortgage payment and other debts. Specifically, they calculate two different DTI ratios: a front-end ratio and a back-end ratio.

The front-end ratio only features your housing-related costs. These include the principal and interest payment for your mortgage, property taxes, homeowners insurance, and condo- or homeowners association fees if applicable. To calculate the ratio, you take the sum of those housing expenses and divide them over your gross income. Conventional loans typically allow a maximum front-end ratio of 28%. 

Your back-end ratio includes not just your housing costs, but also all your other debt obligations. That includes car payments, student loans, credit card minimum payments, and any other debts you owe each month. Conventional loans typically allow a back-end ratio up to 36%. 

For example, if you earn $5,000 per month before taxes, expect your lender to cap your monthly payment at $1,400, including all housing expenses. Your monthly payment plus all your other debt payments couldn’t exceed $1,800. 

The lender then works backward from that value to determine the maximum loan amount you can borrow, based on the interest rate you qualify for. 

Loan Limits

In 2022, “conforming” loans allow up to $647,200 for single-family homes in most of the U.S. However, Fannie Mae and Freddie Mac allow up to $970,800 in areas with a high cost of living. 

Properties with two to four units come with higher conforming loan limits:

Units Standard Limit Limit in High CoL Areas
1 $647,200 $970,800
2 $828,700 $1,243,050
3 $1,001,650 $1,502,475
4 $1,244,850 $1,867,275

You can still borrow conventional mortgages above those amounts, but they count as “jumbo” loans — more on the distinction between conforming and non-conforming loans shortly.

Private Mortgage Insurance (PMI)

If you borrow more than 80% LTV, you have to pay extra each month for private mortgage insurance (PMI).

Private mortgage insurance covers the lender, not you. It protects them against losses due to you defaulting on your loan. For example, if you default on your payments and the lender forecloses, leaving them with a loss of $50,000, they file a PMI claim and the insurance company pays them to cover most or all of that loss. 

The good news is that you can apply to remove PMI from your monthly payment when you pay down your loan balance below 80% of the value of your home. 


Types of Conventional Loans

While there are many conventional loan programs, there are several broad categories that conventional loans fall into.

Conforming Loan

Conforming loans fit into Fannie Mae or Freddie Mac loan programs, and also fall within their loan limits outlined above.

All conforming loans are conventional loans. But conventional loans also include jumbo loans, which exceed the conforming loan size limits. 

Non-Conforming Loan

Not all conventional loans “conform” to Fannie or Freddie loan programs. The most common type of non-conforming — but still conventional — loan is jumbo loans.

Jumbo loans typically come with stricter requirements, especially for credit scores. They sometimes also charge higher interest rates. But lenders still buy and sell them on the secondary market.

Some banks do issue other types of conventional loans that don’t conform to Fannie or Freddie programs. In most cases, they keep these loans on their own books as portfolio loans, rather than selling them. 

That makes these loans unique to each bank, rather than conforming to a nationwide loan program. For example, the bank might offer its own “renovation-perm” loan for fixer-uppers. This type of loan allows for a draw schedule during an initial renovation period, then switches over to a longer-term “permanent” mortgage.

Fixed-Rate Loan

The name speaks for itself: loans with fixed interest rates are called fixed-rate mortgages.

Rather than fluctuating over time, the interest rate remains constant for the entire life of the loan. That leaves your monthly payments consistent for the whole loan term, not including any changes in property taxes or insurance premiums.

Adjustable-Rate Mortgages (ARMs)

As an alternative to fixed-interest loans, you can instead take out an adjustable-rate mortgage. After a tempting introductory period with a fixed low interest rate, the interest rate adjusts periodically based on some benchmark rate, such as the Fed funds rate.

When your adjustable rate goes up, you become an easy target for lenders to approach you later with offers to refinance your mortgage. When you refinance, you pay a second round of closing fees. Plus, because of the way mortgage loans are structured, you’ll pay a disproportionate amount of your loan’s total interest during the first few years after refinancing.


Pros & Cons of Conventional Home Loans

Like everything else in life, conventional loans have advantages and disadvantages. They offer lots of choice and relatively low interest, among other upsides, but can be less flexible in some important ways.

Pros of Conventional Home Loans

As you explore your options for taking out a mortgage loan, consider the following benefits to conventional loans.

  • Low Interest. Borrowers with strong credit can usually find the best deal among conventional loans.
  • Removable PMI. You can apply to remove PMI from your monthly mortgage payments as soon as you pay down your principal balance below 80% of your home’s value. In fact, it disappears automatically when you reach 78% of your original home valuation.
  • No Loan Limits. Higher-income borrowers can borrow money to buy expensive homes that exceed the limits on government-backed mortgages.
  • Second Homes & Investment Properties Allowed. You can borrow a conventional loan to buy a second home or an investment property. Those types of properties aren’t eligible for the FHA, VA, or USDA loan programs.
  • No Program-Specific Fees. Some government-backed loan programs charge fees, such as FHA’s up-front mortgage insurance premium fee.
  • More Loan Choices. Government-backed loan programs tend to be more restrictive. Conventional loans allow plenty of options among loan programs, at least for qualified borrowers with high credit scores.

Cons of Conventional Home Loans

Make sure you also understand the downsides of conventional loans however, before committing to one for the next few decades.

  • Less Flexibility on Credit. Conventional mortgages represent private markets at work, with no direct government subsidies. That makes them a great choice for people who qualify for loans on their own merits but infeasible for borrowers with bad credit. 
  • Less Flexibility on DTI. Likewise, conventional loans come with lower DTI limits than government loan programs. 
  • Less Flexibility on Bankruptcies & Foreclosures. Conventional lenders prohibit bankruptcies and foreclosures within a certain number of years. Government loan programs may allow them sooner. 

Conventional Mortgage vs. Government Loans

Government agency loans include FHA loans, VA loans, and USDA loans. All of these loans are taxpayer-subsidized and serve specific groups of people. 

If you fall into one of those groups, you should consider government-backed loans instead of conventional mortgages.

Conventional Loan vs. VA Loan

One of the perks of serving in the armed forces is that you qualify for a subsidized VA loan. If you qualify for a VA loan, it usually makes sense to take it. 

In particular, VA loans offer a famous 0% down payment option. They also come with no PMI, no prepayment penalty, and relatively lenient underwriting. Read more about the pros and cons of VA loans if you qualify for one. 

Conventional Loan vs. FHA Loan

The Federal Housing Administration created FHA loans to help lower-income, lower-credit Americans achieve homeownership. 

Most notably, FHA loans come with a generous 96.5% LTV for borrowers with credit scores as low as 580. That’s a 3.5% down payment. Even borrowers with credit scores between 500 to 579 qualify for just 10% down. 

However, even with taxpayer subsidies, FHA loans come with some downsides. The underwriting is stringent, and you can’t remove the mortgage insurance premium from your monthly payments, even after paying your loan balance below 80% of your home value.

Consider the pros and cons of FHA loans carefully before proceeding, but know that if you don’t qualify for conventional loans, you might not have any other borrowing options. 

Conventional Loan vs. USDA Loan

As you might have guessed, USDA loans are designed for rural communities. 

Like VA loans, USDA loans have a famous 0% down payment option. They also allow plenty of wiggle room for imperfect credit scores, and even borrowers with scores under 580 sometimes qualify. 

But they also come with geographical restrictions. You can only take out USDA loans in specific areas, generally far from big cities. Read up on USDA loans for more details.


Conventional Mortgage Loan FAQs

Mortgage loans are complex, and carry the weight of hundreds of thousands of dollars in getting your decision right. The most common questions about conventional loans include the following topics.

What Are the Interest Rates for Conventional Loan?

Interest rates change day to day based on both benchmark interest rates like the LIBOR and Fed funds rate. They can also change based on market conditions. 

Market fluctuations aside, your own qualifications also impact your quoted interest rate. If your credit score is 800, you pay far less in interest than an otherwise similar borrower with a credit score of 650. Your job stability and assets also impact your quoted rate. 

Finally, you can often secure a lower interest rate by negotiating. Shop around, find the best offers, and play lenders against one another to lock in the best rate.

What Documents Do You Need for a Conventional Loan?

At a minimum, you’ll need the following documents for a conventional loan:

  • Identification. This includes government-issued photo ID and possibly your Social Security card.
  • Proof of Income. For W2 employees, this typically means two months’ pay stubs and two years’ tax returns. Self-employed borrowers must submit detailed documentation from their business to prove their income. 
  • Proof of Assets. This includes your bank statements, brokerage account statements, retirement account statements, real estate ownership documents, and other documentation supporting your net worth.
  • Proof of Debt Balances. You may also need to provide statements from other creditors, such as credit cards or student loans.

This is just the start. Expect your underwriter to ask you for additional documentation before you close. 

What Credit Score Do You Need for a Conventional Loan?

At a bare minimum, you should have a credit score over 620. But expect more scrutiny if your score falls under 700 or if you have a previous bankruptcy or foreclosure on your record.

Improve your credit score as much as possible before applying for a mortgage loan.

How Much Is a Conventional Loan Down Payment?

Your down payment depends on the loan program. In turn, your options for loan programs depend on your credit history, income, and other factors such as the desired loan balance.

Expect to put down a minimum of 3%. More likely, you’ll need to put down 10 to 20%, and perhaps more still.

