It may seem counterintuitive given the extreme speculation in the market these days. Prime evidence comes from trading equities on margin, which in March 2021 again hit an all-time high. However, investors ought to consider safe stocks to buy. No, I’m not suggesting a wholesale shift. But the craziness warrants some exposure to the dull but reliable.
First, safe stocks to buy represent pure common sense. No asset class in history has ever gone consistently higher in a perfectly linear line without suffering a downside movement. This is really the free market in action, absorbing all publicly available information and reacting accordingly. Too often, though, some assets continue unabated until they no longer can.
Second, speculation creates boom-bust cycles. The more extreme the speculation, the more extreme the highs and lows of said cycles. But the problem here is that high-risk, high-reward names essentially become pyramid schemes. Look at a chart of the tulip bubble mania or any asset peak and crash. The focal point is narrow because only a few profited here. As the selloff widens, that’s where most investors are: stuck holding the bag.
Needless to say, you’re going to limit the damage with safe stocks to buy. Usually, people don’t gamble on known factors because the upside potential isn’t very robust. For instance, you can figure that water processing plants will be important a century from now. But whether solid-state batteries will become commercially viable for electric vehicles, for instance? That’s a gamble.
Plus, with risky trades, you don’t know whether the underlying organizations will be in business to build generational wealth. While the following safe stocks to buy almost surely will not start a social media frenzy, you can definitely hand them off to your children.
Now, before you fire off that angry email, please note that there is no such thing as 100% safe stocks to buy. As the novel coronavirus pandemic demonstrated, unexpected disruptions can heavily impact even the most robust institutions. Not even U.S. government bonds are totally risk free. But they offer reasonable protection, potentially providing profitability that will outlast you.
- McDonald’s (NYSE:MCD)
- Archer Daniels Midland (NYSE:ADM)
- Johnson & Johnson (NYSE:JNJ)
- Microsoft (NASDAQ:MSFT)
- Disney (NYSE:DIS)
- Procter & Gamble (NYSE:PG)
- Carriage Services (NYSE:CSV)
Safe Stocks for Your Kids: McDonald’s (MCD)
A bit on the controversial side because of its core fast-food business and society’s shift toward healthier fare, McDonald’s remains one of the most relevant safe stocks to buy, especially if you’re looking to pass down generation wealth. Yes, the health craze that has affected millennials is certainly a distraction for MCD stock. But here’s the thing — it may be a bit overplayed.
You see, one of the truest principles in life is the bell curve: the brilliant, the exceptional are few and far between while the mediocre is all around us. This applies to everything, whether you’re focusing on workers, athletes, neighborhoods, singers on talent shows, whatever. So it’s doubtful that the lion’s share of millennials are forward-thinking and health-conscious citizens.
If so, it would destroy the very essence of the bell curve concept. Fortunately, that’s not happening. Furthermore, McDonald’s really caters to the meaty components of the bell curve.
Thanks to its products loaded with sugar, and its marketing and business model geared toward sparking a dopamine effect, McDonald’s knows addiction. Their products are created to trigger happy reactions in you, keeping you coming back. With a recurring business model like that, MCD stock will do very well for your kids — just don’t eat the stuff.
Archer Daniels Midland (ADM)
Having an ear somewhat to the rumblings on social media, one of the catalysts driving speculative assets to the stratosphere is fear of inflation. Due to global supply chain disruptions that continue to wreak havoc on the economy, it’s understandable why people believe this. Prices are rising for many products. However, this overlooks the potentially overriding threat of deflation.
That’s right. As I’ve explained in prior InvestorPlace articles, we may be seeing inflation in some sectors but we’re also experiencing deflation broadly. For instance, higher productivity (think work-from-home initiatives) across a lower worker base is deflationary.
So, how do you protect yourself from deflation? Food-processing giant Archer Daniels Midland may have the answer.
Typically a boring name among safe stocks, ADM has impressed this year, gaining nearly 31% since the January opener. In large part, this is likely due to its inherent stability. Archer Daniels is one of the Dividend Aristocrats, companies who have provided at least 25 years of consecutive dividend increases.
Archer Daniels will do everything it can to keep this distinction. Nobody wants to be the executive that lost the dividend throne. Therefore, expect ADM stock to keep shareholders happy for generations to come.
Safe Stocks for Your Kids: Johnson & Johnson (JNJ)
Throughout the Covid-19 pandemic, multiple pharmaceutical and biotechnology firms forwarded compelling solutions to the SARS-CoV-2 virus. While the messenger-RNA vaccines have so far won out, healthcare giant Johnson & Johnson developed an adenovirus-based vaccine. Long story short, this approach places the “ingredients” for SARS-CoV-2 antibody production within a “defanged” adenovirus, which causes cold-like symptoms.
