As the chances of a recession keep climbing, the clock’s ticking when it comes to getting your portfolio ready to ride out the continued storms in the markets. Fortunately, it’s not too late to do so by cycling into safe stocks.
These types of high-quality, low-volatility names hold up far better than many of the more speculative stocks that could drop even further if today’s challenges (inflation, interest rates and Russian-Ukraine war) cause a recession.
But it’s not simply just a matter of “these stocks will go down less than the overall market.”
These safe harbor plays also have a strong chance of providing solid returns for your portfolio. Why? They are the types of stocks that perform well during an inflationary environment. In other words, they are fundamentally superior stocks that can serve as inflation hedges.
Here are seven safe stocks, all ‘A’-rated in my Portfolio Grader, that you should consider adding to your portfolio today:
- AbbVie (NYSE:ABBV)
- Bank of Montreal (NYSE:BMO)
- Equinor (NYSE:EQNR)
- Pfizer (NYSE:PFE)
- Prologis (NYSE:PLD)
- Regeneron Pharmaceuticals (NASDAQ:REGN)
- Exxon Mobil (NYSE:XOM)
Safe Stocks: AbbVie (ABBV)
Over the past six months, shares in pharmaceutical giant AbbVie have been on a tear. In sharp contrast to how the overall market has performed.
What’s behind this? For most of 2021, ABBV stock delivered a mixed performance. Mostly, because of concerns that patent expiration of its main blockbuster drug, Humira, would severely impact its operating performance going forward.
However, it’s now clear the company’s robust pipeline will more than make up for this. The company’s most recent guidance update indicated it will likely deliver results this year above prior expectations.
Seeing it as good value, with a solid dividend (3.5% forward yield), investors have pounced on it. Yet while it has gone up about 50% in the past six months, and over 19% year-to-date, don’t assume you’ve missed the boat adding this safe stock to your portfolio.
As it remains reasonably priced, at 11.3x this year’s estimated earnings, there’s still good reason to enter a position in this recession-resistant healthcare play.
Bank of Montreal (BMO)
Don’t let its name fool you. Although this is a bank headquartered in Montreal, Canada, this financial services giant has a large footprint in the United States. It’s the parent company of Chicago-based BMO Harris Bank, one of America’s top 25 largest banks.
BMO is expanding its U.S. operations further, through its pending acquisition of Bank of The West. It may be pursuing this deal at the right time. With interest rates moving higher, the banking sector is expected to see higher profitability this year and the next.
In turn, that’s good news for investors in BMO stock. Not only will higher profits justify additional gains for shares. Higher profits mean an increased chance of a high dividend increase as well.
Currently paying out a 3.5% yield, this financial institution has raised its dividend six years in a row. Its average annual dividend increase over the past five years has been 6.51%. Consider it one of the safe stocks to add to your watchlist.
Norway-based Equinor may not be a household name stateside. But with a $111.6 billion market capitalization, it’s hardly a small fry in the energy industry. This integrated oil and gas company has operations all over the world, including the U.S.
For example, it’s the fifth-largest producer of oil and gas in the Gulf of Mexico. That’s not to say, however, that this stock is under-the-radar among investors. Year-to-date, it has gone up by over 43%, in line with the big increase in crude oil and natural gas prices.
Already performing strongly, you may be wondering why I’m still recommending it. Although investors have priced-in an improved environment for the oil and gas industry (which underperformed during the 2010s), that doesn’t mean it has run out of runway.
With the economic sanctions imposed on Russia sending its oil east instead of west? Oil companies based in North America and Europe will make up the difference. That bodes well for EQNR stock, as higher earnings will likely support additional moves higher for this cheap (it trades for around 7x this year’s earnings) stock.
Safe Stocks: Pfizer (PFE)
After performing well in 2021, PFE stock has delivered more choppy performance so far in 2022. A big reason for this is waning excitement over both its pandemic vaccine tailwind, as well as its Paxlovid Covid-19 treatment.
As the virus has fallen out of the headlines, that’s no surprise. But while sales of its vaccine peaked last year, Pfizer is still expected to generate $32 billion from the vaccine and boosters this year. Paxlovid could generate another $22 billion this year for the big pharma giant.
Beyond the pandemic, it’s important to note that it has more going for it than just this catalyst. Yet the market has put too much emphasis on this event. In turn, it has been oversold. It trades for just 7.1x this year’s expected earnings, and has a high dividend yield (3.03%).
Having said that, Investors are starting to catch on that its pullback in January and February was an overreaction. Consider buying it now, before it re-hits its past high, and hits new highs, between now and the end of 2022.
Real estate, like energy, is a great inflation hedge. As the U.S. dollar uses purchasing power (i.e., what’s happening now), hard assets like property become more valuable. Yet among the scores of real estate investment trusts (REITs) out there, PLD stock may be one in particular you should consider adding.
The acceleration of e-commerce growth since 2020 has been a boon for Prologis, a global provider of warehouse space. Growth in this industry may be taking a post-virus breather. The risk that a recession brings the post-pandemic recovery to a screeching halt.
However, per CEO Hamid Moghadam, demand for its properties “shows no signs of slowing.” The REIT expects another year of solid results. Core Funds From Operations (FFO), a common metric for measuring REIT earnings, is expected to come in between $5 and $5.10 per share.
Continuing to expand its presence, and able to raise rents in line with inflation, this high-quality industrial real estate lessor is likely to remain a top performer in its industry.
Regeneron Pharmaceuticals (REGN)
Biotech firm Regeneron is best known for its Covid-19 antibody treatment. This product resulted in a massive increase in revenue during 2021. For the year, sales were up nearly 100%.
Yet like Pfizer, the market may be putting too much emphasis on its pandemic catalyst. This particular treatment is far from being the company’s sole blockbuster. Macular degeneration treatment Eylea remains its largest treatment by revenue.
Granted, there are concerns that even its non-Covid catalysts are not long for this world. Eylea’s patents will expire later this decade. However, with its robust pipeline, concerns about this are overblown.
Regeneron has a strong track record of developing and bringing to market treatments for rare diseases. As InvestorPlace’s Dana Blankenhorn argued late last year, a big reason for this is the company’s Velocisuite drug discovery method. You could say this is the “secret sauce” that gives it a deep economic moat.
A biotech company may not be what first enters your mind when talking about safe stocks. But demand for rare disease treatment stays strong, even in a recession. This is definitely a defensive play to consider.
Safe Stocks: Exxon Mobil (XOM)
What a difference a year has made for the fortunes of Exxon Mobil. Last year, even as oil began to recover, doubts ran high that this oil giant would have to cut its dividend.
Now? With crude oil back above $100 per barrel, a dividend cut is the last thing on anyone’s mind. As a result of a secure payout, and stronger earnings ahead, XOM stock has surged over 48% in the past twelve months.
So, as it has gone from out-of-favor to very in-favor, is it time to cash out or stay away? Not so fast. The crisis playing out in Eastern Europe will likely continue to keep crude oil prices high. This will result in large profits for the integrated oil and gas giant.
That’s not all. Like I discussed in early March, Exxon Mobil has laid out a long-term plan to create shareholder value. Through cost cutting, and wise capital allocation, it’s well-positioned to deliver strong earnings, irrespective of crude oil prices. In turn, it’ll return these earnings to investors, via its high dividend (forward yield of 4.13%), as well as through the repurchase of shares.
On the date of publication, Louis Navellier has positions in ABBV and REGN in this article. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.