By exclusively reading the headline print, one might not recognize the pressing need for stable stock picks. For example, as CBS News recently pointed out, the bear market is finally over. Earlier this month, the S&P 500 pushed 20% higher than the trough the equities sector hit in Oct. last year.
As well, the May jobs report seemingly renders obsolete the concept of best stock for a volatile market. Specifically, the economy added 339,000 jobs last month, far outpacing projections calling for 190,000. By logical deduction, it appears that fears of a recession have been well overblown. At the same time, historical data for the major equity indices reveal that market sentiment looks bullish until it doesn’t. In other words, you don’t want to base an entire thesis on one technical dynamic. Also, the details of the latest jobs report leave some question marks. For instance, the length of the average workweek declined slightly, translating to a significant impact at scale.
Also, job seekers are taking longer to find work, which implies in part that employers may not be offering with great vigor attractive incentives like higher pay or remote work options. Therefore, reliable stocks designed fortuitously as confusing market investments remain surprisingly relevant.
| SRE | Sempra | $148.20 |
| KR | Kroger | $46.17 |
| AFL | Aflac | $69.43 |
Sempra (SRE)
If you’re targeting stable stock picks for investing during market confusion, it’s difficult to overlook Sempra Energy (NYSE:SRE). For one thing, as a public utility, Sempra benefits from the concept of natural monopolies. Specifically, the barrier to entry for the utility sector is so steep that would-be competitors don’t even try. Given the massive presence that Sempra commands, it easily ranks among the most relevant ideas for confusing market investments.
Second, Sempra owns large swathes of the lucrative Southern California market. According to data from Statista, the gross domestic product (GDP) of California came out to $3.59 trillion. While some debate on the topic exists, if California were its own country, it would be the fifth-largest economy in the world. Recently, California Governor Gavin Newsom stated that it’s the fourth largest economy, though that might be a premature assessment.
However, if you want to drill into the granularity, the Golden State represents a massive economic powerhouse. And that means its residents – complain as they might about high prices – generally have the wherewithal to pay them. Therefore, SRE ranks as a relatively easy buy for the best stocks for a volatile market.
Kroger (KR)
Fundamentally, grocery store giant Kroger (NYSE:KR) sells itself as one of the best stable stock picks for investing during market confusion. Obviously, no matter how advanced we get as a civilization, humans will always require nutritional sustenance. Kroger provides exactly that, which is why I’m not surprised that it’s up over 3% since the Jan. opener. If anything, it appears underappreciated.
Sure enough, the market prices KR at a forward multiple of only 10.26. As a discount to projected earnings, Kroger ranks better than 83.08% of companies listed in the defensive retail segment. Also, it’s noteworthy that shares trade at a trailing sales ratio of 0.23 times. In contrast, the sector median stands at 0.46 times.
From the framework of reliable stocks to buy during ambiguous times, Kroger also benefits from the trade-down effect. Basically, when consumers face financial pressures, they will trade down to cheaper alternatives of commonly purchased goods and services. Here, Kroger is the trade-down beneficiary of both dining out and shopping at higher-end grocery stores.
Aflac (AFL)
Ordinarily, I’d like to stick an auto insurance firm into a list involving stable stock picks. Because most states in the union require some form of auto insurance, practically everybody has to buy a policy. You can’t get much more of a hostage audience than that. However, supplemental insurance firms like Aflac (NYSE:AFL) may offer a viable alternative.
As a supplemental insurance provider, Aflac covers the gaps found in mainline coverage plans. While that might seem a bit of a superfluous purchase – and thus vulnerable to red ink should a down cycle materialize – the Covid-19 crisis likely changed people’s minds on this topic. Essentially, the pandemic taught us that anything can happen, even in this modern age of technical wizardry.
Put another way, it’s better to have it and not need it than to need it and not have it. To be fair, Aflac doesn’t offer the greatest read in terms of financial metrics. However, you should note that its greatest strength lies in its excellent profitability. As well, Aflac carries a forward yield of 2.41%. While not particularly generous, its payout ratio sits at 27.54. Additionally, Aflac features 40 years of consecutive annual dividend increases, a status the company will want to hold onto.
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.
