Today’s episode of Full Court Finance at Zacks digs into the stock market as the bulls and bears tussle for near-term control of the market as we close out August. Of course, the downbeat month and the recent stretch of volatility are not pleasant in the moment. But pullbacks are healthy and vital parts of the stock market and one was desperately needed after the huge rally.

The market swung between solid gains and losses through early afternoon trading on Friday as Wall Street attempted to make sense of Jay Powell’s Jackson Hole speech and its impact on near-term price action. Stocks then surged higher once again near the end of the session.

The Fed chair continued to stay the course, saying the central bank is “prepared to raise rates further if appropriate,” while aiming to “proceed carefully.” Various headlines pointed to different snippets. The Fed boss also said that inflation was still “too high” and that they intend to “hold policy at a restrictive level” until prices cool even more.

Powell was never going to declare victory with core inflation still solidly above the Fed’s floating target range. And investors should be pleased the Fed isn’t growing complacent since slightly higher rates for longer is a far better scenario than rebounding inflation.

Taking a giant step back, August has been a historically bad month for the stock market over the last 30 or so years. More importantly, the downturn this time around was also very much needed to help cool things off after the huge rally. Plus, S&P 500 earnings are projected to grow by double digits in both 2024 and 2025.

The foundation that drove the market comeback is still in place. Investors with long-term horizons who can block out the near-term noise might want to consider buying proven large cap stocks and holding them for the long haul. The three stocks we explore today are Caterpillar (CAT), Walmart (WMT), and Visa (V).

Caterpillar (CAT) and its iconic yellow machines are the titans of the construction and mining sector, and business is booming. Caterpillar is benefitting from the ongoing surge in construction spending in the U.S. and it is set to benefit over the next decade-plus from the U.S. government-backed push for infrastructure spending, reshoring, and beyond.

CAT topped our Q2 estimates in early August and boosted its guidance, with it projected to post massive top and bottom-line growth this year. Caterpillar’s positive EPS revisions help it land a Zacks Rank #1 (Strong Buy) right now. Meanwhile, CAT’s dividend tops its highly-ranked industry’s average.

Caterpillar stock has more than doubled the S&P 500 over the last 25 years, with it also up 230% in the past 10 years vs. the benchmark’s 170%. CAT stock has surged 40% in the last year.

The stock is trading around 7% below its recent highs and still above its 50-day moving average. Plus, Caterpillar’s valuation is appealing at the moment, trading 60% below its 10-year highs, nearly 20% below its median, and 15% beneath the Zacks Industrial sector at 13.4X forward 12-month earnings.

Walmart (WMT) topped our quarterly estimates and boosted its guidance once again on August 17 as shoppers of all income levels continue to hunt for the best prices. WMT’s upbeat EPS outlook helps it land a Zacks Rank #2 (Buy) right now. Zacks estimates call for its overall revenue to climb 5% this year and 4% higher next year to help lift its adjusted earnings by 2% and 9%, respectively.

Walmart offers every form of delivery and pick-up possible and its subscription service is helping it better compete against Amazon (AMZN). The company is also actively expanding its digital advertising segment, pushing forward its automation frontiers, and more to help it thrive in the coming decades.

WMT stock has climbed 65% over the last five years vs. the S&P 500’s 53%, and Amazon’s 36%. Walmart hit new highs earlier this month, with it now trading about 13% below its average Zacks price target, as it floats around its 50-day moving average. And it trades at a 14% discount to its own 10-year highs at 23.2X forward 12-month earnings.

Visa Inc. (V) is a credit card powerhouse that remains influential in the U.S. and around the world despite all of the ‘disruptions’ from fintech. Visa operates an extensive and powerful payment and processing network and it takes a piece of the endless number of credit card payments in a world that is growing more cashless every day. Visa’s constant and never-ending role in the economy shows up in its consistent and impressive revenue expansion.

Visa beat our earnings and revenue estimates in late July as it has every quarter for the last five years. Visa’s EPS outlook has improved slightly since then, though it sits at a Zacks Rank #3 (Hold) at the moment. Zacks estimates call for Visa to expand its bottom line by 15% this year and another 13% higher next year on the back of 11% and 10% higher revenue.

Visa shares have climbed 450% in the last 10 years to blow away the Zacks Tech sector’s 240%. Visa stock has stalled out a bit over the last three years, with it currently neck and neck with Tech, up around 16%.

Visa is trading around 10% below its average Zacks price target. And Visa trades 35% under its peaks and slightly below its decade-long median at 24.8X 12-month forward earnings.
Amazon.com, Inc. (AMZN): Free Stock Analysis Report

Visa Inc. (V): Free Stock Analysis Report

Caterpillar Inc. (CAT): Free Stock Analysis Report

Walmart Inc. (WMT): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

This article originally appeared on Zacks