What Types of Property Can You Buy With a Conventional Loan?

You can use conventional loans to finance properties with up to four units. That includes not just primary residences but also second homes and investment properties. 

Do You Need an Appraisal for a Conventional Loan?

Yes, all conventional loans require an appraisal. The lender will order the appraisal report from an appraiser they know and trust, and the appraisal usually requires payment up front from you. 


Final Word

The higher your credit score, the more options you’ll have when you shop around for mortgages. 

If you qualify for a VA loan or USDA loan, they may offer a lower interest rate or fees. But when the choice comes down to FHA loans or conventional loans, you’ll likely find a better deal among the latter — if you qualify for them. 

Finally, price out both interest rates and closing costs when shopping around for the best mortgage. Don’t be afraid to negotiate on both. 

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GME is so 2021. Fine art is forever. And its 5-year returns are a heck of a lot better than this week’s meme stock. Invest in something real. Invest with Masterworks.

G. Brian Davis is a real estate investor, personal finance writer, and travel addict mildly obsessed with FIRE. He spends nine months of the year in Abu Dhabi, and splits the rest of the year between his hometown of Baltimore and traveling the world.

Source: moneycrashers.com

Could Musk’s Twitter Buyout Hit the Skids?

Anyone who expected turbulence amid Elon Musk’s quest to acquire Twitter (TWTR) got precisely what they anticipated Friday morning, when the Tesla (TSLA) CEO tweeted that the Twitter deal was “temporarily on hold.”

TWTR shares plunged roughly 15% in Friday’s premarket trade following Musk’s tweet, which linked to a May 2 Reuters story about Twitter’s recent statement that “the average of false or spam accounts during the first quarter of 2022 represented fewer than 5% of our [monetizable daily active users] during the quarter.”

Musk later tweeted that he is “still committed to acquisition,” which helped cut into the losses somewhat, though another seed of doubt was already sown. 

“[Musk] is clearly intent in querying the company’s estimate that spam accounts make up less than 5% of active daily users – a key metric given that establishing an accurate number of real tweeters is considered to be key to future revenue streams via advertising or paid for subscriptions on the site,” says Susannah Streeter, senior investment and markets analyst for U.K. firm Hargreaves Lansdown.

But she also raises the possibility of an ulterior motive.

“There will also be questions raised over whether fake accounts are the real reason behind this delaying tactic, given that promoting free speech rather than focusing on wealth creation appeared to be his primary motivation for the takeover,” Streeter says. “The $44 billion price tag [of the Twitter deal] is huge, and it may be a strategy to row back on the amount he is prepared to pay to acquire the platform.”

That price tag might seem like even more of a stretch now than when Musk first got involved with Twitter.

“I am offering to buy 100% of Twitter for $54.20 per share in cash, a 54% premium over the day before I began investing in Twitter and a 38% premium over the day before my investment was publicly announced,” Musk said in April when he declared his bid for the social media platform.

Since then, the S&P 500 and the communication services sector have both declined by double digits, with many high-priced technology and tech-esque shares plunging precipitously.

Twitter, to be fair, is roughly flat since then. But this latest hurdle puts his once seemingly imminent Twitter deal even further in doubt among investors and analysts alike.

TWTR stock chartTWTR stock chart

The market has yet to price TWTR shares at the $54.20 per share Musk offered in April. Not even after Musk revealed earlier this month that backers such as Andreessen Horowitz, Sequoia Capital and Oracle (ORCL) founder Larry Ellison were lined up to help provide more than $7 billion in financing.

As of Thursday’s close, TWTR shares were trading 15% below Musk’s $54.20-per-share bid. In Friday’s premarket trade, that number was nearly 30%.

Wall Street’s pros appear mildly skeptical the Twitter deal closing, too. According to S&P Global Market Intelligence, the 27 analysts who currently cover Twitter have an average price target of $51.50 and collectively consider the stock a Hold.

Source: kiplinger.com

How To Start a Wedding DJ Business in 9 Essential Steps

Want to hone your DJ skills? Or maybe show them off?

Wedding DJs are in high demand these days.

Industry experts expect 2022 to be the busiest wedding season in 40 years, thanks to lockdown romances and postponed ceremonies during the pandemic.

A wedding DJ is the focal point of great wedding receptions. They set the mood, engage with the crowd and keep the couple happy.

They make good money, too. Wedding DJs make $1,000 per gig on average, according to WeddingWire, with experienced pros fetching upward of $2,000 or more.

But it takes a lot of hard work and planning to DJ a wedding. To start a successful wedding DJ business, you’ll need seed money for gear, reliable transportation — and great people skills.

