Given the significant drop in the market this year, there are a lot of opportunities for investors in today's environment. Many stocks are trading at very reasonable, if not low valuations, to where they could eventually trade long term.
But despite the opportunities, the outlook is far from certain. Many investors are trying to figure out how the Federal Reserve's massive interest rate hikes and unwinding of its balance sheet will impact the economy in 2023. There is certainly a wide range of predictions among experts.
That's why in addition to opportunities, investors should look for stocks with strong, impregnable balance sheets that will be able to navigate a more difficult economy if there is a deep recession next year. That said, here are three Robinhood stocks to buy right now.
1. Microsoft
If you're looking for a strong balance sheet, few companies can rival the multinational tech giant Microsoft (MSFT 0.37%), which had more than $107 billion of cash at the end of September and about $45.4 billion of debt.
Microsoft offers investors the opportunity to get in on an elite digital business that's also quite diverse, when you consider all of its different businesses. These include LinkedIn, Xbox, Office 365, Windows, and its cloud computing service, Azure.
Furthermore, Microsoft seems to be managing a tough macro backdrop quite well with a strong dollar creating headwinds for many international businesses. Management still expects the company to achieve double-digit growth in revenue and operating income for its full 2023 fiscal year. This growth stock is trading at just below 24 times forward earnings, so you can still get in on it at a pretty reasonable valuation, although I wouldn't necessarily call it cheap.
2. Bank of America
Since its struggles during the Great Recession more than a decade ago, CEO Brian Moynihan has done an excellent job of transforming Bank of America (BAC -0.13%) into the strong bank it is today, focusing on a responsible growth strategy.
Not only has the bank acquired $1 trillion of stable consumer deposits but it is also incredibly asset sensitive, meaning that more yields on its loans and securities will rise along with interest rates than the yields on its deposits.
That has made Bank of America a big beneficiary of the current environment. Revenue from its loans and bond holdings is starting to surge in the third quarter and is expected to continue to do so in the fourth quarter and into 2023.
Furthermore, credit quality has remained extremely clean at Bank of America, with no real signs of deterioration through the third quarter of the year. Management also told investors to expect the bank to ramp up share repurchases, which not every large bank is able to do right now. Bank of America's stock price is a little above pre-pandemic levels but the bank is experiencing the most rapidly rising interest rate environment since the Great Recession, which I believe will benefit its business on a net basis.
3. Berkshire Hathaway
The last Robinhood stock I would recommend is none other than Berkshire Hathaway (BRK.A -0.28%) (BRK.B -0.68%), one of the largest companies in the world that also happens to be run by legendary investor Warren Buffett.
Berkshire has crushed the market this year and is only down about 5% in 2022, versus the S&P 500 which is down more than 22% and in bear market territory. The conglomerate, which operates in a number of businesses including energy, mortgages, railroads, and insurance, has held up far better against high inflation and rising interest rates than most. Berkshire has also been active this year in its roughly $328 billion equities portfolio, deploying more than $57 billion of cash into equities through the first half of the year, particularly in the energy sector.
Berkshire has not only benefited from the higher interest rate environment due to all of the U.S. Treasury bills it owns, which have seen their yields rise, but the conglomerate also still has more than $100 billion of cash at the end of the second quarter, making it well prepared for any downturn in the economy.
