3 Stocks to Buy for Growth and Downside Protection

Stocks to buy

Most stocks present investors with two choices: growth or downside protection. A company like Nvidia (NASDAQ:NVDA) can generate sizable returns if it continues to grow. However, a slowdown in AI spending or unsavory macroeconomic conditions can result in a sharp correction. 

Verizon (NYSE:V) investors don’t have to worry about a sharp and sudden decline. The telecom giant isn’t going anywhere and has a 15 P/E ratio. The 6.61% yield is a big draw for Verizon, but the stock hasn’t been a good performer. Shares are down by 30% over the past five years. The dividend offsets some of those losses before taxes.

Some investors don’t want the high-risk, high-reward stocks like Nvidia. Others don’t want to deal with “safe” companies like Verizon that drastically trail the S&P 500. Luckily, there is a middle ground. These three stocks still stand to grow and present decent safety margins for investors.

Alphabet (GOOG, GOOGL)

Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) is the top advertising choice for many businesses. Google, YouTube and the company’s other ad channels generated $61.7 billion of the company’s $80.5 billion in Q1 2024 revenue. Overall revenue increased by 15% year-over-year, while Google Cloud delivered an exceptional 28.4% year-over-year growth rate. 

While ad revenue will decrease during slower economies, Alphabet is more insulated since it’s the top choice. Furthermore, the stock only trades at a 28 P/E ratio. That reasonable valuation doesn’t give the stock as much room to fall as other tech giants. 

The stock also has plenty of growth. Shares are up 29% year-to-date and have more than tripled over the past five years. Alphabet recently announced a quarterly dividend of $0.20 per share, which should bring more attention to the stock. The company’s efforts to trim costs helped to make the dividend possible. Alphabet displayed its cost-cutting efforts with 57% year-over-year net income growth.

American Express (AXP)

Source: Shutterstock

American Express (NYSE:AXP) trades at a 19 P/E ratio and offers investors a 1.22% yield. While a 1.22% yield is decent, the company has an exceptional dividend growth rate. American Express hiked its dividend by 17% this year and has maintained a double-digit growth rate for several years. Shares are up by 22% year-to-date and have gained 85% over the past five years.

People will use their credit and debit cards in any economy. These cards are more convenient, have security and offer rewards. Many would prefer receiving some cash or points back on every purchase than not receiving those perks. American Express also does well in booming economies. The firm reported 11% year-over-year revenue growth in the first quarter, and net income surged by 34% year-over-year. 

American Express is winning younger generations, setting the stage for long-term growth. More than 60% of new account openings came from Millennials and Gen Z consumers.

Texas Roadhouse (TXRH)

Source: Jonathan Weiss / Shutterstock.com

People always need to eat, but not everyone wants to cook their food. Some people don’t want to learn about home cooking, while others don’t have the time. Restaurants, especially fast-food restaurants, make it more convenient for people who want to eat without cooking. However, some restaurant stocks have become expensive and look vulnerable to pullbacks. Texas Roadhouse (NASDAQ:TXRH) is a notable exception.

The stock trades at a 34.5 P/E ratio and offers a 1.43% yield with a solid growth rate. Shares are up by 43% year-to-date and have more than tripled over the past five years. The steakhouse chain continues to deliver revenue and profit margin growth. Revenue increased by 12.5% year-over-year in the first quarter, while net income jumped by 31.0% year-over-year. Texas Roadhouse’s profit margins came in at 8.6% for the quarter.

22 Wall Street analysts rated Texas Roadhouse a moderate buy. None of them rated the company a Sell.

On this date of publication, Marc Guberti held long positions in GOOG and TXRH. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Marc Guberti is a finance freelance writer at InvestorPlace.com who hosts the Breakthrough Success Podcast. He has contributed to several publications, including the U.S. News & World Report, Benzinga, and Joy Wallet.

Articles You May Like

Top 3 Digital Advertising Stocks for Your July Buy List
3 Cruise Stocks to Buy on the Dip: July 2024
3 Travel Stocks to Buy Now: Q3 Edition
Intel Stock Analysis: AI Surge and Political Winds Fuel Bullish Outlook
Nvidia Stock Strategy: Don’t Buy the Dip, Wait for the Trough