How to Start a Wedding DJ Business in 9 Steps

Nick Smith started DJing weddings in southwest Indiana when he was 20 years old. His first set of speakers and audio equipment came from a bar that was going out of business.

Sixteen years later, Smith’s business has booked over 200 weddings.

“It’s a great gig if you love people and music,” he said.

Ready to spin up your own side hustle? Follow these nine steps to start a wedding DJ business.

1. Research and Talk to Other DJs

Before you invest major money into gear and advertising, make sure you’re comfortable with this type of gig.

Talk to other wedding DJs and ask what challenges they faced in the beginning — and how they overcame those hurdles.

If you’re new to DJing in general, it’s a good idea to shadow a professional wedding DJ. Search Google, Yelp or the Knot to find some in your area.

Send a friendly email asking if you can help them out at an event or two because you’re interested in being a wedding DJ.

On the day of the wedding, show up early and stay for the entire event. Observe how the wedding DJ interacts with the crowd and the type of music they play. Take notes.

Ask yourself the following questions:

  • How do they make announcements?
  • What do they do when the dance floor thins out?
  • How do they handle requests?
  • What equipment do they have?

In exchange for the experience, offer to help the other DJ by unloading gear from the car and setting up the speakers.

2. Hone Your Skills

Practice makes perfect. You need to be comfortable behind the booth before you’re ready to book gigs.

Play for family and friends first. You can also book other, smaller events — like birthday parties and company parties — to get your feet wet. Online classes are another way to grow your knowledge base.

Practice playing songs, using a microphone and flowing from one song to another.

If you’re not ready to start your own wedding DJ business quite yet, consider working for a multi-op — a mobile DJ company that employs several disc jockeys.

3. Create a Business Plan

Creating a business plan is important if you plan to invest time and money into becoming a wedding DJ.

Your business plan should include:

  • Your business name and location
  • Customer demographics and target audience
  • Price points
  • Suppliers for your equipment
  • Initial start-up costs and how long until you’re profitable
  • Competitors

You can use one of these templates from the U.S. Small Business Administration to create a more detailed business plan.

Looking for more tips? Check out these 10 things you should know before you start a business. 

Setting Your Rate

The best way to set your initial rates is by researching prices for wedding DJs in your area, then offering a lower price.

How much you charge also depends on where you live: A wedding DJ in a big city earns more money than a wedding DJ in a small town.

Still, a good starting rate for a novice wedding DJ is roughly $500. You can raise your rates as you gain more experience. According to The Knot’s Real Weddings Study, couples spent an average of $1,400 on a DJ in 2021.

Wedding DJs usually pick one or more of the following pricing structures:

  • Flat fee or hourly rate
  • Packages
  • A la carte services
  • Custom quote

You should also be open to negotiating when you first start out.

Decide What DJ Services to Offer

Smith said offering additional services to clients is one of the best ways to make extra money as a wedding DJ.

“Additional services can really help add value,” Smith said. “You can offer things like uplighting, or doing sound for both the ceremony and the reception.”

Consider add-ons that earn you extra money with minimal effort. For example, some DJs offer photo booth services for guests, but Smith said photo booths are labor intensive to transport and set up.

“Unless you have someone else helping you, you want to keep things simple,” he said.

4. Buy Your DJ Gear

A big hurdle for many new DJs is acquiring equipment. It can cost a couple thousand dollars to purchase all your DJ gear.

“It’s a big cost up front for sure,” Nick said, “but you’ll earn it back quickly with gigs.”

While you don’t need state-of-the-art equipment to be a great wedding DJ, you do need a solid foundation to get started.

Wedding DJ gear checklist:

  • Laptop with at least 6 GB of internal memory and three USB inputs
  • DJ software, like Serato or Traktor
  • PA system (amplifier and speakers)
  • DJ controller / mixer
  • Over-the-ear headphones
  • Cables
  • MP3 music files

On a budget? Smith recommends looking for deals on sites like eBay and Craigslist. Check out sales at your local music store, too.

You could even borrow equipment from a friend or neighborhood church for your first couple gigs.

“You can start with a cheaper set-up, then upgrade it up over time,” Smith said.

You’ll also need to be comfortable setting up and tearing down your own DJ equipment. Figuring out how to efficiently store and transport your gear is also important if you want to be a mobile DJ.

Buy the Music

Buying music is important if you want to run a successful wedding DJ business.

Professionals caution against using streaming services like Spotify or YouTube. It isn’t technically legal and you shouldn’t rely on anything that requires Internet access anyway.

You have several options to legally purchase music for your wedding DJ business:

  • Buy mp3s through Amazon or iTunes/Apple Music.
  • Subscribe to a DJ pool like Promo City. This is a paid service that gives you access to volumes of modern music for download.
  • DJ subscription service like Virtual DJ or Pulselocker.
  • Buy used CDs and rip them to your laptop.

