Let’s face it — the way you pick stocks in your 40’s isn’t the same way you choose investments in your 20’s. Nor should it be.
When you’re twenty-something, retirement seems a million years off in the distance. When you’re forty-something, the reality of your financial needs beginning in just a couple of decades becomes very real, and you can’t roll the dice the way you used to. A little less aggressive growth and a little more stable value starts to make good sense.
And on top of that, as market and global conditions change, certain types of investments can fall in and out of favor, making them a smart area to target as they start upward. So as you hit a point where you need to make some adjustments, this can be worth keeping in mind.
With that as the backdrop, here’s a closer look at five stocks with a strong value bent from sectors that should do exceedingly well in certain situations or economic environments.
Stocks to Buy: When In Doubt, Buy Utilities
There’s an old saying in the game of chess — when in doubt, move a pawn. It’s a reference to the notion that at the very least, moving the very limited piece on the board doesn’t do any damage, even if it doesn’t help a great deal.
Along those same lines, when you’re not quite sure what else to buy, it’s hard to go wrong buying an uber-safe utility stock. Nobody ever stops piping in water or electricity to their home. If nothing else, you’ll get to collect a decent dividend for your time and effort.
There are several great utility names to choose from, but Southern Co (NYSE:SO) is a perennially good one to bet on, and it’s usually priced at palatable levels.
Stocks to Buy: Late in an Economic Expansion, Buy Consumer Staples
While boring ol’ no-growth things like soap, noodles and juice rarely if ever pump their corresponding stock prices up to what some might consider rich valuations, there are better times than others to step into consumer staples names. They’re at their best prices and right in front of their best performance in the latter stages of an economic expansion … kind of like what we’re seeing on the horizon right now.
The go-to value name in the this group is usually Procter & Gamble Co (NYSE:PG), though P&G has a lot of work to do to get out of the hole it has been digging itself into for years now. The better bet may be a more off-the-radar pick like Johnson & Johnson (NYSE:JNJ).
Not only are JNJ shares cheaper than Procter & Gamble stock, it has also got a lot of exposure to the resilient healthcare supply market.
Stocks to Buy: When Oil Prices Are on the Rise, Buy Energy
One only has to look at the rout energy stocks suffered between 2014 and 2016 to swear them off forever. But, doing so would be a mistake. See, energy stocks are highly cyclical, and if you catch them at the right time you can scoop up bargains right in front of a major upcycle.
The catch? Crude oil’s boom/bust cycle isn’t exactly linked to the economy’s expansion/contraction cycle. The energy sector’s hot-and-cold cycle is simply the rise of oil prices, the subsequent ramp-up of production capacity, oversupply, followed by the elimination of production capacity. Repeat.
Whatever the case, the energy name to keep on your watchlist forever more is Exxon Mobil Corporation (NYSE:XOM). It has got the size and financial wherewithal to survive downturns, and even make investments when everyone else in the business is forced to liquidate.
Stocks to Buy: In the Middle of an Economic Growth Cycle, Buy Industrials
They’re almost as boring as consumer staples stocks, though they don’t shine at quite the same time. Instead, industrial names are at their best in the middle portion of an economic growth cycle.
You’ll see valuations across the possible spectrum here, but stick to stocks with price-to-earnings ratios in the single digits — there will be enough of them if you check the market’s most obscure corners. In fact, the less known the company is, the better. The slow-and-steady companies in this sliver of the market are the one that quietly grind out widgets — and a profit — year in and year out.
One of the most attractive stocks from the sector is an almost-always-reliable Gardner Denver Holdings Inc (NYSE:GDI), which makes blowers and compressors for just about any industry you can think of. It’s not a household name, which is kind of the point. It’s boring, quietly cranking out a profit year in and year out.
Stocks to Buy: As an Economic Rebound Begins, Buy Financials
Last but not least, it will admittedly take a lot of guts to step into these names because things will still look and feel grim at the time, but you want to go on the hunt for financial stocks in the early stages of an economic rebound. They’re generally the first to recover, as they grease the wheels for all the economic growth to come later.
Though things change over time, the pick of the litter from this bunch is arguably Bank of America Corp (NYSE:BAC). It struggled more than most other names in the business to get out of the subprime hole it dug itself into, but that struggle has made it a lean and mean operation.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter.