A chorus of warnings about an approaching recession has become louder, and David Rubenstein, a billionaire, has spoken out on the issue. Right now, Wall Street believes that one is all but inevitable.

The Carlyle Group co-founder believes that the current economic environment of “jacked up” interest rates will cause GDP growth to slow, bringing a recession into play.

Not only that, but he believes the Fed is unlikely to ease its hawkish monetary policy until the unemployment rate reaches about 6%, the point at which inflation is anticipated to cool.

Rubenstein knows a thing or two about the markets and stock selecting as a co-founder of a private equity firm with about $400 billion in assets under control and he certainly appears to be selective; at the moment, two equities account for 76% of his firm’s portfolio.

With the risk of a recession high on his list of possibilities, David Rubenstein clearly believes these are the stocks to invest in right now.

Rubenstein is not the only one who believes in both names; Wall Street analysts rate them as ‘Buys,’ according to the TipRanks database. Let us investigate more.

ZoomInfo Technologies Inc. (ZI)

The first of David Rubenstein’s picks that we’ll check is ZoomInfo, which accounts for the largest stake in his portfolio (39%), and is worth about $1.6 billion.

This B2B data and software firm collects information about businesses and professionals and uses artificial intelligence (AI) to help salespeople understand their industry and prospective clients.

Previously, sales teams relied on instincts and know-how to find and attract new clients.

ZoomInfo, on the other hand, assists them in making the most of data and technology in order to engage the right customers at the right time and this can help businesses get an advantage over their competitors.

ZoomInfo’s third-quarter financial report was strong. Revenue increased 45.5% year on year to $287.6 million, above Wall Street’s projection by $9.12 million.

Similarly, adj. EPS nearly doubled from $0.13 to $0.24 in the prior-year quarter, exceeding the $0.20 consensus expectation.

However, investors expected more from the outlook, and the business also stated that it expects dollar-based net retention to fall in 2022 due to lengthier sales cycles and a stressed sales staff.

As a result, the company’s outlook for the fourth quarter and 2023 is cautious.

Such speculation has contributed to the stock’s decline, with shares down 55% year to date.

Wells Fargo analyst Michael Turrin, on the other hand, sees a lot to like here. “ZI has a best-in-class operating model, with 30%+ growth and 40%+ uFCF margins,” he says.

While the company has retreated from its highest margin level in FY20 and is suffering ST headwinds to uFCF conversion/margins this year as a result of advantageous customer payment terms, it remains optimistic in re-expanding ST margins as a step function and progressively over time.

It also anticipates margins to expand quicker if macroeconomic factors lead growth to slow faster than expected. All of this suggests that ZI is still well positioned to sustain both strong top-line growth and best-in-class margins, which should continue to expand.

Turrin’s optimistic assessment does not end there.

He recommends ZI shares as Buy, with a $60 price target implying a 109% one-year upside potential.

Overall, Wall Street is enthusiastic about this name.

With the exception of one skeptic, all 18 analyst reviews are positive, resulting in a consensus rating of Strong Buy. Given the average objective of $47.56, the prediction calls for a 6-month gain of 66%.

Corporation QuidelOrtho (QDEL)

David Rubenstein‘s next major holding is QuidelOrtho, which ranks second in his portfolio (37%) and is worth just over $1 billion.

The company is a leading creator and manufacturer of diagnostic testing products, formed through Quidel’s acquisition of Ortho Clinical Diagnostics for $6 billion earlier this year.

These diagnostic services range from infectious disorders to women’s health to cardiometabolic and gastrointestinal diseases.

Quidel’s claim to fame is that its Covid-19 antigen test was the first to receive FDA Emergency Use Authorization (EUA).

Quidel released its third-quarter financial results in early November.

The top line was $783.8 million, a 54% rise over the same time last year.

However, net income decreased precipitously, resulting in an adj. EPS declined by 54% to $1.85. Nonetheless, both outcomes exceeded Wall Street estimates.

Recently, the stock had a brief sell-off following the company’s investor day, during which it reduced its three-year financial guidance for both top-line growth and adjusted EBITDA margins, disappointing investors.

Raymond James analyst Andrew Cooper, on the other hand, is upbeat about the negative revisions.

“We consider the modifications as a reasonable move to better match the outlook with expectations, as well as a movement from a guidance methodology that seemed to bias toward optimistic targets before the transaction closure to one that errs on the conservative side moving forward,” the analyst noted. “The tone and remarks from the remainder of the meeting were broadly constructive and supportive of our view, and the valuation remains appealing even if our year numbers fall slightly.“

“With new realistic, if not beatable, targets in place, not to mention what we believe will be a strong 4Q report and nothing at the analyst day implying a need to lower our 2023 forecasts,” Cooper continued.

This recommendation is supported by a $136 price target, implying that the stock will rise 66% over the next year.

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