U.S. stocks have seen a historical rally from 2020 lows, but the Street is increasingly jittery about short-term volatility as we head into the new year. Rising Covid-19 cases have put pressure on global stock benchmarks and oil prices. Now, investors are once again searching for safe stocks if omicron or other new variants lead to a significant slowdown in the global economy.
Pfizer executives recently pointed out that the pandemic could stretch well beyond 2022 through 2023. While the increase in the number of cases might signal a choppy economic period ahead, most economists believe the damage might be less severe than the previous waves. Research by the Organisation for Economic Co-operation and Development (OECD) forecasts “a rebound in global economic growth to 5.6% this year and 4.5% in 2022, before settling back to 3.2% in 2023, close to the rates seen prior to the pandemic.”
Meanwhile, Wall Street analysts are warning investors that the recovery process could be bumpy and multi-layered. Therefore, as we head into the new year, a prudent approach would be to focus on defensive and robust names in the stock market.
With that information, this list of seven safe stocks should generate lucrative returns, regardless of the outcome of the ongoing fight against Covid:
- Adobe (NASDAQ:ADBE)
- Fiverr International (NYSE:FVRR)
- Mastercard (NYSE:MA)
- Oshkosh (NYSE:OSK)
- Pfizer (NYSE:PFE)
- Prologis (NYSE:PLD)
- Disney (NYSE:DIS)
Safe Stocks to Buy: Adobe (ADBE)
52-week range: $420.78 – $699.54
First up on this list of safe stocks is California-based Adobe, a company well-known for its document management and digital marketing software and services. Some of Adobe’s various software offerings include Acrobat, Photoshop, Dreamweaver, Illustrator and InDesign. In particular, Wall Street likes this company’s recurring subscription model.
Adobe released fourth-quarter results on Dec. 16. For the period, the company achieved a record revenue of $4.11 billion, up 20% year-over-year (YOY). Further, non-GAAP net income stood at $1.54 billion, or $3.20 per diluted share, compared to $1.36 billion ($2.81 per diluted share) in the prior-year quarter. Cash and equivalents ended the period at $3.84 billion.
On the results, CEO Shantanu Narayen said, “Adobe’s record performance in Q4 resulted in fiscal 2021 revenue exceeding $15 billion.” CFO Dan Durn also cited that, “[w]ith an estimated $205 billion addressable market, we are well positioned for significant growth in the years ahead with our industry-leading products and platforms.”
When it comes down to it, increased digitalization during the pandemic has provided tailwinds for digital advertising and marketing, increasing the demand for Adobe’s software products. For example, in the graphics market, Adobe’s market share is well over 85%.
ADBE stock currently hovers above the $565 territory, up nearly 14% year-to-date (YTD). Shares are trading at 40.8 times forward earnings and 17 times trailing sales. The 12-month median price forecast for ADBE stock stands at $672.50.
Fiverr International (FVRR)
52-week range: $108.19 – $336
Based in Israel, Fiverr International operates a well-known platform that brings together freelancers and businesses looking for contractors. Some of the freelance projects most completed on Fiverr are graphics, digital marketing, video animation, writing and translation services. Further, Wall Street agrees that Fiverr has become a crucial player in the gig economy, which is expected to reach $455 billion in 2023.
Fiverr released Q3 results on Nov. 10. For the quarter, revenue increased 42% YOY to $74.3 million. Non-GAAP net income came in at $7.7 million as well, or 19 cents per diluted share. That’s compared to $4.7 million or 12 cents per diluted share in the prior-year quarter. Finally, cash and equivalents ended the period at $145.6 million. On the metrics, CEO Micha Kaufman remarked the following:
“Fiverr delivered a strong third quarter […] We are also making exciting progress towards our long-term vision of the future of work with the acquisitions of CreativeLive and Stoke Talent, further strengthening our value proposition to increase market share in our massive TAM.”
