Three Safe Stocks to Buy for an Umbrella of Protection

  • Walmart (WMT) —  The company’s has a leading position in the industry and the ability to sustain strong dividend growth
  • Pfizer (PFE) — Currently sporting a cheaper valuation and has huge growth prospects
  • Lockheed Martin (LMT) — Government contracts provide stable earnings and revenue visibility
a hand drawing umbrellas covering money from rain, safe stocks
Source: Shutterstock

The global financial markets have been going through turbulent times. The last two years had been particularly difficult as the economy struggled to recover from the pandemic. While things are starting to return to normalcy, new challenges have emerged. Most notable being the risk of rising inflation and crisis led by Russia-Ukraine conflict. This instability will push investors towards safe stocks.

Annual inflation rate in the U.S. has surged to 7.9% in February 2022. This is the highest inflation rate in the last 40-years. Energy prices have been the biggest contributor to inflation.

The conflict in the Europe shall further exacerbate the global energy crisis, leading to higher oil prices and supply-chain constraints.

As such, the market outlooks appear uncertain with inverted yield curve pointing towards a likelihood of economic recession.

According to Goldman Sachs (NYSE:GS) analyst, Jan Hatzius, there is a 20%-35% chance of economy going into recession next year based on the yield curve. U.S. GDP growth forecast is also slashed to 1.75% (from 2%) for 2022.

Given looming concerns, investors should plan to invest in low-beta, recession-resistant stocks to withstand market downturns. Let’s talk about three safe stocks that are proven to generate steady income-flow while protecting capital from market downturns.

WMT Walmart $156.84
PFE Pfizer $54.64
LMT Lockheed Martin $460.66

Walmart (WMT)

Image of Walmart (WMT) logo on Walmart store with clear blue sky in the background
Source: Jonathan Weiss / Shutterstock.com

Walmart (NYSE:WMT) is one of the largest discount retailers globally operating 10,500 stores across 24 countries. The company’s long-standing relationship with its vendors, large scale of operations, and wide customer reach are its competitive advantages.

Walmart has thrived well during economic downturns in the past due to its low-price offerings and inelastic nature of its products.

During the Covid-19 pandemic, the company has enjoyed higher sales as consumers stocked their inventories. Most countries allowed Walmart stores and facilities to remain open to facilitate uninterrupted distribution of necessary goods. Total revenues increased by an impressive 6.7% for fiscal year 2021.

Although growth has moderated, same-store sales and e-commerce sales growth have been healthy. Going forward, Walmart expects to invest $16 billion to $17 billion to enhance its e-commerce capabilities and technology. This is likely to support growth.

With inflation rising to a 40-year high, Walmart will stand to gain, given shoppers’ preference for discounted products.

The company has a history of paying dividends consistently over the last 49 years, which should work in favor of investors seeking stable income during recession.

All together, these factors make WMT stock a leader among potential safe stocks.

Pfizer (PFE)

blue Pfizer (PFE) logo on the windows of a corporate building
Source: photobyphm / Shutterstock.com

Pfizer (NYSE:PFE) is the second largest biopharma company in the world that innovates, develops, and markets its medicines. Lipitor, Celebrex, and Viagra are some of its well-known medicine inventions.

The company’s Covid-19 Comirnaty vaccine (in collaboration with BioNTech) dominates the U.S., European markets, and other international markets with 70% market share. Its ability to generate higher levels of antibodies has led to superior vaccine adoption. Especially when compared to the vaccines developed by other players, like AstraZeneca (NASDAQ:AZN) and Johnson & Johnson (NYSE:JNJ).

In fact, in the U.S., currently only Pfizer’s vaccines can be administered to children aged five years and above. In 2021, the company’s operational revenues increased by an impressive 92%, mostly due to its sale of Comirnaty vaccine.

Going forward, Pfizer should benefit from its roll out of antiviral pill for treating Covid-19 called Paxlovid. Additionally, Comirnaty booster doses will also support growth.

Other than that, the company has made significant blockbuster deals (like Arena Pharmaceuticals) that could be beneficial to the shareholders in the long run. The company is expected to report on its development of ulcerative colitis patients and Etrasimod. If these projects are successful, they could begin adding revenue to Pfizer’s top line in 2023.

Let’s also not forget about the company’s dividend profile for income seeking investors. Pfizer has an attractive dividend yield of 3.1%. Its strong financial position should allow it to maintain its dividend payments in the future.

PFE stock is currently trading at a significant discount to its peers at a price to earnings ratio (P/E) of 7.24x (versus sector average of 21.59x). Given, the company’s long-standing history of successful innovations and pipeline of products, it is worth investing in this stock.

Lockheed Martin (LMT)

An F-16 and an F-35 model at the background, at the Lockheed Martin exhibition stand in Thessaloniki International Fair.
Source: Giannis Papanikos / Shutterstock.com

Lockheed Martin (NYSE:LMT) is the largest U.S.-based defense contractor. It is best known for its fighter aircraft like the F-16 Fighting Falcon and F-35 Lightning II. But this massive defense conglomerate is also involved in everything from building satellites and cybersecurity systems to radars and lasers.

The company provides a stable stream of revenues and earnings as its business is highly dependent on the defense budget of the U.S. government and its allies. As government contracts are long term in nature and made in advance, it gives investors revenue and growth visibility.

Hence investors looking for a stable income and growth can consider this stock.

The war between Russia and Ukraine has led to increased demand from NATO members for defense products such as fighters, helicopters, missiles, among others.. Lockheed being the leader in this space, is likely to benefit.

The stock is currently trading below it 5-year average P/E at 16.29x. This is also at a discount in comparison to its peer group average of 19.10x.

Given, the company’s growth prospects, attractive valuation and 2.5% dividend yield investment in the stock can be considered in uncertain times from a long-term perspective.

On the date of publication, Sakshi Agarwalla did not have (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.

Sakshi Agarwalla has more than eight years of experience writing equity research reports and preparing financial models for companies across various industries, as well as writing newsletters and financial articles. Recently, she assisted her Fund manager in executing trades, preparing weekly, monthly NAVs and writing newsletters. She has a postgraduate degree in finance and has completed CFA.


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