One of the most intriguing aspects of the JNJ vaccine is that it’s a one-and-done approach. In contrast, the mRNA vaccines require two shots — it’s very inconvenient to say the least. All was well until, as my colleague Will Ashworth pointed out, concerns about blood clots developing in a handful of patients sidelined the vaccine.
Still, Ashworth also notes that JNJ stock is a low-volatility name and therefore, it’s one of the more reliable safe stocks to buy. I won’t disagree with him there.
Moreover, the blood clot issue is a distraction for the nearer term. This is about safe stocks to hand down to your children, not about investments that will outperform in the next hour. For that, you should consider cryptocurrencies.
Seriously, your children will likely encounter new viruses and pandemics. The research that JNJ is doing now will aid in addressing the outbreaks of the future.
Another one of my colleague’s ideas for safe stocks to buy is Microsoft. One of my favorites when it comes to boring but stable investments that you can depend on, MSFT stock is easily a generational play as well. While I’m not sure what the next computing device will look like 50 years from now, it’s a fair bet that it will run on a Windows operating system.
First, you have the sheer domination of Microsoft’s OS reach. Among desktop computers, the Windows platform accounts for nearly 75% of total market share. While PCs are on the decline, they still represent incredible relevance in the professional sector. It’s hard to run processor-intensive programs on a tablet or smartphone. Even compared to all platforms, Windows carries a hefty 32% market share.
Second, MSFT stock is tied to a business that constantly innovates. For instance, the underlying company’s Microsoft Teams provided connectivity and productivity at a time when most white-collar workers transitioned to remote operating platforms.
Finally, Microsoft is a great play on video games. Its Xbox console consistently draws in revenue and with the global gaming market expected to hit $287 billion by 2026, you can hand down MSFT stock to your kids — and they’d probably love you for it.
Safe Stocks for Your Kids: Disney (DIS)
While big acquisitions can lead to greater returns down the line, they also give stakeholders much anxiety. That’s especially the case when you’re dealing with the entertainment arena. Not only can customer whims change their preferences for content type, the manner in which said content is delivered can encounter its own challenges. Indeed, the Covid-19 crisis accentuated the glaring differences between streaming and the box office.
Prior to the pandemic, Disney enjoyed a moat in its industry. Acquiring both the Star Wars and Marvel Comics franchises, DIS stock became an investment in money printing. No matter who you are, you’re going to watch films from either entertainment universes. I’ve only met a small handful of people who liked neither franchise, and they are all very strange.
Of course, the Covid-19 crisis put a question mark on this thesis, with major studios deciding to release their marquee films to their streaming platforms. However, there’s also an argument to be made that we humans are social creatures. At some point, we will return to the box office, enjoying multiple stories from the Star Wars and Marvel Comics universe.
Definitely, that will be the case for your children and grandchildren. Therefore, DIS is one of the safe stocks you can pass on for generations.
Procter & Gamble (PG)
When it comes to safe stocks to buy, I can’t think of a safer name than Procter & Gamble. That’s not necessarily a compliment, though I guess you can look at it this way in some circumstances. Rather, PG stock is simply a boring investment. That said, the Covid-19 crisis certainly gave Procter & Gamble an unexpected kick in the hind end.
As you know, one of the household goods giant’s brands is Charmin. Prior to the pandemic, I didn’t think twice about toilet paper. It’s TP. You wipe yourself with it. What’s there to think about? Well, SARS-CoV-2 changed this narrative in a hurry, didn’t it?
In January, I knew that this crisis was going to hit us like a freight train. Therefore, I loaded up on the essentials. By early February, the grocery stores became a war zone, and one of the most sought-after items was TP.
Of course, I’m not suggesting that you should buy PG stock on this basis alone. It was a one-off event (hopefully). But the pandemic proved that when the proverbial (and literal) smelly stuff hits the fan, you can depend on this secular powerhouse.
Safe Stocks for Your Kids: Carriage Services (CSV)
I know it’s an extremely uncomfortable topic. But people die and so will you. Aside from taxes, death is the reality that every individual — I don’t care how much money or influence you have — will face. Since it’s an inevitable outcome, you might as well profit from it posthumously through your children.
In a way, Carriage Services is like life insurance. It’s a policy that doesn’t really benefit you per se, but rather your loved ones. Further, you just look at the supply demand equation. Between now until your children also start seriously pondering the great beyond, there will be many millions that will die. Cynically, this is a powerful catalyst for CSV stock.
Moreover, I like the way Carriage Services distinguishes itself through its partnerships with local funeral home and cemetery owners. Rather than buying them out, CSV works with local operators, allowing them to decide which aspects to control and which to delegate. This concept stems from Carriage Services’ decentralized approach to final services, proving that death care is a true crypt-currency.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.