by James Brumley | October 15, 2012 9:11 am
Stocks were up 10% through the first three months of the year, then down 8.5% over the next two. More recently, the market has soared on global stimulus hopes, then sunk on the possibility that it may not matter. Equities were up 4% in the first two weeks of September, then down 3% since then. The market stumbled on weak job numbers earlier in the year, and then rallied right back on encouraging numbers from the housing sector.
You get the idea: Stocks are all over the map, and with little rhyme or reason. That’s not even the troubling part, though. What’s troubling is that with each wild, unpredicted swing, traders are increasingly frustrated by a market that doesn’t behave like it should. Why bother playing the game if the rules keep changing?
There is a solution. Oh, it may be one you like, and it’s certainly not sexy. But the solution is …. buy stocks you don’t have to worry about, and just accept the fact that the market’s going to push them around a little in the short run.
If you’re really ready to embrace that idea, here are your top prospects for a true buy-and-hold portfolio.
How does the old cliché go? The only things that are certain in this world are death and taxes? You can add one more item to that list — trash. As long as human beings walk the planet, they’ll be throwing stuff away.
That’s good news for trash-hauling company Waste Management (NYSE:WM), which has been profitable for 10 straight years, escaping the recession practically unscathed. Chalk it up to the nature of the business, and the fact that trash companies have a de facto monopoly in the markets where they operate. Throw in the fact that Waste Management has a pretty robust waste-to-gas side business, and the company makes money coming and going.
How does a high-flying biopharma name like Gilead Sciences (NASDAQ:GILD) make a list of reliable stocks? Relax. Gilead isn’t as high-flying as it may seem. It just makes a point of focusing on high-demand, high-margin drugs (primarily for HIV, but with increasing exposure to hepatitis C), and it lets the Johnson & Johnsons (NYSE:JNJ) of the world struggle with the headaches of trying to be as many things to as many people as possible.
IBM (NYSE:IBM) may be classified as a technology name, but it’s unlike those we tend to think of when we hear the word “tech.” IBM is actually a nickel machine, designed to generate recurring revenue in perpetuity. Though it sells “one-off” products and consulting work, mostly it aims to set up service contracts that bill on a monthly or quarterly basis. It’s a great business model because once IBM becomes integrated into a client’s daily routine, it’s very difficult to disconnect what IBM does for the organization. That’s why Big Blue has managed to increase year-over-year earnings in every quarter since 2005.
In early September, the point was made that paint manufacturers were about as recession-resistant as anybody had a right to hope for. Though there are several fine paint makers to choose from, PPG Industries (NYSE:PPG) is the cream of the crop. It’s got a decent 2% dividend right now, and a decade-long track record of solid growth and profitability … even when times were exceedingly tough in 2008. For perspective, the pros expect PPG to increase earnings by an average of 14% per year over the next three years.
Last but certainly not least, no list of reliable stocks would be complete without 3M (NYSE:MMM), for a couple of different reasons.
While most investors consider General Electric (NYSE:GE) to be the market’s mutual-fund-in-a-stock, 3M is actually involved in more business lines. It makes everything from packing tape to road signs to library management systems. That diversity has helped it weather more than a few storms for decades now, and should continue to do so.
That’s not the most compelling reason to want 3M in your portfolio. What’s most attractive about 3M is a dividend payment in every quarter since 1916. Better still is that the dividend has increased every year since the 70s. The current yield of 2% isn’t a lot, but when 3M increases that consistently while shares also appreciate in value, it can become a favored holding real quick.
All that being said, while these companies may be the market’s most reliable, that doesn’t inherently mean now is the right time to get into a long-term position. Gilead and 3M, in fact, are technically overbought as of the latest look at both charts. That doesn’t mean they’re not great long-term ideas, though. It just means true buy-and-hold investors may find a better price on them by being patient.
As of this writing, James Brumley didn’t own any securities mentioned here.
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