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Best stocks to buy now during one of the worst earnings seasons

Many analysts think July has marked the worst earnings season since the 2008–09 global financial crisis.Finding best stocks to buy now might seem like a tough task.

Stock indexes around the world have rallied since the end of March. At the same time, corporate earnings declined in the first quarter of 2020. Many experts argue that the second quarter was even worse for the companies’ profits. And there are plenty of macroeconomic and political risks to boot. In fact, some of my Foolish colleagues and I think that there will even be another stock market crash pretty soon.

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But that doesn’t mean investors should panic. You might even want to think of another market crash and the earnings season as opportunities to buy more shares. Choosing ‘good’ companies can really help you achieve your financial goals. 

Here are some of my favourite stocks to buy now. 

Best retail stocks to buy

The best retail stock to buy now must be Tesco (LSE:TSCO). It is the industry’s clear leader. On 26 June, it reported a wonderful sales rise, which totalled about 8% for the group. This was mainly due to an increase in online shopping. Tesco’s customers bought plenty of groceries and other essentials. Unfortunately, they also cut spending on non-essentials such as clothing items. 

The results clearly show Tesco’s ability to adapt to challenging situations and rising competition from online supermarkets. At the same time, the sales boost comes at significant costs. That’s simply because Tesco had to employ some temporary staff to meet the high demand and implement social distancing measures.

But management expects Tesco to report roughly the same profit as it did in 2019. This means the growth rate will not be brilliant this year. But remember that Tesco will be one of the few companies to actually avoid a significant profit drop in 2020.

It all comes at a dividend yield of about 4%. Finally, don’t forget that Tesco is a stable business. In fact, some traders say: “No-one ever went bust buying Tesco“. The publishing of good results didn’t lead to any share price boost. In fact, Tesco’s stock is near its 52-week lows.  

BAE Systems during this earnings season

The best or safest stocks to buy, in my opinion, are issued by defence companies. Why is that? Well, governments tend to be these companies’ main customers and rarely go bankrupt. And the demand for defence equipment doesn’t tend to be very cyclical. That is, it doesn’t depend on economic growth. So, even now BAE Systems (LSE:BA) has many things to do.

The company will announce its earnings results on 30 July. Of course, no one expects a significant profit rise and some people think the company might not pay a dividend this year. But the share price fully reflects this.

Some time ago, BAE announced acquisitions of two companies – the Collins Aerospace Military Global Positioning System and Raytheon’s Airborne Tactical Radios businesses. This came at some leverage but Moody’s expects the company to reduce its debt level in 12 to 18 months time. So, it looks like the worst is almost behind for BAE.

My stock picks are defensive. They will let you build a recession-proof portfolio but don’t just limit yourself to these two. FTSE 100 offers many other great companies that will help you survive the 2020 recession.

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Anna Sokolidou has no position in any of the companies mentioned in this article. The Motley Fool UK has recommended Tesco. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.