3 Low-Risk Large Caps for a Risky Environment

In the world of stock investing sometimes boring is good.

With the Russia-Ukraine conflict in its second week, market volatility has found a second gear. This has left many investors making tactical adjustments to protect principal. A common tactic during times of turbulence is to dial back the risk whether by increasing cash, shifting to bonds, or rotating into more conservative equities.

Conservative, or low-risk, stocks are defined any number of ways from the simple beta metric (sensitivity to broader market movements) to the sector in which they reside. Any way you slice it, a low risk stock should provide some level of protection during market downturns.

Here we focus on beta in selecting three attractive low-risk stocks for the current geopolitical crisis. To use a sports analogy, they aren’t likely to light up the scoreboard on offense but should fare well in a defensive battle. 

Does Tyson Foods Stock Benefit From Inflation? 

Tyson Foods, Inc. (NYSE: TSN) has a beta of 0.78. This means that for every 1% the stock market goes down, it (theoretically) declines a more modest 0.78%. The chicken, beef, and pork producer is a good name to own in this environment because its products are in steady demand from grocery stores, restaurants, and food distributors. 

The new fiscal year is off to a good start at Tyson Foods. First quarter profits that more than doubled crushed the analyst consensus thanks to reopened restaurants and healthy at-home protein consumption trends. Like most commodity-linked businesses, higher prices also contributed to the stellar bottom line performance.

Shares of Tyson Foods have been living up to their defensive reputation, this year up 3% compared to the S&P 500’s 10% slump. Yet after touching $100 for the first time ever last month, some traders have flown the coop. Now back at the $90 level, the low volume pullback is nothing to balk at. 

As Tyson continues to invest in new products and e-commerce, a hearty consumer appetite for meats and a rebounding foodservice channel should support a run back to the triple digits. 

Is it Too Late to Buy Hershey’s Stock?

With a 0.39 beta, The Hershey Co. (NYSE: HSY) is up approximately 7% year-to-date and likely to remain a solid low risk investment. The 128-year old confectioner has been quietly going about its business selling Kit Kats, Reese’s Cups, Twizzlers, and other treats—and will continue to do so during this period of high geopolitical risk. 

Hershey has evolved into a more diversified business by branching out into the snack category. It is aiming to capture more of consumers’ increasing propensity to stock up on all things sweet and salty for the home and office. The recent $1.2 billion acquisition of Dot’s Pretzels, the country’s fastest-growing pretzel brand, is the latest addition to an expanding lineup of popular non-candy brands. 

A growing taste for at-home consumption drove a 10% increase in sales and 14% jump in profits last year. It is a trend that isn’t expected to go away with management forecasting 8% to 10% growth in 2022.

In addition to its low-risk nature, Hershey is a solid (and patriotic) choice in this environment because less than 10% of sales come from outside North America. A share repurchase program and 13 year dividend hike streak also provide peace of mind. Hershey’s shares are trading near an all-time high but this shouldn’t deter risk-averse investors from getting a sweet tooth. 

Is Public Storage a Low Risk Stock?

Public Storage (NYSE: PSA) has one of the lowest betas (0.24) among S&P 500 constituents. Not uncommon for a REIT to go against the grain, the self-storage facility operator has historically been a reliable cash flow generator through economic booms and busts alike. 

With 2,500-plus facilities located within U.S. borders, Public Storage is almost perfectly immune to overseas geopolitical risk. It does have a partial equity stake in 13 million square feet of rentable space in Europe, but this represents less than 1% of the size of its domestic footprint.

Although the self-storage industry has seen a wave of new facilities pop up in recent years, occupancy rates remain high. This shows that underlying demand is keeping pace with construction owing to trends in urban living and a better jobs market.

After more than doubling the return of the S&P last year, Public Storage is outperforming year-to-date down less than 2%. The stock has doubled off its pandemic low but should continue to benefit from favorable self-storage fundamentals and a sprawling presence in all major U.S. markets. Its most recent acquisition, All Storage, will add 56 properties mostly in the Dallas area which is experiencing above average growth. 

At the midpoint, management’s 2022 guidance implies a 17% increase in core funds from operations (FFO) per share, the REIT equivalent of earnings per share (EPS). This type of growth along with an $8.00 annual dividend makes Public Storage a good place to store some funds during the current market volatility.