Management sees its market opportunity at $115 billion, suggesting significant growth potential. In addition, the Great Resignation — the trend whereby record numbers of employees are quitting their jobs as the pandemic ends — should fuel the gig economy in the coming years.
FVRR stock is trading around $114 right now, down 41% YTD. However, its depressed price level offers long-term investors an opportunity to buy it at a moderate valuation. Shares are trading at 15 times trailing sales, according to Seeking Alpha. The 12-month median price forecast for this pick of the safe stocks is $213.
Safe Stocks to Buy: Mastercard (MA)
52-week range: $306 – $401.50
Dividend yield: 0.55%
Next up on this list of safe stocks, financial technology (fintech) giant Mastercard is one of the largest payment processors in the world. Its credit card brands — including MasterCard, Maestro and Cirrus — are used globally. The company generates revenue primarily from swipe fees.
Mastercard issued Q3 results on Oct. 28. For the period, revenue increased 30% YOY to $5 billion. What’s more, adjusted non-GAAP net income came in at $2.3 billion, or $2.37 per diluted share. That’s compared to $1.6 billion or $1.60 per diluted share a year ago. Cash and equivalents also ended the quarter at $8.8 billion. Following the announcement, CEO Michael Miebach remarked the following:
“We saw continued momentum across the business as we delivered strong revenue and earnings growth again this quarter. Our performance was driven by the execution of our strategy, healthy domestic spending and solid growth in cross-border spending which has recently returned to pre-pandemic levels.”
Recent metrics suggest the global digital payments market, which is currently around $5.9 trillion, could reach $9 trillion in 2025. This increase would mean a compound annual growth rate (CAGR) of about 11%.
As such, Mastercard is primed to deliver significant top-line growth. MA stock hovers at around $350 currently. The stock is up just 1% YTD, mainly due to investor concerns about surging inflation and the new omicron variant outbreak. Shares are trading at 43.3 times forward earnings and 19.9 times trailing sales. The 12-month median price forecast for Mastercard stock stands at $430.
Oshkosh (OSK)
52-week range: $83.96 – $137.47
Dividend yield: 1.35%
Oshkosh manufactures specialty trucks like cement mixers, truck-mounted cranes and other access equipment. Last year, the global specialty vehicles market was valued over $255 million. Through 2027, it’s expected to grow at a CAGR of almost 4%.
This pick of the safe stocks is even more interesting, however, because it’s a leading name in commercial electric vehicles (EVs). Earlier this year, OSK was awarded a contract to modernize the mail truck fleet of the U.S. Postal Service (USPS).
Oshkosh announced Q4 results on Oct. 28. For the period, revenue grew 15.6% YOY to $2.06 billion. Net income stood at $89.7 million as well, or $1.30 per diluted share, down from $100 million ($1.46 per diluted share) in the prior-year quarter. Finally, cash and equivalents ended the period at $1.38 billion. On the metrics, CEO John Pfeifer said the following:
“Despite significant supply chain disruptions and higher material costs in the latter half of fiscal 2021, we completed another successful year […] During the year, we overcame many pandemic-related challenges, continued to strengthen our customer relationships, won major new programs in the Defense segment, introduced exciting new electric-powered vehicles and delivered double digit revenue and earnings growth.”
Not too long ago, the U.S. government passed one of the largest infrastructure bills of recent history into law. As a result, increased infrastructure spending will likely provide tailwinds for Oshkosh’s products.
OSK stock hovers around $110 per share right now, up 28% this year. Shares have a moderate valuation at 17.4 times forward earnings and 0.97 times trailing sales. The 12-month median price forecast for OSK stock is $125.50.
Safe Stocks to Buy: Pfizer (PFE)
52-week range: $33.36 – $61.71
Dividend yield: 2.69%
Pfizer is the next name on this list of safe stocks and one of the largest pharmaceutical firms worldwide. It has an annual revenue level close to $50 billion excluding sales of Comirnaty, its Covid-19 vaccine developed jointly with Biontech (NASDAQ:BNTX).
