All signs seem to be pointing to a recession for the U.S. economy sometime this year as the Federal Reserve is intent on containing inflation by raising interest rates. They're going to go higher and last longer than previously thought.
But that's no reason to stick your money in a mattress or a low-yield savings or money market account. Sharp stock price corrections are the perfect time to buy quality companies to hold for the long-term. Besides, recessions have historically been measured in months while the bull markets that inevitably follow typically go on for years.
Yet buying quality is important, though that's true whether there is a recession or not, and the following pair of solid stocks ought to be no-brainers, particularly if you don't have a lot of money to invest. Investing just $200 in these two companies can generate substantial rewards down the road for patient investors.
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Raytheon Technologies
Giant defense contractor Raytheon Technologies (RTX -0.33%) should be a top-of-list stock for investor consideration. While there is always room to debate how big military budgets should be, most of the time it is simply just "bigger." Defense Dept. budgets are rarely cut, just the rate of growth is reduced.
And in today's world, there doesn't seem to be any will to reduce its size. Congress just voted to keep U.S. troops in Syria and since Russia invaded Ukraine a year ago, we have sent more than $75 billion in military aid to help the country's defense.
Raytheon has been one of the big beneficiaries of that support as it is one of the primary manufacturers of the various missile systems that have been shipped overseas, while these weapon systems are also key for U.S. defense capabilities. With supplies nearly depleted, they will have to be restored.
Beyond missiles, Raytheon provides command and control systems for various military branches; serves as the primary contractor for sensor, electronic, and combat systems for the new Zumwalt-class Navy destroyer warships; and makes the engines for the F-35 fighter jets through its Pratt & Whitney division. It (along with peer Lockheed-Martin (LMT -0.36%)) just won a $619 million contract to supply missiles and F-16 fighter jets to Taiwan, and it also won a $250 million contract for a missile-tracking satellite constellation while supporting launch and ground operations by the Space Development Agency.
There's big money to be made in the art of defense, and Raytheon is the second biggest player behind Lockheed. It also rewards its shareholders by having paid a dividend to investors every year since 1936 (through its merger with United Technologies) while raising the payout for 25 consecutive years. There is plenty of business to go around and Raytheon Technologies will be a beneficiary of that spending.
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Chevron
Energy behemoth Chevron (CVX -0.06%) is one of Warren Buffett's top three holdings in Berkshire Hathaway (BRK.A -0.53%) (BRK.B -0.63%) and it should be a top choice for your portfolio, too.
Second only to Exxon Mobil (XOM -0.02%) in market valuation, Chevron remains one of the best-run integrated energy companies in the world with vast operations in oil and gas exploration, production, and refining, as well as the marketing and distribution of fuel products.
The vast majority of its earnings come from upstream operations and the majority of that is from international markets (about 52% of total earnings is from foreign assets). The war in Ukraine, subsequent sanctions against Russia, and Russia's shutting off the flow of gas to Europe in response, has sent energy prices soaring.
While Brent crude oil prices are down from the highs of around $123 a barrel they hit last summer (prices are currently around $83 a barrel), it remains well-above what Chevron considers its break-even price for covering its capital expenditures and dividend, or $50 a barrel. That means the oil and gas giant has plenty of room to finance its operations, which it recently announced will include increased production, particularly in the U.S. from its shale basins, as well as for its dividend and stock buyback program.
Capex is growing about 3% annually, but Chevron says it is primarily focused on improving returns even more while growing its cash flows. It just increased its dividend again (it hasn't cut it since the Great Depression) and after buying back $15 billion worth of stock, the board of directors just authorized a new $75 billion share repurchase program.
There remains outsized global demand for fossil fuels that will not be displaced by renewable energy anytime soon. As one of the biggest and best companies in the business, Chevron should be a no-brainer buy for your portfolio today.