Set aside a little money from each gig to buy more music, and it won’t take long to compile a competitive professional DJ library.

5. Market Yourself

You have the gear. You have a plan. Now it’s time to get some customers.

You’ll need to create a DJ website and social media accounts to attract potential customers. Look at websites for other wedding DJ businesses to get ideas.

At the bare minimum, your website should include:

  • Your rates
  • Where you’re located (and how far you’re willing to travel)
  • A contact email address and phone number
  • What makes you unique from other DJs in the wedding industry
  • Testimonials and positive reviews

You can use a service like Wix or Weebly for free, or hire a professional to design a website for you.

Word of mouth is huge in the wedding business, Smith said. It’s about who you know and who knows you.

“Recommendations are everything,” Smith emphasized.

Give discounts for referrals. Make it easy for the bride and groom to leave glowing reviews about your wedding DJ business on Google and Facebook.

You’ll want to create some business cards and maybe some flyers, too.

Leave a space in your budget for marketing costs. Advertising on sites like The Knot and WeddingWire can really help pull in new customers because couples often visit these sites to find venues and vendors.

6. Meet the Couple for a Consultation

Meet up with the wedding couple several weeks before the event to discuss the playlist.

Ask about their favorite genres and bands, then create a short list of must-have songs, including their pick for the first dance and other important dances.

Perhaps more importantly, get a list of songs they don’t want played. The Chicken Dance, for instance.

“Get an idea of what they’re looking for,” Smith said, “then execute that to the best of your abilities.”

Print a questionnaire for the couple to fill out at the consultation with a timeline of the wedding, names of important people in the wedding party and other key details you should know.

You’ll also want to create contracts you can customize for each couple.

Your business contract should cover things like cancellation fees and damaged equipment policies. Make sure to discuss these policies with clients during the initial consultation.

Finally, prepare to spend several hours communicating back and forth with the couple before the wedding. Smith said he usually spends about 10 hours total preparing for the big day.

Two brides dance at their wedding reception.
Getty Images

7. Create the Playlist

Your goal as a wedding DJ is to create a memorable experience for the couple and keep the party going.

Don’t slide your original deep house remix into the wedding playlist. Remember, focus on the bride and groom — not your personal taste in music.

Play music to match the festivities. Break your songs into different blocks for the ceremony, cocktail hour, introductions, dinner and dance floor.

Each block should have different music to the atmosphere: Classical music at the ceremony, light jazz for the cocktail hour and soulful tunes for dinner, for example.

You can flex more creativity and play new music for the dance floor. But remember: You’re playing for a diverse audience. Don’t be afraid to bust out crowd favorites like “Don’t Stop Believin’” and “Livin’ On A Prayer.”

“People are at a wedding to have a good time,” Smith said. “Your job is to play the right music and create a fun atmosphere for everyone.”

8. Be On Time and Professional

You can’t be late to the party when you’re the DJ. Get there early, set up on time and prepare for a late night.

Before the wedding, write out a script of everything you plan to say. Practice pronouncing names. You don’t want to butcher the best man’s last name on stage.

Make sure to bring backup chargers, cables and other necessary gear. Things go wrong, break and run out of battery. Don’t let something unexpected (but easily preventable) ruin your wedding gig.

9. Work the Crowd and Keep the Party Going

Successful wedding DJs set the tone and vibe for the entire reception.

Be friendly, energetic and don’t forget to smile!

It’s not all about the music, though: You’ll be in charge of making announcements, calling for special dances and fielding song requests from (often intoxicated) guests.

You’ll need to communicate with other vendors at the wedding, too. You don’t want to start playing music for a special dance, for example, without the photographers and videographers in place.

Be observant, flexible and keep the party going.

It’s a lot to manage but pulling off your first successful gig can be the start of a rewarding and lucrative wedding DJ business.

Rachel Christian is a Certified Educator in Personal Finance and a senior writer for The Penny Hoarder

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Source: thepennyhoarder.com

How Rising Inflation Affects Mortgage Interest Rates

While the inflation rate doesn’t directly impact mortgage rates, the two tend to move in tandem. Rising inflation can shrink purchasing power as prices of goods and services increase. Higher prices can then influence the Federal Reserve’s interest rate policy, affecting the cost of borrowing for lending products like mortgages.

Homebuyers looking for a home loan and homeowners who want to refinance a mortgage need to know that mortgage rates may rise as inflation increases. Therefore, understanding the difference between the inflation rate, interest rates, and what affects mortgage rates matters for all home finance consumers.

Inflation Rate vs Interest Rates

Inflation is a general increase in the overall price of goods and services over time.

