When markets get turbulent, it’s a good time to consider re-allocating into less risky assets. Some folks call them low-beta or “safety-cushion” stocks. I call them volatility-resistant stocks because they function like financial shock absorbers.
They’re tough to find when stock market indexes are rocking and rolling. You have to check for metrics like beta, or average movement relative to the indexes. It’s also important to consider what industry or niche the company you’re considering is in.
With the following three stocks to buy, you’ll have some really solid companies and that may reduce the strain on your portfolio in turbulent times. Let’s take a closer look at what each has to offer amid the current market turmoil.
Volatility-Resistant Stocks to Buy: Walmart (WMT)
The coronavirus from China has caused some shoppers to panic. You might have to contend with other people to get emergency supplies. Still, that’s not stopping people from going to Walmart (NYSE:WMT) and loading up on supplies. Even during the Great Recession, people continued to shop there.
In fact, the price of Walmart stock rose nearly 2% during 2008 and 2009. That’s much better than the 31% decline of the overall retail sector suffered during that time. Therefore, it makes sense that analyst firm Cowen deemed Walmart to be “one of the best positioned” retail companies to ride out the economic volatility we’ve been facing.
If times to get tough financially, shoppers might count on Walmart as a one-stop shop for cheap goods. And with a five-year monthly beta of 0.43, Walmart shares should remain considerably less volatile than the broader market in the foreseeable future.
Johnson & Johnson (JNJ)
I like to look to the Dow Jones for low-volatility stocks. Johnson & Johnson (NYSE:JNJ) is a Dow component that could do well during this unfortunate health crisis. The company doesn’t need to come up with a coronavirus solution to be profitable. After all, they also own personal-care brands that people might stock up on. These include Neosporin, Band-Aid, Benadryl, Motrin, Stayfree, Tylenol and Listerine.
Johnson & Johnson stock has a five-year monthly beta of 0.75, suggesting slower historical price movement than the overall market. Besides, the trailing 12-month price-to-earnings ratio is a very reasonable 22.37. That signals a pretty decent price point, and properly priced stocks tend to hold up better during market contractions.
Thus, JNJ stock could prove to be a low-vol safe harbor, even if the Dow Jones enters into a prolonged bear market. Some folks call JNJ stock “boring,” but the last thing investors need is excitement when the market waters are choppy.
Looking again to the Dow for stability, you might turn to Visa (NYSE:V) stock for ultra-stability. For decades, Visa has been recognized globally as a leader among payment processors. It’s a company with $12 billion in free cash flow, which suggests an ability to withstand macroeconomic turbulence.
Throughout the Great Recession, Visa managed to increase its dividend payments. That’s a great sign. Today, with the coronavirus causing many people to shop online, Visa could stand to benefit as electronic payments may increase substantially. Moreover, V stock has a five-year monthly beta of 0.93. Granted, that’s higher than the other ones mentioned on this list. Still, it’s lower than the broader market.
Ultimately, V stock represents a cash-flow-positive, brand-name company and a chance to keep your portfolio’s volatility under control.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets. As of this writing, he did not hold a position in any of the aforementioned securities.