China, the Federal Reserve and questionable fourth-quarter earnings have thrown a curveball to investors clamoring for a way to ease their portfolio’s pain.
While the knee-jerk reaction may be to buy something that will snap back, investors in 2016 should KISS and make up — meaning, “keep it simple, stupid!”
That’s right, simple and unsexy is what’s likely to help investors outpace the market in 2016 as questions about valuations and growth rates cast a haze over highfliers.
Notching the level of difficulty a little higher is the fact that correlations among the major indices and sectors are still on the decline, underscoring the fact that 2016 will remain a stock picker’s market.
The best KISS stocks to buy right now are in the consumer staples sector, what with it’s relatively steady revenues and ample dividends.
Here are three at the top of our list.
KISS Stocks to Buy: Clorox Co (CLX)
Dividend Yield: 2.4%
Our clothes and houses get dirty regardless of what the market does, right? Well, Clorox Co (CLX) stock will benefit from this as its household items will continue to see demand, driving revenue, earnings and the nice 2.4% dividend yield.
What we love? The fact that CLX stock is underloved. Only 13% of the analysts have it ranked a “buy” and the shorts have been trying to call a top in this relative strength leader for a while.
The current short interest ratio of 5.5 is slightly lower than the 6 from a few weeks ago, telling us that an imminent short squeeze will push shares higher.
Target a move between $140 to $145 over the short term for CLX shares.
KISS Stocks to Buy: Procter & Gamble Co (PG)
Dividend Yield: 3.5%
Another company that serves the “must have” niche of the market is Procter & Gamble Co (PG).
The mostly personal care company delivers products that we all use every day. Activists have leveled their sights on P&G stock over the last year in an effort to get the company to focus its efforts. The results are promising, as P&G continues to sell off pieces to focus on its higher-margin products.
Again, only 24% of the analysts covering the stock have it ranked a “buy,” which is lighter than the average stock in the S&P 500 Index. This means that fundamental and technical improvements will attract upgrades that drive prices higher.
Speaking of the technical, P&G stock is sitting at support from the $75 price level. A move higher from here will shift the stock back into intermediate-term bullish conditions and result in a golden cross as P&G stock’s 50-day crosses above its 200-day trendline.
Along with the relative strength P&G stock offers a 3.5% dividend yield, something that just got more attractive as the Federal Open Market Committee seems to be shifting its view on when the next interest rate hike will come.
Target a move to $83 within the next six months for P&G stock.
KISS Stocks to Buy: Dr Pepper Snapple Group Inc. (DPS)
Dividend Yield: 2.13%
Finally, one of our favorites from more than a year ago, Dr Pepper Snapple Group Inc. (DPS). The soft drink distributor has continued to quietly outperform the market, with shares 20% higher on a 12-month basis.
Still, the analyst community hasn’t picked up on the stock. We think this will change soon, and the 75% of analysts that are covering the stock with a “hold” will start to upgrade the shares.
Dr. Pepper is one of 78 companies in the S&P 500 that are still trading above their respective 50-day trendlines, a fact that will draw the attention of technical buyers as the market’s volatility continues.
Finally, Dr. Pepper stock actually saw an increase in short interest over the last two week reporting period, moving the short interest ratio to 6.3, typically a potential trigger for short covering rallies.
Put simply, Larry Culpepper, the company’s funny spokesperson and self-designated creator of the College Football Playoffs, has had a great year and is looking for another stellar performance in 2016.
We expect DPS stock to reach $100 while throwing off a 2%-plus dividend.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.