The Federal Reserve, the central bank of the United States, tracks inflation rates and inflation trends using several key metrics, including the Consumer Price Index (CPI), to determine how to direct monetary policy. A target inflation rate of 2% is considered ideal for maintaining a stable economic environment over the long run.

When inflation is on the rise and the economy is in danger of overheating, the Federal Reserve may raise interest rates to cool things down.

Interest rates reflect the cost of using someone else’s money. Lenders charge interest to borrowers who take out loans and lines of credit as a premium for the right to use the lender’s money.

Higher rates can make borrowing more expensive while also providing more interest to savers. People borrowing less and saving more can have a cooling effect on the economy.

When the economy is slowing down too much, on the other hand, the Fed can lower interest rates to encourage borrowing and spending.

Recommended: Federal Reserve Interest Rates, Explained

What Affects Mortgage Rates?

Inflation rates don’t have a direct impact on mortgage rates. But there can be indirect effects because of how inflation influences the economy and the Federal Reserve’s monetary policy decisions. Again, this relationship between inflation and mortgage rates is related to how the Federal Reserve adjusts interest rates to cool off or jump-start the economy.

The Federal Reserve does not set mortgage rates, however. Instead, the central bank sets the federal funds rate target, the interest rate that banks lend money to one another overnight. As the Fed increases this short-term interest rate, it often pushes up long-term interest rates for U.S. Treasuries. Fixed-rate mortgages are tied to the 10-year U.S. Treasury Note yield, which are government-issued bonds that mature in a decade. When the 10-year Treasury yield increases, the 30-year mortgage rate tends to do the same.

Recommended: Understanding the Different Types of Mortgage Loans

So in terms of what affects mortgage rates, movement in the 10-year Treasury yield is the short answer. Higher yields can mean higher rates, while lower yields can lead to lower rates. But overall, inflation rates, interest rates, and the economic environment can work together to sway mortgage rates at any given time.

A simple way to see the relationship between inflation rates and mortgage rates is to look at how they’ve trended historically . If you track the average 30-year mortgage rate and the annual inflation rate since 1971, you’ll see that they often move in tandem.

They don’t always move perfectly in sync, but it’s typical to see rising mortgage rates paired with rising inflation rates.

Inflation Trends for 2022 and Beyond

In March 2022, the U.S. inflation rate hit 8.5%, as measured by the Consumer Price Index. This increase represents the largest 12-month increase since 1981 and moving well beyond the Federal Reserve’s 2% target inflation rate.

While prices for consumer goods and services were up across the board, the most significant increases were in the energy, shelter, and food categories.

Rising inflation rates in 2022 are thought to be driven by a combination of things, including:

•   Increased demand for goods and services

•   Shortages in the supply of goods and services

•   Higher commodity prices due to geopolitical conflicts

The coronavirus pandemic saw many people cut back on spending in 2020, leading to a surplus of savings. In addition to government stimulus, these savings created a pent-up demand for purchases once the economy got back on track. However, the supply chains have not been able to catch up to demand.

Supply chain disruptions and worker shortages are making it difficult for companies to meet consumer needs. This has resulted in rapidly rising inflation to levels not seen in decades.

In March 2022, the Fed started to raise interest rates to tame inflation and will likely continue to raise interest rates throughout the year. Many analysts believe that inflation is peaking and will steadily decline throughout 2022. However, there is still a lot of uncertainty surrounding the economy that makes forecasting price trends difficult.

Recommended: 7 Factors that Cause Inflation

Is Now a Good Time for a Mortgage or Refi?

There’s a link between inflation rates and mortgage rates. But what does all of this mean for homebuyers or homeowners?

Rising inflation and higher interest rates have caused mortgage rates to spike at the fastest pace in decades, though mortgage rates are still near historic lows. As the Fed continues to pursue interest rate hikes, it could lead to even higher mortgage rates. It simply means that if you’re interested in buying a home, it could make sense to do so sooner rather than later.

Buying a home now could help you lock in a better deal on a loan and get a reasonable mortgage rate, especially as home values increase.

The higher home values go, the more important a low-interest rate becomes, as the rate can directly affect how much home you can afford.

The same is true if you already own a home and are considering refinancing an existing mortgage. However, when refinancing a mortgage, the math gets a bit trickier. You might need to determine your break-even point — when the money you save on interest payments matches what you spend on closing costs for a refinanced mortgage (a refi).

To find the break-even point on a refi, divide the total loan costs by the monthly savings. If refinancing fees total $3,000 and you’ll save $250 a month, that’s 3,000 divided by 250, or 12. That means it’ll take 12 months to recoup the cost of refinancing.

If you refinance to a shorter-term mortgage, your savings can multiply beyond the break-even point.

If your current mortgage rate is above refinancing rates, it could make sense to shop around for refinancing options.

