If the title of this presentation piqued your interest, then you understand that there’s no such thing as risk-free investing. And that’s particularly true when you’re investing in stocks. The truth is sometimes the best thing that can happen is that your portfolio performs less badly than the market.
The goal of the risk-averse investor is not to avoid stocks, it’s to ensure that you retain the capital you gain, even if that means your portfolio does not grow as fast or as far as more aggressive stocks. You have to have a very low FOMO (fear of missing out) level.
With that in mind, there are still ways you can profit from this market without throwing caution to the wind. One is to look for stocks that have a low beta. Beta is a measure of a stock’s volatility in comparison to the rest of the market. A stock with a beta of 1, for example, means that investors can expect the price movement of the stock to be closely correlated to the market. A beta of more than 1 means the stock price will be more volatile (higher highs but lower lows).
What you’re looking for is a beta of less than 1. This means that the stock is less volatile than the broader market. While this may mean lower highs, it also generally means lower lows.
And many of these stocks are in defensive sectors. This means that their performance is consistent under both good and bad economic conditions.
Quick Links
- J.M. Smucker
- Campbell Soup
- Walmart
- Kroger
- Merck
- Duke Energy
- Verizon Communications
#1 - J.M. Smucker (NYSE:SJM)
J.M. Smucker (SJM) - Beta: 0.14 - Dividend Yield: 3.08%
In the good old days of February 2020, J.M. Smucker (NYSE:SJM) would have been considered a solid defensive stock. And there was nothing in the company’s first-quarter earnings report to dispute that. On February 26, 2020 the company reported earnings that exceeded analysts’ expectations. And although revenue was slightly down on a year-over-year basis, it was largely in-line with the analysts.
However, with the overlay of a global pandemic that is putting millions of Americans under extended shelter-in-place orders, the maker of consumer staples stands to benefit more than most. Although generic equivalents exist for many of the company’s products, consumers tend to be brand loyal, particularly when they are limiting their shopping trips and they know they may have to stock up on staples.
To that end, the company raised its guidance for the second quarter which includes March and April. And even as the economy begins to re-open, the reality for many Americans will still revolve around more eating at home. And that bodes well for investors in SJM stock. The company is also a rock-solid dividend play that has delivered over 18 consecutive years of dividend growth.
About J. M. Smucker
The J. M. Smucker Company manufactures and markets branded food and beverage products worldwide. It operates in three segments: U.S. Retail Pet Foods, U.S. Retail Coffee, and U.S. Retail Consumer Foods. The company offers mainstream roast, ground, single serve, and premium coffee; peanut butter and specialty spreads; fruit spreads, toppings, and syrups; jelly products; nut mix products; shortening and oils; frozen sandwiches and snacks; pet food and pet snacks; and foodservice hot beverage, foodservice portion control, and flour products, as well as dog and cat food, frozen handheld products, juices and beverages, and baking mixes and ingredients.
Read More - Current Price
- $112.04
- Consensus Rating
- Hold
- Ratings Breakdown
- 4 Buy Ratings, 7 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $127.09 (13.4% Upside)
#2 - Campbell Soup (NASDAQ:CPB)
Campbell Soup (CPB)- Beta: 0.14- Dividend Yield: 3.08%
We’re heading out of the traditional “soup season”, but Campbell Soup (NYSE:CPB) is still a good investment in the consumer staples sector. Initially, the stock popped as consumers stocked up on soup. But the company has a portfolio of brands that go well beyond soup. Goldfish brand crackers, Pepperidge farm cookies, and Swanson frozen meals are just a few examples.
And the company’s supply chain is largely located in the United States. This means that customers should be able to find the company’s products when they shop online or at the store.
I ask you to consider this. As the calendar turns to June, kids would be home from school anyway. If your household is anything like mine then you know that the demand for snack foods increases in proportion to the number of children in my house. So whether we’re all still staying home or not, there is a need for the company’s products.
Some will argue that Campbell’s Soup has been a market laggard, but for investors who have held the stock for over five years have a gain of over 10%. And they get a nice dividend for the down times.
About Campbell Soup
Campbell Soup Company, together with its subsidiaries, manufactures and markets food and beverage products in the United States and internationally. The company operates through Meals & Beverages and Snacks segments. The Meals & Beverages segment engages in the retail and foodservice businesses in the United States and Canada.
