Based on the strong print of the major indices since late last month, the idea of deliberately targeting reliable stocks for a volatile market might seem overkill. In the past 30 days, the benchmark S&P 500 gained almost 6%. Since the start of the year, the index moved up 18%.
On the surface, that might seem like a no-lose proposition. After all, if you buy the snooze-inducing SPDR S&P 500 ETF Trust (NYSEARCA:SPY), you’re beating the inflation rate and adding a decent return on top of that. Under this context, it’s easy to see why some would consider safe stocks to be an overly pensive strategy.
However, it’s important to point out that while we see some key improvements, inflation remains stubbornly high. As well, excessive borrowing costs have hurt spending for high-ticket items, likely contributing to an erosion of demand for electric vehicles, to mention just one example.
With the real possibility of red ink in 2024, investors shouldn’t outright dismiss these reliable stocks for a volatile market.
Procter & Gamble (PG)
As a popular manufacturer of household goods, you can’t get that much better of an idea for reliable stocks for a volatile market than Procter & Gamble (NYSE:PG). To use an extreme example, the company’s products saw intense demand during the initial disruption of the Covid-19 pandemic. Of course, I don’t anticipate a repeat performance anytime soon.
However, it goes to show you that household goods manufacturers have their place when the smelly stuff hits the fan; in this case, quite literally. For those interested in the data, in the company’s fiscal year ended June 2009, it posted revenue of $76.7 billion. That was a 6.2% loss from the prior year. However, the company quickly marched higher, making it a top choice for safe stocks to buy.
To be sure, P&G is not an exciting enterprise and that’s by design. It exists to provide a stable, predictable business. In addition, it will offer a decent (but not great) forward yield of 2.49%. If we do face troubles, this is a name you’ll want in your portfolio.
Speaking of boring enterprises, Costco (NASDAQ:COST) is incredibly relevant. However, it pays for this relevance through a business narrative that eschews heart-pounding antics for predictability. Still, that could be a wonderful attribute if we face economic uncertainty. Indeed, since the start of the year, COST gained over 27% of equity value. You got to admit, that’s quite impressive for what it is.
Fundamentally, Costco makes a strong case for reliable stocks for a volatile market because of its core consumer base. Listen, we’re all special in our own unique way. But Costco members are more special than shoppers of competing big-box retailers. Featuring a younger, wealthier and more upwardly mobile base than the competition, COST could be relatively insulated.
To be sure, the retailer took a beating in its fiscal 2009, posting revenue of only $71.42 billion. However, in the following year, it stormed to $4.95 billion. Then a year later, it’s up to $88.92 billion. Put another way, COST is one of the safe stocks to buy.
With fast-food icon McDonald’s (NYSE:MCD), investors may absorb an opportunity cost acquiring shares of the Golden Arches during bullish cycles. Yes, MCD is one of the reliable stocks to buy, no doubt about it. However, during decisive upswings, your money can go much further with spicier enterprises. However, if you anticipate storm clouds brewing, then Mickey D’s could be quite appropriate.
Fundamentally, I appreciate the cheap pick-me-up argument that the Golden Arches offers. With consumer phenomena such as revenge travel showing signs of fatigue, everyday folks just might not be in the mood to spend their hard-earned discretionary dollars. After all, with major layoffs planned or announced, those dollars could eventually become unearned, as in not real.
In that case, you want to go as cheap as possible with your discretionary funds. McDonald’s can help in that regard. Also, the fast-food giant didn’t really suffer tumultuously during the Great Recession. In 2009, it posted revenue of $22.75 billion, down only 3.3%. It quickly recovered after that and I expect more of the same.
A multinational confectionary company, Mondelez (NASDAQ:MDLZ) also specializes in food, beverages and snacks. As a powerhouse in the grocery aisles, Mondelez should theoretically benefit handsomely from the trade-down effect. That is, consumers facing financial pressure might not immediately go cold turkey on their spending. Rather, they’ll trade down until they find an acceptable balance between price and quality.
Now, as humans, we all love a little indulgence – dopamine and all that jazz. During decisively bullish cycles, consumers may go out to boutique eateries to satisfy their cravings. Well, when the economic fecal matter hits the proverbial fan, guess what? You’re eating Oreos – which of course happens to be a Mondelez brand. So yeah, I do think it’s one of the reliable stocks for a volatile market.
To be blunt, Mondelez didn’t quite perform that well during the immediate aftermath of the Great Recession. However, it seems the trade-down effect is in full swing currently. For example, in the third quarter of this year, the company posted $9.03 billion in sales, up 16.3% against the year-ago period.
Southern Company (SO)
A gas and electric utility holding company, Southern Company (NYSE:SO) benefits from a core catalyst: advantaging a natural monopoly. As you know, not just anyone can become a public utility. Setting aside the matter of entrenched competition, prospective utilities must comply with various rules and regulations. Nothing legally prevents competition from materializing; it’s just that it’s too difficult to stack up against a Southern Company and its ilk.
Along with that natural monopoly is the captive audience concept. No matter what happens with the economy, both households and businesses must pay their utility bills. Otherwise, in this modern paradigm, you’d be up a smelly creek without a paddle. It’s not a great place to be which is why entities do everything they can to pay their obligations. Cynically, that’s a key reason why SO represents one of the reliable stocks.
For full disclosure, Southern did take a hit during the Great Recession. In 2009, its revenue slipped to $15.74 billion, down 8% on the prior year. However, in the next year, the company bounced right back up so it could be one of the safe stocks.
While the technology space has been on fire (in a good way), you can leave it to IBM (NYSE:IBM) to turn a riveting subject into a snoozefest. That’s not to disparage the myriad relevant businesses under the “Big Blue” umbrella. However, since the beginning of the year, IBM stock gained a mere 8%. That’s just not cutting it against the competition.
However, with so many companies trading at wildly intense multiples, IBM deserves a closer look for patient investors. For example, Nvidia (NASDAQ:NVDA) shares trade at a trailing-year earnings multiple of over 119x. In sharp contrast, IBM’s price-earnings (PE) ratio sits at 20.3X. Also, Big Blue’s forward PE is a mere 15.3x, lower than nearly 69% of its peers.
While Nvidia captured headlines for its undergirding of artificial intelligence protocols, let’s not forget that IBM helped pioneer research into this field. Ahead of possible grumblings in the market, IBM just might make more sense. Additionally, the company offers a forward dividend yield of 4.34%, well above the tech sector’s average yield of 1.37%.
Bristol Myers Squibb (BMY)
I’m going to take a huge risk with so-called reliable stocks with Bristol Myers Squibb (NYSE:BMY). Under a basic framework, BMY should indeed be in the running for safe stocks for a volatile market. As a pharmaceutical giant, its narrative enjoys insulation, all other things being equal. Good economy or not, people get diagnosed with all kinds of conditions and diseases. BMY is on the forefront of positive change.
Unfortunately, shares stumbled nearly 30% since the January opener. Circumstances continue to get worse, with the pharma posting key product sales that fell short of expectations in Q3. Per MarketWatch, among these disappointments was cancer drug Opdivo. While the end result was lackluster, a possibility exists of a bounce back.
As you might expect, the options market hasn’t been pretty for those long BMY. In particular, Fintel’s screener for options flow – which exclusively targets big block trades likely made by institutions – shows significant volume for sold calls.
However, because option sellers don’t have the right to force an exercise of the trade (that right belongs to option buyers), an open lability exists. Eventually, we could see a gamma squeeze, which would make things very interesting.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.