Keep in mind, of course, that the actual rate you pay for a purchase loan or refinance loan can also depend on things like your credit score, income, and debt-to-income ratio.

Recommended: How to Refinance Your Mortgage — Step-By-Step Guide

The Takeaway

Inflation appears to be here to stay, at least for the near term. Buying a home or refinancing when mortgage rates are lower could add up to a substantial cost difference over the life of your loan. From a savings perspective, it’s essential to understand what affects mortgage rates and the relationship between the inflation rate and interest rates.

SoFi offers fixed-rate mortgages and mortgage refinancing. Now might be a good time to find the best loan for your needs and budget.

It’s easy to check your rate with SoFi.


SoFi Mortgages
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External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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Source: sofi.com

5 Stocks to Sell or Avoid Now

It’s been a horrific year so far for equities, and yet the market remains littered with stocks to sell in anticipation of even deeper losses.

True, one of the worst starts to a year in market history has surely created a smorgasbord of bargains. But it hardly follows that every stock is worth buying on the dip. 

Although being greedy when others are fearful is a generally fine first principle, remember that some stocks go down for good reasons. Such stocks to sell have plenty of room to decline even further.

Given that negative ratings on equities are exceedingly rare on Wall Street, it seemed like a good time to see which names analysts collectively single out as stocks to sell now. To that end, we used data from YCharts and S&P Global Market Intelligence to screen the Russell 1000 index for the stocks with the highest-conviction consensus Sell recommendations by industry analysts.

Here’s how the ratings system works: S&P surveys analysts’ stock calls and scores them on a five-point scale, where 1.0 equals a Strong Buy and 5.0 is a Strong Sell. Any score equal to or below 3.5 means that analysts, on average, rate the stock at Sell. The closer a score gets to 5.0, the stronger the consensus Sell recommendation.

After running the screen we were left with a very short list of names. (As we said above, Sell calls are rare.) And although they come from sectors as diverse as retail, insurance and utilities, they all have one thing in common: The Street expects them to underperform the broader market handily over the next 12 months or so.

Read on for more information about Wall Street’s top five stocks to sell now.

Share prices, price targets, analysts’ recommendations and other market data are as of March 9, courtesy of S&P Global Market Intelligence and YCharts, unless otherwise noted. Stocks are listed by conviction of analysts’ Sell calls, from weakest to strongest. 

1 of 5

Hawaiian Electric Industries

offshore electricity wind generatorsoffshore electricity wind generators
  • Market value: $4.6 billion
  • Analysts’ consensus recommendation: 3.6 (Sell) 

Hawaiian Electric Industries (HE, $41.99) stock is holding up pretty well so far in 2022. It’s essentially flat for the year-to-date vs. a drop of 16% for the S&P 500. 

The Street, however, says that outperformance is set to come to an end in a big way.

The five analysts covering this utility stock collectively view it a hair on the negative side. The average price target of $41.60 implies that the stock is a little overvalued, and ratings lean to the sell side, at three Holds, one Sell and one Strong Sell, per S&P Global Market Intelligence.

The pros who have Hawaiian Electric among their stocks to sell believe the company is set for a fall. UBS Global Research analyst Daniel Ford rates the stock at Sell, and his price target of $36 gives HE stock implied downside of about 15% in the next 12 months or so.

That’s due in part to the company’s unique total exposure to its state. Hawaiian Electric Industries comprises three operating subsidiaries: Hawaiian Electric, an electric utility serving 95% of Hawaii; American Savings Bank, one of Hawaii’s largest financial institutions; and Pacific Current, an independent subsidiary that aims to advance Hawaii’s sustainability goals.

As such, HE was sort of a COVID-19 recovery play, but now much (if not all) of the upside has been baked in. The valuation would certainly appear to support that view. 

Indeed, shares trade at just under 20 times the Street’s 2022 earnings per share (EPS) estimate. Meanwhile, analysts forecast the company to generate modest average annual EPS growth of less than 8% over the next three to five years.

2 of 5

Southern Copper

Copper miningCopper mining
  • Market value: $45.1 billion
  • Analysts’ consensus recommendation: 3.75 (Sell) 

Southern Copper (SCCO, $58.38) stock is off more than 5% for the year-to-date. Although that’s beating the broader market by a wide margin, the Street says its days of outperformance are coming to an end 

Shares in the copper miner, smelter and refiner get a consensus recommendation of Sell, with fairly strong conviction. Of the 16 analysts covering SCCO tracked by S&P Global Market Intelligence, eight rate it at Hold, four say Sell and four call it a Strong Sell.

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The bearishness stems primarily from political and social upheaval in Peru, where the company maintains a key presence. SCCO saw copper production tumble 10% in the most recent quarter after community protests forced it to halt work at its Cuajone mine. 

