3 Stocks to Watch in the Wake of August’s Jobs Report

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August’s disappointing jobs report knocked some of the optimism out of Wall Street’s bulls — bad timing at best, considering the end to the Federal Reserve’s bond buying program is coming fast upon the market. Although sluggish hiring and the prospect of higher interest rates will boost volatility, there are still some good stocks for investors to check out now.

Key_Takeaways_From_August_Jobs_Report.jpgFirst the facts: U.S. employers added an anemic 142,000 jobs to the market last month, according to Labor Department data.  That’s a big disappointment from the average of 225,000 new jobs that have been created during the first seven months of the year, as InvestorPlace’s Dan Burrows breaks down here.

But the disappointing jobs report was just good enough to reaffirm the Fed’s plans to end its so-called “easy money” policies — and that’s bad news for businesses that thrive on low interest rates. Add in a bull market that has been running wild since March 2009, and the stage is set for serious volatility.

Whether we’re talking about football or investing, defense wins championships. In volatile markets, stable defensive plays like utility stocks, real estate investment trusts (REITs) and non-cyclical consumer stocks can deliver strong dividend yields and cushion the blow if booming growth stocks go bust.

Here are three good stocks to watch in the wake of August’s jobs report:

Stocks to Watch — AT&T (T)

AT&T stockFew sectors can match utilities for their stability — and dull darlings like T provided good protection and income during the recession — and AT&T’s current dividend yield of 5.2% is particularly attractive now.

But T could actually gain altitude if its planned $48.5 billion buyout of DirecTV (DTV) passes final muster in the next few weeks. The resulting mega-merger would give T a subscriber base of 26 million customers — not too far behind the 30 million customers the Comcast (CMCSA) — Time Warner Cable (TWC) merger would deliver if regulators ignore the outcry of content providers and consumer advocates.

AT&T is trading at less than 13 times forward earnings now, which is an attractive valuation. In a market that will be buffeted by volatility, T is the ultimate low-beta stock. Beta is a measure of volatility, with a beta of 1.0 indicating that the stock’s volatility is the same as the overall market. AT&T’s beta, however, is only 0.23 — meaning that T stock is 77% less volatile than the broader market.

Stocks to Watch — Exelon (EXC)

exelon185Exelon (EXC) is a perfect example of a non-cyclical stock — after all, you have to have power and heat year-round. Exelon generates power and operates electric utilities in 38 states, and EXC stock continues its bid to boost shareholder value while adding strategic acquisitions.

This spring, EXC made a bid to purchase D.C.-based PEPCO (PEP) for $6.8 billion — the move comes less than three years after it acquired Baltimore-based Constellation Energy Group. PEPCO, which serves some 537,000 customers in the area, has been under fire over reliability issues in recent years — particularly given extended power outages. Exelon’s current dividend yield is 4%, and the company has reliably paid its dividends in the past. As a hedge against market volatility, EXC’s 0.29 beta looks delightfully dull.

Starwood Property Trust (STWD)

Starwood HotelsIf you’re looking for high yield as well as stability, it’s hard to beat a real estate investment trust like Starwood Property Trust (STWD).

True, non-traded REITs have come under severe scrutiny and stricter regulations in recent weeks. However, publicly traded REITs generate growth and income, and they boast higher liquidity because they’re bought and sold over an exchange like stocks. They also pay out 90% of their annual earnings to investors.

STWD is the nation’s largest commercial mortgage REIT; it focuses on portfolio safety as well as providing a consistent dividend yield — which is currently 8%.

One thing that sets STWD apart from many of the mortgage REITs (mREITs) is the focus on commercial property mortgages, rather than mixed or residential loans. Commercial loans typically have variable rates, making STWD less vulnerable to interest rate hikes than many of its mREIT counterparts.

As of this writing, Susan J. Aluise did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2014/09/stocks-to-watch-jobs-report/.

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