Inflation, rising interest rates, and other macroeconomic headwinds have prompted many investors to stash more of their cash in fixed-income plays like CDs and U.S. Treasury bonds rather than stocks over the past year. That's a prudent strategy, but investors could miss out on some big long-term gains by blindly shunning all stocks.
Instead of ignoring stocks completely until a new bull market starts, investors should take this opportunity to accumulate shares of well-run companies that are trading at attractive valuations. These three resilient stocks fit that description: Chewy (CHWY +4.87%), Williams-Sonoma (WSM +1.68%), and Accenture (ACN 1.31%).
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1. Chewy
Chewy is an online retailer of food, medications, and a wide array of other products for pets. It was acquired by PetSmart in 2017 and spun off in an IPO in 2019. It was serving 20.4 million active customers at the end of its fiscal 2022 (which ended in January 2023), and about 60% of those customers joined within the past three years -- so its management team clearly didn't lose much sleep over Amazon's (AMZN 0.91%) entry into the private-label pet products market in 2018.
NYSE: CHWY
Key Data Points
Chewy's revenue rose 14% in fiscal 2022, which represented a slowdown from its 24% growth in fiscal 2021. But it also turned profitable for the first time on a generally accepted accounting principles (GAAP) basis in fiscal 2022, and its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) surged by 289%.
Management attributed those rising profits to Chewy's persistent pricing power in its niche, supply chain improvements, and its robust sales of higher-margin products. Looking ahead, it expects its new pet insurance business, private-label brands, integrated ads, and upcoming international expansion to drive its long-term sales growth and boost its gross margins. Analysts expect Chewy's revenue and adjusted EBITDA to rise by 11% and 3%, respectively, in fiscal 2023 as it ramps up its investments in those ecosystem-expanding strategies.
If you expect Chewy to keep dominating the online pet retail space and remain resistant to the macro headwinds, then it's a no-brainer buy right now, trading at 1.3 times this year's expected sales.
2. Williams-Sonoma
Williams-Sonoma owns several home furnishing retail chains: its eponymous banner, Pottery Barn, Pottery Barn Kids and Teen, and West Elm. All of them generated double-digit percentage comparable sales growth throughout fiscal 2020 and fiscal 2021 (which ended in January 2022), even as many of its peers struggled with store closures throughout the pandemic.
NYSE: WSM
Key Data Points
Williams-Sonoma thrived during that period for four simple reasons: Most of its sales already came from its online marketplace instead of its brick-and-mortar stores; it differentiated itself from its competitors with exclusive in-house products; it aggressively expanded West Elm to court millennial shoppers; and it limited its promotions to protect its pricing power.
Those consistent strategies prevented Williams-Sonoma from suffering the same fate as Bed Bath & Beyond and other struggling home furnishings retailers. Analysts expect its revenue and earnings will decline by 3% and 17%, respectively, this year as it grapples with a slowdown in the residential real estate market, supply chain disruptions, and inflationary headwinds.
However, Williams-Sonoma should easily survive this cyclical downturn -- and its stock looks dirt-cheap at 9 times forward earnings. That low valuation, along with its attractive dividend yield of 3.1%, make it an easy stock to buy and hold as the bear market drags on.
3. Accenture
Accenture is one of the world's largest providers of IT services. It serves companies in a wide range of industries, and operates in more than 200 cities across 49 countries.
NYSE: ACN
Key Data Points
Accenture's business isn't immune to macro and currency-related headwinds, but it's arguably one of the best plays on the trend of digital transformations in large businesses -- which will continue to hire the tech giant to handle their cloud upgrades, install new analytics software, secure their networks, and streamline their digital workflows. During Accenture's latest earnings conference call, CEO Julie Sweet said the recent macroeconomic challenges merely highlighted the need for businesses to execute "compressed transformations to achieve lower cost, stronger growth, more agility, and greater resilience faster."
Some of Accenture's clients -- particularly in the communications, media, and tech sectors -- temporarily reined in their IT spending over the past year. However, those lost revenues were largely offset by stable spending on its IT services across the financial, health, public service, and utilities sectors.
Analysts expect Accenture's revenue and earnings to rise by 5% and 8%, respectively, this year. Its stock still looks reasonably valued at 25 times forward earnings, and it pays a decent yield of 1.6%. Accenture might not attract as much attention as other blue chip tech stocks, but it's still a great buy for long-term investors.