Read More - Current Price
- $43.81
- Consensus Rating
- Hold
- Ratings Breakdown
- 4 Buy Ratings, 6 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $51.58 (17.7% Upside)
#3 - Walmart (NYSE:WMT)
Walmart (WMT)- Beta: 0.27 - Dividend Yield: 1.75%
Would you be surprised if I told you that Walmart (NYSE:WMT) may be a better investment at the moment than Amazon (NASDAQ:AMZN)? Amazon is a strong, well-run company and its stock will probably be moving much higher. However, Amazon continues to invest most, if not all, of their earnings back into their business. The company’s current initiative is designed to help the company better protect workers, and ultimately customers, in response to the Covid-19 pandemic.
In the past, that would have received a thumbs up from shareholders. But for now at least, Amazon stock took a dip. Meanwhile, despite missing on both revenue and earnings per share (EPS) in its latest earnings report, Walmart stock is showing a slight gain in 2020. One of the reasons, of course, is that the company is regarded as an essential business. But Walmart has taken huge strides in embracing the omnichannel model that Amazon continues to perfect. With customers having multiple options for ordering and receiving the merchandise they purchase, the company is showing to be an even stronger defensive stock than they were before. And Walmart offers a consistent, secure dividend that the company has increased for the last 45 consecutive years.
About Walmart
Walmart Inc engages in the operation of retail, wholesale, other units, and eCommerce worldwide. The company operates through three segments: Walmart U.S., Walmart International, and Sam's Club. It operates supercenters, supermarkets, hypermarkets, warehouse clubs, cash and carry stores, and discount stores under Walmart and Walmart Neighborhood Market brands; membership-only warehouse clubs; ecommerce websites, such as walmart.com.mx, walmart.ca, flipkart.com, PhonePe and other sites; and mobile commerce applications.
Read More - Current Price
- $87.18
- Consensus Rating
- Buy
- Ratings Breakdown
- 29 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $91.51 (5.0% Upside)
#4 - Kroger (NYSE:KR)
Kroger (KR)-Beta: 0.36- Dividend Yield: 2.03%
Kroger (NYSE:KR) has recently become a Warren Buffett stock. Berkshire Hathaway (BRK:B) purchased nearly 19 million shares of the grocery chain. Berkshire’s stake at the time was $549 million which means that Buffett owns more than 2.4% of the company’s outstanding shares.
I could leave this argument with just saying that Berkshire does not typically invest in companies that he doesn’t believe in. But there are more reasons to like Kroger as a conservative investment. The company last reported earnings on March 5, 2020. The report was great. And one thing to note was, at the time, the company did not adjust its guidance in the wake of the coronavirus. This was before much of the nation was asked and/or mandated to stay at home.
Kroger is making successful inroads in the digital grocery movement. An interesting initiative that Kroger is examining is a partnership with Microsoft (NASDAQ:MSFT) to experiment with digital store displays. They are also partnering with Walgreens Boots Alliance (NYSE:WBA) to have stores within each other’s stores. The company is also looking into autonomous delivery vehicles in Houston.
Kroger has a solid dividend history and has increased its dividend for the last 11 consecutive years.
About Kroger
The Kroger Co operates as a food and drug retailer in the United States. The company operates combination food and drug stores, multi-department stores, marketplace stores, and price impact warehouses. Its combination food and drug stores offer natural food and organic sections, pharmacies, general merchandise, pet centers, fresh seafood, and organic produce; and multi-department stores provide apparel, home fashion and furnishings, outdoor living, electronics, automotive products, and toys.
Read More - Current Price
- $57.61
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 8 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $60.09 (4.3% Upside)
#5 - Merck (NYSE:MRK)
Merck (MRK)-Beta: 0.55-Dividend Yield: 3.02%
Biopharmaceutical companies are among the most volatile stocks in the broader healthcare sector. While Merck (NYSE:MRK) may not be on the front line of the race to a treatment for the novel coronavirus, they are lending their support in important ways.
A number of companies that is too long to list are working on treatments for the novel coronavirus. One of the risks that are involved with investing in these stocks is that they are frequently traded on the news. That’s why a stock like Gilead Sciences (NASDAQ:GILD) soared upwards on hopeful news of their drug remdesivir and its effectiveness in potentially shortening the recovery time of infected patients.
However, what goes up can come down. And investors with a queasy stomach need not invest in GILD stock as the price has moved up and down with every piece of news good or bad.
Which brings us back to Merck and its signature cancer drug, Keytruda. On April 28, the company received accelerated approval to launch a new treatment schedule for Keytruda. This drug generated $11.1 billion in sales for the company last year. That’s over 50% more than its nearest competitor.
While all the focus is on the novel coronavirus, diseases like cancer are not going away. And that means that for investors looking for stocks with long-term stability, Merck is a solid choice.
About Merck & Co., Inc.
