5 Stocks to Buy If You Just HATE Risk

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You can’t invest without taking on risk, but that doesn’t mean you can’t find stocks to buy that are significantly safer than others. Heck, the way the market has been acting lately, you can’t make a list of stocks to buy without looking for low-risk names.

Risk vs. Reward stocks to buyLess than a month ago, the market was notching new all-time highs seemingly every other day, and it was pretty easy to find stocks to buy: Just buy the S&P 500.

But that hasn’t worked out so well since the top. After closing above 2000 for the first time ever last month, the broader market is off 3%.

Even worse, this slow-motion selloff doesn’t mean we still can’t have a big crash. If one thing’s for sure, it’s very prudent to lighten up on risk at this late stage of an historically epic bull market.

A great way to find stocks to buy if you just hate — hate! — risk is to look for low-beta stocks. Stocks with beta of less than 1 typically (though not always) are less volatile than the S&P 500. Yes, they can lag when the market is rising, but they also will hold up much better when the market is tanking.

Big companies with strong balance sheets, low betas and market-beating year-to-date gains are stocks to buy in this shaky market. They’re doing well YTD for a reason, but low betas mean they won’t get clobbered in a crash.

So, here are five low-risk market-beating stocks in the S&P 500 this year:

Stocks to Buy If You Hate Risk: Southern (SO)

Stocks to Buy If You Hate Risk: Southern (SO)The utilities sector has always been a bastion of defense. These companies can’t grow quickly because of regulation, but they’re fountains of cash thanks to all those checks coming in every month.

Southern Co. (SO) has taken low-risk/good returns to a new level in 2014. The stock is up 9.5% for the year to date, beating the S&P 500 by about 3 percentage points. At the same time, SO stock pays a whopping-fat dividend yield of 4.7%.

Most importantly if you hate risk, SO has a five-year beta of 0.19, and has very little wiggle compared to the broader market. True, SO stock has underperformed the S&P 500 during the past five years (that’s what low-beta stocks sometimes do), but it also has had a much smoother run on its way to a 36% gain.

Stocks to Buy If You Hate Risk: Duke Energy (DUK)

Stocks to Buy If You Hate Risk: Duke Energy (DUK)Duke Energy (DUK) is another utilities stock putting up market-beating gains while also throwing off big dividends. Even better, it’s a long-time market beater too.

DUK stock is up 12% for the year-to-date, beating the broader market by more than 3 percentage points. Add in the dividend with a yield of 4.2% and this year’s total return comes to more than 15%.

Look farther back and you’ll see that DUK stock has also outperformed the market over long periods of time — something you want to see in a retirement stocks. Over the past decade, DUK has returned 200% including dividends vs. a gain of 115% for the S&P 500.

And with a five-year beta of just 0.24, DUK stock is absolutely crushing it on a risk-adjusted basis.

Stocks to Buy If You Hate Risk: American Tower (AMT)

Stocks to Buy If You Hate Risk: American Tower (AMT)It’s not unusual to see real estate investment trusts (REITs) putting up solid gains this year, but American Tower (AMT) leads the sector is you’re looking for safety.

AMT stock is up nearly 20% for the year-to-date and has more than tripled the performance of the S&P 500 this year. The dividend yield of 1.5% isn’t huge — especially for a REIT — but with that sort of price appreciation, you can take it as icing on the cake.

Best of all if you hate risk, AMT, like Southern, has a five-year beta of around 0.2. That’s right: American Tower has a total return of 171% during the past five years vs. a 100% gain for the broader market, and it has done so with a fraction of the risk.

Even more impressive, over the past 10 years, AMT stock has returned more than 520%.

Stocks to Buy If You Hate Risk: Dr Pepper Snapple (DPS)

Dr Pepper Snapple DPSIt turns out that some fizzy drinks have defensive characteristics. Dr Pepper Snapple (DPS) has a five-year beta of just 0.36.

At the same time, DPS is putting up market-beating returns despite moving very little compared to the S&P 500. DPS stock is up 33% for the year-to-date. Yes, the yield of 2.5% might not quicken a dividend investor’s pulse, but it sure does add up over time.

During the past five years. DPS is up 130% on a price basis. Add in the deceptively puny yield, and the total return comes to 151%. Go back even farther, and over the last decade DPS is close to tripling the performance of the broader market.

Stocks to Buy If You Hate Risk: Monster Beverage (MNST)

Stocks to Buy If You Hate Risk: Monster Beverage (MNST)Strange as it might seem, some makers of energy drinks are also clobbering the market both on an absolute and risk-adjusted basis. Just have a look at Monster Energy (MNST).

Thanks in part to inking a long-term partnership with Coca-Cola (KO) in August, MNST outperforms the S&P 500 on pretty much any time frame you can chart. And it has done so with a five-year beta of only 0.27.

MNST doesn’t pay a dividend, but who’s complaining with this kind of price performance? MNST is up 42% for the year-to-date, 125% over the past three years, 430% over the last five years, and roughly 670% over the last 10 years.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2014/10/stocks-to-buy-low-risk/.

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