The mine has since returned to full capacity, but tensions remain high. Indeed, BofA Securities joined the pros listing Southern Copper among their stocks to sell earlier this year, downgrading shares to Underperform because of the potential for further unrest in Peru.

At the same time, SCCO is also struggling with lower ore grades and recoveries at other mines, notes CFRA Research analyst Matthew Miller, who rates shares at Hold. Those headwinds forced the company to cut its full-year production guidance by 3%, the analyst adds. 

The Street also worries about Southern Copper’s heavy dependence on the Cuajone mine, as it accounts for 40% of the company’s production in Peru.

3 of 5

Xerox

A person using a copying machineA person using a copying machine
  • Market value: $2.7 billion
  • Analysts’ consensus recommendation: 4.00 (Sell) 

Xerox (XRX, $17.24) stock has lost nearly a quarter of its value so far this year, but you won’t find any analysts imploring clients to buy the dip on this long-time market laggard. 

Indeed, shares in the digital printing company have carried a consensus recommendation of Sell for more than a year, and it’s not hard to see why. XRX underperformed the broader market by pretty much epic margins in five of the past seven years.

Apparently there’s little reason to see it snapping that streak anytime soon.

“Prior to the pandemic, Xerox had faced pressure from the rise of the paperless workplace and the corresponding decline in imaging equipment revenue,” writes Argus Research analyst Kristina Ruggeri (Hold). “The increase in work-from-home practices during the pandemic further accelerated this trend.”

At the same time, supply-chain disruptions are impeding the company’s efforts to manufacture higher-margin products, and inflation is taking a heavy toll on input costs.

“We expect these headwinds to weigh on sales and earnings well into 2022 and believe that it will take time for the company’s transformation efforts to gain traction,” Ruggeri says.

The majority of the seven analysts with opinions on XRX have it among their stocks to sell. Specifically, three call Xerox a Hold, one says Sell and three have it at Strong Sell.

4 of 5

Mercury General

Mercury General stock sell auto insurance Mercury General stock sell auto insurance
  • Market value: $2.8 billion
  • Analysts’ consensus recommendation: 4.00 (Sell) 

Only one analyst covers shares in property and casualty insurer Mercury General (MCY, $49.80), which should give would-be investors pause in and of itself.

That the sole analyst tracking MCY slaps a rare Sell call on it makes this name only that much more unattractive.

Raymond James analyst C. Gregory Peters rates MCY at Underperform (the equivalent of Sell), citing a number of factors. For one thing, the insurance underwriter continues to be hurt by the supply-chain problems and inflationary pressures endemic to the auto and property markets.

In addition to the fact that consumers don’t need to buy insurance for cars they can’t find or afford, MCY is struggling with the California Department of Insurance’s rates policies.

“The CA Department of Insurance is notoriously anti-insurance industry and political, which we believe could make rate approvals even more problematic considering it is an election year,” Peters writes. “In a worst-case scenario, the CA DOI could delay rate increases by up to two years.”

MCY stock is beating the broader market year-to-date, but it’s still off about 6%. Raymond James’ Peters doesn’t have a price target for the stock, saying it’s not material at this point.

“Our Underperform rating is primarily a reflection of the longer-term structural challenges associated with California,” he says.

5 of 5

GameStop

A storefront of video game retailer GameStop (GME)A storefront of video game retailer GameStop (GME)
  • Market value: $7.5 billion
  • Analysts’ consensus recommendation: 4.33 (Sell) 

The godfather of meme stocks is set for a massive fall, at least as far as Wall Street pros are concerned. And that’s after falling by more than a third for the year-to-date already.

Analysts’ average target price of $26.50 gives shares in GameStop (GME, $98.79) implied downside of 73% in the next 12 months or so. Their consensus recommendation, needless to say, stands at Sell.

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To be fair, we’re talking about a miniscule sample size of recommendations here. Only three analysts bother issuing opinions on GME anymore. Of those who remain, one rates the stock at Hold and two call it a Strong Sell, per S&P Global Market Intelligence.

Once upon a time – before shares in the brick-and-mortar video game retailer became a plaything for social media day traders – as many as 10 analysts covered GME. But once the stock’s price action became divorced from reality – it gained 1,740% over the course of a few weeks at one point in early 2021 – fundamental research became pointless. 

That schism remains a real problem for analysts who refuse to drop coverage of the name.

“The share price continues to trade at levels that are completely disconnected from the fundamentals of the business due to ongoing support from certain retail investors,” writes Wedbush analyst Michael Pachter. “As a result, we continue to believe that an Underperform rating [the equivalent of Sell] is warranted.”

Source: kiplinger.com