Merck & Co, Inc operates as a healthcare company worldwide. It operates through two segments, Pharmaceutical and Animal Health. The Pharmaceutical segment offers human health pharmaceutical products in the areas of oncology, hospital acute care, immunology, neuroscience, virology, cardiovascular, and diabetes under the Keytruda, Bridion, Adempas, Lagevrio, Belsomra, Simponi, and Januvia brands, as well as vaccine products consisting of preventive pediatric, adolescent, and adult vaccines under the Gardasil/Gardasil 9, ProQuad, M-M-R II, Varivax, RotaTeq, Live Oral, Vaxneuvance, Pneumovax 23, and Vaqta names.
Read More - Current Price
- $97.43
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 12 Buy Ratings, 6 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $130.86 (34.3% Upside)
#6 - Duke Energy (NYSE:DUK)
Duke Energy (DUK) - Beta: 0.33 - Dividend Yield: 4.36%
For those investors unfamiliar with Duke Energy (NYSE:DUK), don’t let the name confuse you. DUK is a utility company. And utility stocks are among the most solid performers in any economic condition. They really are the definition of a defensive stock. Investors won’t get meteoric capital growth, but they are protected against the downside risk because of prices that are regulated.
Still, utility companies aren’t without risk. Size matters. And Duke is one of the largest companies with approximately 7.7 million retail electric customers that stretch across six states. To complement that, the company also distributes natural gas to over 1.6 million customers across several states. The regions that the company operates in are defined by solid demographics which means that the population remains fairly stable.
And Simply Safe Dividends consistently ranks Duke Energy as one of the best recession-proof stocks. It has delivered a dividend for over 90 years. And for the last 13 years, it has increased its dividend. The company reports earnings on May 12, 2020. Investors should pay attention to the company’s forward guidance. Although utility usage should be going up as more people are staying home, you would expect the company to have a solid year.
About Duke Energy
Duke Energy Corporation, together with its subsidiaries, operates as an energy company in the United States. It operates through two segments: Electric Utilities and Infrastructure (EU&I), and Gas Utilities and Infrastructure (GU&I). The EU&I segment generates, transmits, distributes, and sells electricity in the Carolinas, Florida, and the Midwest.
Read More - Current Price
- $113.78
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 7 Buy Ratings, 6 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $121.85 (7.1% Upside)
#7 - Verizon Communications (NYSE:VZ)
Verizon Communications (VZ)- Beta: 0.46- Dividend Yield: 4.23%
Like many wireless phone providers, Verizon (NYSE:VZ) is still awaiting the rollout of 5G technology. It will certainly provide a lift to wireless phone sales as customers look to upgrade to the latest and best. However for now, the company is experiencing soft sales as retail stores are closed. It’s fair to be concerned about Verizon only being a “pure-play” for wireless. The company does not really compete it the digital, streaming world.
But while streaming is all the rage, there may be some “streaming fatigue” that sets in once the stay at home orders are lifted. That’s why you have to look beyond the pandemic to understand why Verizon is a good investment.
All things being equal, retail stores should be able to open fairly quickly with appropriate social distance and safety protocols. But even if the store openings take longer than expected, the company has rock solid free cash flow and should easily be able to weather the current storm. And while the stock is down for the year, the stock has paid a dividend for 30 consecutive years and has increased its dividend payment each of the last 15 years.
About Verizon Communications
Verizon Communications Inc, through its subsidiaries, engages in the provision of communications, technology, information, and entertainment products and services to consumers, businesses, and governmental entities worldwide. It operates in two segments, Verizon Consumer Group (Consumer) and Verizon Business Group (Business).
Read More - Current Price
- $42.22
- Consensus Rating
- Hold
- Ratings Breakdown
- 8 Buy Ratings, 9 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $46.37 (9.8% Upside)
Even with a market that is proving to be amazingly resilient, the day-to-day movement of the market is enough to spook even aggressive investors. If you’re an investor who has a low-risk tolerance but want to stay in the market, it’s important to look at stocks that prove how slow and steady wins the race.
The novel coronavirus has created a situation unlike anything investors have seen in their lifetime. Not just businesses, but entire industries, have been shut down as our world responds to a global pandemic. Investors hate uncertainty, but the market is shrouded in uncertainty.
Many companies are refraining from releasing forward guidance for precisely that reason. Apple (NASDAQ:AAPL) CEO, Tim Allen, described trying to predict the rest of the year as driving without being able to see out your windshield.
The stocks that are presented in this presentation all have a beta value of less than 1. That means they tend to be less volatile than the broader market. And while that may not be the most exciting way to enjoy the market during a bull run, it will help you sleep better in more turbulent times.
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