If you thought the market turbulence created by political turmoil was starting to wind down, think again. We’ve only seen the beginning of it. With months of pent-up frustration from both sides of the political aisle just now starting to be unleashed, it could be months before anyone is comfortable enough to start making long-term trades again. That indecision is inherently volatile for stocks.
Then there’s the not-so-small matter of the nation’s debt ceiling. Prior to the events in Charlottesville and the en masse rejection of how President Donald Trump handled it, the odds of a bipartisan avoidance of a budget-based government shutdown at the end of September already were quickly withering away.
Oh yeah … then there’s the calendar. While August is generally a so-so month for stocks, it’s only a mediocre performer because gains during the first half offsets weakness in the second half of the month. The September lull for the market actually begins in August, and lasts until early October. While Q4 should be bullish, it won’t be any less volatile.
In other words, the next few weeks — if not months — could be complete chaos, particularly if investors finally realize how overbought and overvalued stocks really are.
With that as the backdrop, here are the seven best stocks to consider if you’re just looking to shield yourself from the looming volatility but don’t want to get out of the market altogether.
Best Stocks for Survival: Southern (SO)
It’s admittedly an obvious, almost-cliche approach to hunkering down for wave of uncertainty for stocks, but the defensive nature of utility stocks makes them some of the best stocks to own when things could get hairy. People may stop buying cars and computers when the environment is alarming, but they don’t stop their water or electricity service.
The top pick in the sector right now is arguably Southern Co (NYSE:SO).
The sector has other stocks that yield more than the 4.8% dividend SO is paying right now, and a lower price-to-earnings ratio than Southern’s trailing P/E of 18. There aren’t many alternatives that have the same reliable operating history Southern has, however.
Do bear in mind that the strength of defensive sectors during turbulent times is one based more on perception and less on fundamentals; the only thing that really creates sea-change for earnings are recessions. But it doesn’t matter. That perception is enough to prompt certain investor behaviors, and utility names like Southern are almost always seen as a go-to safe haven.
Best Stocks for Survival: Northrop Grumman (NOC)
It’s only a coincidence, but some of the best defensive stocks to buy when the market is under fire are defense stocks.
The pick of the litter right now may be Northrop Grumman Corporation (NYSE:NOC).
You know the company better than you might think. Northrop Grumman is the outfit that makes — and makes maintenance parts for — military aircraft like the A-10 and B-2. More than that, though, it supports a whole slew of military support aircraft you rarely hear much about but are crucial to the U.S. military in times of war as well as in times of peace. NOC also makes a wide array of electronic components most people have never even heard of.
In the same sense that individual consumers don’t shut off their electricity and water, the federal government rarely skimps when it comes to keeping its military up and running.
As was the case with utility stocks, there’s more psychology and perception to this trade than actual fundamental results. As was also the case with utility names, though, that perception is enough.
Best Stocks for Survival: Apple (AAPL)
While most stocks rise and fall with the broad market whether they deserve to or not, there are some that trade entirely on their own terms.
Apple Inc. (NASDAQ:AAPL) is one of those stocks, and it’s positioned to keep chugging higher as it’s done for the past several years. It’s just a stock the market loves to love, when it’s choosing to love it. Apple’s massive war chest of more than $260 billion also provides a perception of additional safety when the market gets rocky.
Bonus boost: Though it technically shouldn’t matter, Apple is on the verge of releasing its most amazing iPhone yet. The iPhone 8 is tentatively slated for release in September, but forward-thinking investors are apt to wade into a speculative position in front of the catalytic event.
Best Stocks for Survival: Kforce (KFRC)
While Apple is one of the best stocks to own in uncertain times because it’s not subject to the market’s normal assumptions, it’s not the only stock immune to the market’s tidal forces. The more off-the-radar a name is, the more likely it is to survive — and maybe even thrive in — a volatile environment.
A little company called Kforce Inc. (NASDAQ:KFRC) has the right stuff to do just that for the foreseeable future.
Kforce is a specialty staffing firm, focusing on technical and financial jobs. It’s a business that is cyclical, but it’s not apt to hit a headwind just because of a minor market lull. Employers are still desperate for qualified employees (particularly within the technology arena), and that’s not likely to change anytime soon. Indeed, this is a business that may be seen as a much-needed haven of stability should things get hairy.
The yield of 2.7% and trailing P/E of 13 bolsters the bullish case regardless of what’s on the market’s horizon.
Best Stocks for Survival: Telkom Indonesia (TLK)
While the U.S. economy is inextricably linked to the economies of all other global economies, the brewing headwind — perhaps more psychological than fiscal — could be relatively well limited to U.S. stocks. One may be able to be a little more aggressive than defensive with names that are more closely linked with overseas economies.
With that as the backdrop, consider Telekomunikasi Indonesia Tbk PT-ADR (NYSE:TLK) — better known as Telkom Indonesia — as one of the best stocks to buy as a means of sidestepping domestic market turbulence.
As one might be able to piece together from the name, Telekomunikasi is a telecom service provider in Indonesia … an emerging market that’s just starting to see its wireless and high-speed internet revolution. Telkom Indonesia is instrumental in making that happen, and is reaping the benefits as a result. Last quarter, internet, IT and data service revenue was up 25% on a year-over-year basis.
That’s going to be noticed once investors start to look for names that aren’t tightly linked to a falling U.S. market.
Best Stocks for Survival: SPDR Gold Trust (GLD)
Broadly speaking, what’s good for stocks is bad for gold and/or bonds, and what’s bad for stocks is good for gold and/or bonds. If stocks do indeed fall out of favor and bonds struggle to tack on more gains in the foreseeable future (their rally is already slowing), that leaves gold as the only palatable place to put the money flowing out of stock-based assets and bonds.
The easiest way to make that play is the SPDR Gold Trust (ETF) (NYSEARCA:GLD), which more or less mirrors the value of gold. That’s because its underlying assets are raw gold.
There’s another near-term upside for gold right now as well: the falling U.S. dollar. In that gold is priced in U.S. dollars, a deteriorating greenback inherently translates into bullishness for gold. If the world loses faith in America’s economic future — and that appears to be happening — forex traders will continue to shed the dollar and purchase other currencies.
GLD charges 0.4% in fees, or $40 annually on every $10,000 invested.
Best Stocks for Survival: MiMedx Group (MDXG)
Finally, though it’s probably the most speculative of all the names on this list of tickers to own for turbulent times, MiMedx Group Inc (NASDAQ:MDXG) has several of the characteristics that made some of the previous possibilities so interesting.
Namely, with a market cap of less than $2 billion, MiMedX is small enough to avoid the market’s broad tide, and as a biotech outfit, it’s widely regarded as a non-cyclical play.
It’s a rather neat company, if you’re not familiar with it. MiMedx is a supplier of the regenerative biomaterials that make procedures like tissue repair and skin grafts not only possible, but highly successful.
Even more amazing and compelling is, unlike so many of its biotech peers, MiMedx is profitable … and widening its margins at a very brisk clip. Last year’s bottom line of 22 cents per share is projected to climb to 31 cents per share of MDXG this year on a 26% improvement in sales. Next year’s top and bottom lines are expected to grow similarly, making MiMedx Group an easy name to love when few other names feel healthy enough to hold.
The fact that MDXG has been stagnant since May makes it all the more prone to heat up again soon.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter.