3 low-risk stocks to buy now
The country is in a recession, unemployment is at its highest level since the Great Depression, and it is an election year with a lot of political uncertainty. I don’t need to read you the headlines – you live it every day. The stock market, in turn, has been very volatile.
While many investors have benefited from the fall in prices, many are also looking to anchor their portfolios with stable, low-risk stocks. It’s a smart strategy to have a mix of growth and value stocks, both aggressive and conservative. Here are three great, low-risk stocks you can count on to get you through the ups and downs.
Mccormick (NYSE: MKC) makes some spices and flavors that you probably have in your kitchen right now. This stock has been the model for consistency across all types of market. The company hasn’t posted a negative annual return since 2008, which means it has seen its stock price rise every year for the past 12 years. Few companies can say that. Even this year, with the S&P 500 down about 4% and the food industry down about 6%, McCormick continues to advance, up about 6%. On June 25, the company reported stronger results for the second quarter of its fiscal 2020, posting an 8% increase in revenue year-over-year and a 27% gain in profits. . The increases were due in part to people staying at home and cooking more.
But the point is, McCormick performs well in all markets, as his profit margins have consistently been around 40% over the past decade. Another sign of its regularity is its dividend, which has increased by 33 consecutive years to make it a Dividend Aristocrat. McCormick has a low beta of 0.36 which means he is less inclined to react to fluctuations in the overall market. A beta of 1.0 means the stock moves with the market, while a lower value means it is less volatile and a higher value means it is more volatile. McCormick is a stock that offers great stability in times of uncertainty.
2. General dollar
Retail chain General dollar (NYSE: DG) performed very well in 2020, up around 22% since the start of the year. Same-store sales increased 21.7% and earnings per share rose 73% in the first quarter, with the discount retailer remaining open as a core business during door-to-door orders. But that’s not a short-term blip. During the recession and beyond, Dollar General is expected to continue to thrive as more people look to cut spending and buy basic products at discount prices that rival the big chains. The company opened nearly 1,000 new stores last year. Dollar General’s expansion strategy of opening stores in underserved areas has placed a store within five miles of 75% of Americans, giving shoppers a local option in addition to big box stores.
Like McCormick, Dollar General played across all markets, with 10 consecutive years of positive returns since its IPO in late 2009. But consistency goes far beyond as the company has enjoyed 30 consecutive years of same-store sales growth – a key metric which shows whether a retailer is growing through execution as well as expansion. And like McCormick, General dollar has a low five-year beta of 0.53, a testament to its stability.
Few stocks have been as reliable over the past decade as Moody’s (NYSE: MCO). The rating agency has posted an annualized return of 24% over the past 10 years through December 31, 2019 and has also performed well this year, up around 15% year-to-date.
Moody’s is so strong in large part because it is one of only three big players in its industry, with Global S&P and Fitch odds. The three companies control 95% of the market, with Moody’s and S&P 500 being the two leaders with around 40% market share each. This gap is well protected, as the market will only support a handful of rating agencies and they are quite heavily regulated. So don’t expect to see Moody’s facing any new competition anytime soon.
Moody’s also has an analytical business which is smaller than the credit reporting branch, but adds another source of revenue when debt issuance goes down. In the first quarter, Moody’s revenue jumped 13%, while earnings per share climbed 32% to $ 2.60 per share. Revenues from Moody’s Investors Service – the rating business – grew 19% in the quarter, while Moody’s Analytics rose 5%.
Moody’s derives about 60% of its revenue from the credit rating business, but has grown its analytical business in recent years to diversify its revenue when debt issuance is low. Over the past year or so, Moody’s has taken steps to strengthen analytical activity through acquisitions. It bought Regulatory DataCorp, a company that provides data to help companies stay in compliance with regulations, and RiskFirst, a company that provides risk analysis to asset managers and pension funds. It’s a business built to last.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.