Finding stocks for a volatile market doesn’t have to mean sacrificing growth for value. What it does mean is finding quality stocks in defensive sectors of the market. These sectors include companies that tend to outperform the market during times of uncertainty.
This isn’t just about raising the floor, although they do offer that benefit. These stocks offer growth as well. And because many of these stocks pay dividends, an investor gets a larger total return and enjoys the benefits of compounding.
These stocks are often blue-chip companies that can be out of favor with investors who consider them boring. But in volatile markets, boring is a beautiful thing. Owning these stocks can allow you the peace of mind to step away from your screen knowing that your portfolio will be fine when markets are ready to rally.
Here are seven stocks for a volatile market that investors can turn to for both growth and value.
Wendy’s (WEN)
Whenever I look at Wendy’s (NYSE:WEN) as an investment, I’m reminded of the “We’re number two, we try harder” campaign that defined the Avis rental car brand for 50 years. The point was that Avis was working harder than the category leader, Hertz, to win its customers’ business.
I don’t know where Wendy’s falls on the list of fast-food restaurants. But it’s behind the leader which is still McDonald’s (NYSE:MCD). However, Wendy’s continues to update their menu options and digital processes to capture parts of the market that it wasn’t a significant player in just five years ago.
One of those is breakfast, which is a key area of emphasis for fast food restaurants. One of its most recent initiatives is the company’s “2 for $3” Breakfast Biggie Bundles.
And Wendy’s is also turning out to be a worthy competitor in terms of total return. Analysts are forecasting a 35% upside for WEN stock. And that doesn’t include a dividend that currently yields 5.38%. And all of that is underpinned by earnings growth which is expected to grow around 13% in the next 12 months.
Coca-Cola (KO)
When I think about stocks for a volatile market, a stock like Coca-Cola (NYSE:KO) comes to mind. KO stock is down more than 17% in 2023. That could be the result of normalized growth or concerns about valuation. There’s also growing distaste for “snack stocks” in the age of weight loss drugs.
Whatever the reason, investors are getting KO stock at a nice discount. But that’s not likely to last long. The company continues to deliver solid year-over-year (YOY) revenue and earnings growth. And the company is using its 33.7% increase in net income to strategically pay down debt in this higher interest rate environment.
That’s good news for investors that might have been hoping to see more bottom line growth from the company. And even without higher earnings, investors should have little worry that Coke will be raising its dividend early next year. The company is a dividend king that has increased its dividend for 62 consecutive years and there’s no reason to believe that will end.
Currently, KO stock trades at 20x forward earnings and analysts expect 28% share price growth in the next 12 to 18 months.
Walmart (WMT)
In the second quarter, Walmart (NYSE:WMT) was one of the strongest companies in a fairly weak retail sector. The retailer beat on the top and bottom lines, and the company’s third quarter earnings guidance is for EPS between $1.45 and $1.50. The top end of that range would match the same quarter in 2022.
The company is seeing sales from many demographics, including ones that may not have been previously shopping at the store. This is a consequence of inflation which is causing consumers to be more mindful of what they buy, and where they buy it. That’s a value proposition that works in Walmart’s favor.
Walmart projects full-year earnings between $6.36 and $6.46. At the high end, that would be a 2% increase from 2023. Analysts expect earnings to increase by 8.8% in the next 12 months. Combined with a safe dividend that currently yields 1.43%, investors are likely to get a strong total return for their investment in WMT stock.
Exxon Mobil (XOM)
In 2022, crude oil prices struggled to get above $60. Today, $80 is likely to be the new floor. And many analysts are suggesting that $100 oil is likely, if not inevitable. That means there’s still time to buy energy stocks. And Exxon Mobil (NYSE:XOM) is one of the most attractive stocks in the sector.
Even with 8% stock price growth in the last 12 months, the company still trades at an attractive 10x forward earnings. Plus, you get a dividend that has been increasing for 40 consecutive years and currently yields 3.41%. And the company is in the middle of a $50 billion share buyback program that runs through 2024.
Some insiders have been dumping XOM stock in the past year. But there are two things to remember. Individual investors, even company executives, sell stocks for a variety of reasons. They only buy for one reason. And there is a healthy amount of insider buying that points to a higher upside for XOM in 2024.
Microsoft (MFST)
Microsoft (NASDAQ:MSFT) isn’t the first name that comes to mind when investors think about stocks for a volatile market. But there’s a reason it’s considered part of the “Magnificent 7” stocks. Microsoft is a leader in many of the high-growth sectors that will drive the economy in years to come.
The company’s leadership in artificial intelligence (AI) is driving revenue growth in 2023 and will continue to do so in the future. Plus, the company is a leader in areas such as cloud computing, personal computing, and gaming. That means MSFT has a high floor.
And if you believe the analysts, that floor is about to move higher. Even accounting for the 38% growth in MSFT stock in 2023, analysts believe the stock has 13% upside. Plus, the company’s dividend yield of around 0.8% won’t turn many heads. But it’s been growing for 21 consecutive years and now pays an attractive $2.72 per share on an annual basis. And it’s doing that without compromising growth in other areas.
General Dynamics (GD)
Defense stocks are down this year. But General Dynamics (NYSE:GD) can at least say it’s “less bad” than other stocks in the sector. As of this writing, GD stock is down about 5%. One of the issues is lingering supply chain issues that will continue to be in place for the rest of 2023.
But, as is often the case with equity markets, one year’s laggards will be the next year’s leaders. That is likely to be the case with defense stocks.
Geopolitical flashpoints are increasing in both number and intensity. It’s also likely that there will be more clarity on the level of defense spending in the U.S. budget by the end of the year. As the fifth-largest global defense contractor, General Dynamics stands to benefit from that clarity.
Analysts give GD stock a 10% upside from its current price. If that’s enough to get you interested, you can consider the company’s dividend which has a yield of 2.23% and pays out $5.28 per share on an annual basis.
Humana (HUM)
Healthcare stocks continue to be one of the best groups of stocks for a volatile market. Humana (NYSE:HUM) is one of the leaders in this sector, and it continues to show its value in 2023.
Nevertheless, HUM stock is down about 2% for the year despite a 17% rally in the last month. The largest concern is the cost-trend uncertainty about Medicare Advantage. The insurer is also dealing with rising claims from the return of elective surgeries that were postponed during the pandemic. Investors also have to digest the news that its long-time CEO Bruce Broussard is leaving the company.
That’s the bad news. The good news is that HUM stock is now trading at a low multiple relative to its long-term potential. At just 17x forward earnings, the stock looks objectively undervalued. Analysts project earnings growth of 13.5% in the next 12 months which should support predicted stock price growth of 18.9%.
On the date of publication, Chris Markoch 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.
