Are we headed for an economic recession? JPMorgan Chase (NYSE:JPM) puts the odds at 35%, up from 25% earlier this year. Many economists are sounding the alarm, pointing to a slowing labor market and pullback in consumer spending. Notable investors such as Warren Buffett are battening down the hatches, selling stocks and raising cash.
While there continues to be some debate about if, when, and how severe a recession in the U.S. would be, nearly everyone is in agreement that an economic downturn will lead to continued volatility in the stock market. Since early July, equities have been extremely rocky to navigate and that looks likely to continue, at least in the near-term.
Investors shouldn’t panic though. Rather, keep a cool head and consider these three safe harbor stocks to buy amid the August volatility.
Walmart (WMT)
If the economy sputters, it’s a good bet that more people will turn to discount retailer Walmart (NYSE:WMT) for their essential household needs. In good economic times or bad, Walmart remains a staple for most American consumers. The company also has the distinction of being the largest grocery store chain in the U.S., with more and more people relying on it for affordable food purchases. This makes Walmart a safe harbor stock to buy.
Earlier this year, Walmart split its stock on a three-for-one basis as the share price hit an all-time high. So far this year, WMT stock has gained nearly 30% and continues to be a top-performing retailer. The company’s share price has been steadily climbing on strong financial results. In May, Walmart reported EPS of 60 cents, which topped estimates of 52 cents. The company reported quarterly sales of $161.51 billion, surpassing the estimated $159.50 billion. Sales were up 6% year-over-year. Walmart next reports earnings on Aug. 15.
General Mills (GIS)
Speaking of groceries, there’s also General Mills (NYSE:GIS). The maker of Wheaties and Cheerios, as well as pet food, sells the type of essential items that people tend to buy in any type of economy. This gives General Mills stock a bit of a moat around it during hard times. The company’s shares haven’t set the world on fire lately, up 4% this year, but they’re trading at a decent valuation of 16 times future earnings estimates.
GIS stock also offers shareholders a strong dividend of 60 cents a share, giving it yield of 3.47%. The company’s most recent financial results were mixed due to inflation and higher prices charged on its products. EPS of $1.01 beat Wall Street forecasts of 99 cents. However, revenue of $4.71 billion missed consensus targets that called for $4.85 billion. Management blamed the sales miss on financially stressed consumers.
Despite some headwinds, General Mills sales can be expected to hold up even in the event of a market downturn as consumers tend to eat more at home when money is tight.
Costco Wholesale (COST)
Last but certainly not least, we have Costco Wholesale (NASDAQ:COST). The warehouse club is consistently one of the best stocks investors can own. COST stock has risen 31% this year, is up 52% over the last 12 months, and has gained 212% in the last five years. The company’s shares trade a premium and are expensive at a price-to-earnings ratio of 52. But the price reflects the continued growth of Costco and its stock appreciation.
The strength of Costco was on full display when the company reported its financial results for the month of July. Those results showed a 20% rise in the company’s e-commerce sales. Costco, which still reports its results on both a monthly and quarterly basis, said that it had revenue of $19.30 billion in July, up 7.1% YOY. Removing the impact of gas prices, Costco’s same-store sales rose 7.2%, surpassing the 6.9% increase seen in June.
Costco’s online sales, in particular, are showing continued strength. The company has been working to boost its e-commerce business by improving delivery times and adding options to buy products online and pick them up in store, which is proving popular. Costco is also considered a candidate for a stock split as its share price approaches $1,000.
On the date of publication, Joel Baglole 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.
On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.
