In times of turmoil, stable companies boasting low beta shares shine. So the reduced volatility of staple stocks helps shareholders stay the course while the tech sector gets tarnished and growth stocks groan.
Today we’re looking at three of these stocks to buy that recently went on sale.
Sellers didn’t spare today’s trio. They’ve been scrapped from portfolios during the correction like all other risk assets, but therein lies the opportunity.
But while some high fliers are getting their wings clipped, never to rise again, today’s selections have balance sheets that demand eventual recovery. Moreover, their history has been one where all dips like what we’re currently witnessing have been lucrative buying opportunities.
They’ve required patience and a willingness to look past the near-term drama. And if the price discount wasn’t enough of a carrot, here’s another incentive. They all offer market-beating dividend yields that just got juicier.
That said, here are three stocks to buy after the beatdown.
Let’s take a closer look at each price chart and build an options play to capitalize.
Staple Stocks to Buy: Walmart (WMT)
Dividend Yield: 1.6%
Beta: 0.48
The selling in Walmart intensified this week, pulling prices dramatically lower for six sessions in a row. With a beta of 0.48, WMT stock usually is half as volatile as the S&P 500, but you wouldn’t have guessed it based on how nasty the recent whack was. Consider it an aberration. I blame the current interest rate spike for the excessive volatility in all three of today’s picks.
Walmart was down nearly 12% from its 2021 high at Monday’s low. Given its oversold posture, however, a bounce is likely. Historically, buying WMT when it’s down over 10% from its highs has been a money-winning strategy for the patient.
If you want something a little more exciting than buying shares here, consider selling put spreads.
The Trade: Sell the November $130/$125 bull put spread for 75 cents.
Stocks to Buy: Verizon (VZ)
Dividend Yield: 4.68%
Beta: 0.45
Verizon isn’t so much a consumer staples stock as telecom, but both sectors exhibit similar qualities. At 4.68%, Verizon offers the most significant income potential of today’s picks. It trades ex-dividend on Oct. 7, so if you enter quickly, you’ll catch the next quarterly payout. Since May, the price trend has been bearish for VZ stock, but I’m encouraged by its recent spot.
For the past three years, $54 has provided significant support. And that’s made it a perfect spot to pick up shares at a discount. While the dividend offers payment enough if Verizon merely treads water here, I think we will return to $60 at some point, providing about 10% of price appreciation potential.
You could buy shares now or sell puts to increase your probability of profit.
The Trade: Sell the November $52.50 put for 64 cents.
Staple Stocks to Buy: Coca-Cola (KO)
Dividend Yield: 3.14%
Beta: 0.67
Coca-Cola fell nearly 10% from its high, taking out the 200-day moving average in the process. As a result, chart watchers may understandably be skittish at buying here.
Still, history proves an income play like Coca-Cola hasn’t reacted near as negatively to breaking long-term moving averages as most growth stocks. Indeed, the last three times we broke the 200-day, it was a profitable buying opportunity.
While the jump in the 10-year yield to 1.5% may be compelling to some, I still think Coca-Cola’s 3.14% offers enough extra juice to remain attractive to buyers. And that makes it worth adding to today’s stocks to buy.
If you want to spice up the trade a bit, instead of buying shares, sell puts.
The Trade: Sell the November $52.50 puts for $1.03.
On the date of publication, Tyler Craig was long WMT, KO, VZ. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
For a free trial to the best trading community on the planet and Tyler’s current home, click here!
