We live in extraordinarily strange (and possibly perilous) times, thus necessitating consideration for stocks to buy for safety. True, very few people like to be worrywarts. However, under the present market and economic circumstances, a cautionary approach may be wise. These reliable ideas may not be sexy, but they’ll allow you to stay in the equities sector with confidence.
Indeed, the market is lacking in confidence these days. In late August, Federal Reserve chair Jerome Powell outlined his hawkish strategy for monetary policy at the annual economic symposium at Jackson Hole, Wyoming. That discouraged the equities sector initially, until Wall Street realized controlling inflation embodies a net positive for business sentiment.
However, when inflation came in much hotter than expected, the market again entered a dour mood. Particularly, the Street didn’t like that despite energy prices declining, prices for other consumer segments increased. It suggested inflation was broadening out, which cynically bolsters the case for stocks to buy for safety.
While growth ideas offer excitement, the Fed must now implement even more aggressive monetary tightening. About the only positive here is that stocks to buy for safety could rise above the muck.
Berkshire Hathaway (BRK-A, BRK-B)
As some InvestorPlace contributors have noted, investments that cover a broad range of businesses offers confidence for stakeholders. When you bet on everything, you’re bound to hit upon a winner or two. That’s the sentiment I have for Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B). A massive conglomerate that covers everything, its jack-of-all-trades profile makes BRK-B one of the best stocks to buy for safety.
Now, being a jack-of-all-trades usually comes with the pejorative assumption that you’re not a master of the underlying endeavors. However, that’s not the case with Berkshire Hathaway. After all, the company’s CEO and chairman is none other than Warren Buffett, the Oracle of Omaha. I don’t think people label him an oracle because he makes bad stock picks.
In a way, BRK.B functions as an exchange-traded fund. Over the years, ETFs have garnered much praise because they cover a range of market ideas under a given theme. With Berkshire, you’re betting alongside one of the market greats. That’s a wise wager for stocks to buy for safety.
If you’re worried about volatility on Wall Street, the insurance sector provides many of the stocks to buy for safety. Sure, it’s a boring industry. If you’re young and have plenty of time to build your portfolio, you don’t want to play it too safe. Otherwise, you risk the opportunity cost in effectively eschewing some of the best growth opportunities.
However, when the Fed basically promised higher rates, that’s the signal to look at companies like Allstate (NYSE:ALL). Want another reason? When economic data indicates the Fed must be even more aggressive with its interest rate hikes, ALL becomes very attractive.
Fundamentally, the insurance sector features price inelasticity. Even with myriad headwinds affecting households, skimping on vital coverage could lead to devastating financial consequences. That’s one argument.
The other argument is that for some insurance products, they’re mandatory. Cynically, then, ALL is one of the best stocks to buy for safety.
I’ve discussed Costco (NASDAQ:COST) plenty of times, so even I’m bored with mentioning it. However, under the theme of stocks to buy for safety, you can’t go wrong with COST. For one thing, you can look at comparative performance. No, the stock isn’t doing well on absolute terms, shedding 11% on a year-to-date (YTD) basis. However, Target (NYSE:TGT) is down 28% during the same period.
Fundamentally, the income factor bolsters COST stock. Specifically, I refer to the average profile of the Costco member. Typically, Costco members skew higher income (around $125,000 a year), young-ish and married. When you stack these attributes against other big-box retailers, COST stock simply features a more confidence-inspiring profile.
In addition, the company performs well during inflation. Obviously, Costco popularized buying in bulk, but it should also perform well during deflation. Deflation implies lower prices, which should then serve as retail therapy for affluent members.
Alphabet (GOOG, GOOGL)
Now, I’m not going to sit here and tell you that Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) is one of the best stocks to buy for safety at this very moment. If you look at the price charts, you’ll notice that Class C GOOG shares have shed 28% YTD. Similarly, Class A GOOGL stock dipped nearly 29% YTD. Either way, you’re staring at steep losses.
As well, Alphabet suffers from significant headwinds in the digitalization sphere. For instance, Facebook parent Meta Platforms (NASDAQ:META) warned a few months back that troubles are emerging in the digital ad space. With many companies skittish about the forward implications of the new normal economy, Alphabet likewise suffered.
Still, the woes of GOOG and GOOGL arguably reflect a dilemma on the balance sheet. In other words, the red ink represents a snapshot in time. Moving forward, just the U.S. digital ad market alone may reach a valuation of more than $300 billion. That would translate to more than three-quarters of all media spending.
And who owns this digitalization ecosystem? Essentially, Alphabet’s Google. So, GOOG and GOOGL could effectively be some of the best stocks to buy for safety in the long-term.
Home Depot (HD)
A name that has become risky this year, Home Depot (NYSE:HD) nevertheless for me represents one of the best stocks to buy for safety. Primarily, HD provides some diversification from the usual names I mention. But in carefully assessing the wider narrative for the home improvement giant, I believe it’s at least somewhat recession resistant.
For one thing, Home Depot represents one of the few companies that has effectively defended itself against juggernaut Amazon (NASDAQ:AMZN). In this case, Home Depot features superior economies of scale. Home improvement materials tend to be big and bulky, which effectively negates Amazon’s e-commerce delivery advantage. As well, people tend to prefer trying equipment in person before making a purchase decision.
The other factor to consider is that Home Depot is an essential business. Throughout major disruptions such as the coronavirus pandemic, it stays open to provide services to the members of its community.
At first glance, McDonald’s (NYSE:MCD) might not seem like a smart bet among stocks to buy for safety. While it provides food services, the Golden Arches basically represent a discretionary business. Put another way, you don’t need to eat at McDonald’s. Indeed, quite a few medical practitioners will advise you not to eat at McDonald’s.
Still, who are we kidding? The iconic American corporation enjoys a captive audience. It’s not so much that McDonald’s represents a premium culinary experience. Rather, the company provides addictive products. For example, the reason its French fries are so addictive is that they’re incredibly salty. Eating salty foods triggers dopamine, the chemical that stimulates feelings of pleasure.
Therefore, MCD benefits from the “cheap thrills” narrative. Should the Fed accidentally trigger a recession with its hawkish monetary policy, guess what people will need? Dopamine – lots and lots of dopamine. McDonald’s provides that in overdrive, making MCD one of the stocks to buy for safety.
When focusing on stocks to buy for safety, household goods offer a great platform — well, the sector usually does. These days, even the household goods segment suffered steep declines. Unfortunately, Colgate-Palmolive (NYSE:CL) doesn’t distinguish itself from absolute terms, with CL declining nearly 12% YTD. Still, the company outperforms many of its peers in the underlying sector.
On a fundamental note, Colgate-Palmolive could be one of the more attractive names among traditional stocks to buy for safety. According to the Washington Post, many people didn’t go to the dentists’ office during the Covid-19 pandemic. Therefore, a return to the dentist has many folks anxious about oral care.
But I also think an underlying message exists. It’s quite possible some people didn’t undergo dental care due to the associated expense. That makes CL a cynical idea among stocks to buy for safety. Essentially, through the underlying company’s products, some people may be choosing to be their own dentist.
On the date of publication, Josh Enomoto 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.