The pharma giant issued Q3 financials on Nov. 2. Revenue increased 134% YOY to $24.1 billion. Further, adjusted net income soared 133% YOY to $7.7 billion or $1.34 per diluted share. That was up from $3.3 billion, or 59 cents per diluted share, in the previous year. On the results, CFO Frank D’Amelio remarked:
“In addition to raising our expectations for revenues and Adjusted diluted EPS for the company including Comirnaty […] today we are also increasing the midpoint of our guidance range for Adjusted diluted EPS […] excluding Comirnaty […] for the second consecutive quarter.”
Management predicts roughly $36 billion in revenue from Comirnaty in 2021. Biontech and Pfizer split both the expenses and profits equally. In addition, Pfizer has developed an antiviral pill for Covid-19 called Paxlovid. Clinical trial results suggest that Paxlovid led to an 88% decline in the risk of hospitalization in adult patients. The U.S. government has already agreed to buy 10 million doses of Paxlovid for $5.3 billion. Other nations are likely to follow suit.
PFE stock currently sells for around $59, up over 59% YTD. Shares are trading at 14 times forward earnings and 4.8 times trailing sales. The 12-month median price forecast for PFE stock is $55.40. Interested readers might want to wait for a pullback in shares.
Prologis (PLD)
52-week range: $93.08 – $165.08
Dividend yield: 1.55%
Prologis is a California-based real estate investment trust (REIT) that owns about a billion square feet of space in industrial and logistics facilities. The occupancy rate for this leading name in logistics real estate stands at 96.6%.
Like other safe stocks on this list, Prologis released Q3 results in mid-October. For the period, revenue went up by 9% YOY to $1.18 billion. Further, net income stood at $722 million, or 97 cents per share. That was up from $299 million, or 40 cents per share, in the prior-year period. The group also has impressive liquidity position with $5.5 billion in cash and availability on its credit facilities. CEO Hamid Moghadam said the following on the results:
“Our third-quarter results were underpinned by record increases in market rents and valuations […] Operating conditions are being shaped by the structural forces driving demand. With vacancies at unprecedented lows, space in our markets is effectively sold out.”
In 2020, about 2.5% of the global GDP flowed through Prologis properties. Given the continued growth in e-commerce, Prologis should also see continued impressive top- and bottom-line growth.
PLD stock currently hovers around the $160 level, up 62% YTD. Shares also hit an all-time high in recent days. However, they do not look cheap at 56.4 times forward earnings and 24.4 times trailing sales. The 12-month median price forecast for Prologis stock stands at $165.50. Given how far shares are up in 2021, short-term profit-taking could be in the cards soon.
Safe Stocks to Buy: Disney (DIS)
52-week range: $142.04 – $203.02
The last entry on this list of safe stocks is legacy media and entertainment group Walt Disney, which makes films with Pixar, Marvel and Lucasfilm studios. It also operates Disney theme parks, media networks and several TV production studios. In November 2019, management also launched Disney+, its subscription-based streaming service that has become a leading competitor to Netflix (NASDAQ:NFLX). The subscription service has an impressive catalog of content accumulated over several decades.
Disney announced Q4 results on Nov. 10. For the period, revenue increased 26% YOY to $18.53 billion. What’s more, net income came in at $160 million, or 9 cents per diluted share. That’s compared to a net loss of $710 million in the prior-year quarter. Cash and equivalents ended the period at $16 billion. On the metrics, CEO Bob Chapek cited the following:
“As we celebrate the two-year anniversary of Disney+, we’re extremely pleased with the success of our streaming business, with 179 million total subscriptions across our DTC portfolio at the end of fiscal 2021 and 60% subscriber growth year-over-year for Disney+.”
Disney’s powerful brand and valuable intellectual property make DIS stock a safe investment for long-term investors. It hovers above the $150 per share mark right now, down 15% YTD. Shares trade at 37 times forward earnings and 4 times trailing sales. The 12-month median price forecast for DIS stock is $198.
On the date of publication, Tezcan Gecgil did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.
