There’s no doubt investors are quickly shifting for anything safe these days. We can characterize that fear in many ways, but broadly speaking, a strong barometer is the Fear and Greed Index. Its current reading is “fear,” the second-lowest reading there is, which should directly correlate to the market assuming a more defensive stance. That means certain stocks are likely to see increasing investment as portfolios shift in a risk-off period.
In the next few months, this trend is only going to increase as inflation continues, with many factors set to affect the economic outlook. In short, the attractiveness of safe stocks will only rise.
Let’s take a look at these seven safe stocks to buy now.
Safe Stocks: Campbell Soup (CPB)
It’s fairly easy to see why a brand like Campbell Soup (NYSE:CPB) makes sense as a stock to buy in these times. Its brands, especially soups, are synonymous with value. And the company is proving that it can operate well in an inflationary environment marked by significant supply chain constraints.
Management was keen to note that it is finding ways to mitigate margin pressure, which is reflected in net sales that increased 7% in its fiscal third quarter and continuing operational earnings per share, or EPS, which increased 15%.
2022 has already proven to be a very difficult market. It is highly likely that things will get worse before they get better. However, CPB stock has bucked the trend of everything moving downward. In fact, it’s up more than 11% on the year. Don’t expect it to rise significantly. Rather, expect it to continue to act as a hedge against the massive inflation we’re enduring and appreciate it for the 3.15% dividend it comes with.
Alcoholic beverage producer Brown-Forman (NYSE:BF-A, NYSE:BF-B) hasn’t been spared in the downturn in 2022. In fact, it is now trading flat year-to-date after recovering from a summer downturn. That isn’t particularly bad, especially when compared with broader markets that have dropped more than 20%. And there’s good reason to believe several factors will conspire in its favor in the coming months.
For one, people like to drink alcohol on holidays, and we are nearing several as the year begins to wind down. Whether that’s one of its whiskey brands, including Jack Daniels, Woodford Reserve or Finlandia vodka, you can safely assume sales will spike.
Secondly, consider Americans have soured on the economy following the Federal Reserve rate hikes this summer. Yet another increase is planned for September, meaning the closer we move to a recession, the more heavily favored spirit consumption becomes.
Safe Stocks: Dollar General (DG)
Dollar General (NYSE:DG) stock has provided consistent, modest EPS beats over the past four quarters. That’s good news in and of itself.
Further, when earnings were released, Dollar General management announced it was raising fiscal-year forecasts at a time when other retailers were getting crushed. That confidence sends a strong message to investors as DG stock remains nearly flat for the year. In other times, remaining flat is often used to denote weakness. In this case, it doesn’t.
Just as importantly, investors should simply note Wall Street was expecting Dollar General management to scale back guidance. So, when management told Wall Street it intends not only to meet sales growth of 9.3% this year but to hit 11%, investors should have perked up.
Dollar General isn’t ratcheting back guidance. That’s a testament to its pricing strategy. Expect that as inflation continues to run rampant, sales will rise as well.
Goldman Sachs (GS)
Recommending Goldman Sachs (NYSE:GS) is a clear departure from the consumer goods defensive stocks already listed in this article.
The reason is simple, however. In June, UBS Group highlighted the clear opportunity in stocks exposed to the high-end consumer. The fact is that the wealthy are less likely to suffer if and when a recession kicks off.
For one, Goldman Sachs caters to a higher-end clientele than more commercially-minded banks, like Bank of America (NYSE:BAC). The point here is Goldman Sachs is likely to see an uptick in business volume as its wealthier clients diversify their assets to take advantage of any recession.
Additionally, rising interest rates favor the bank, as it can reasonably expect fees to rise as well as revenues as a result.
Safe Stocks: Ulta Beauty (ULTA)
Ulta Beauty (NYSE:ULTA) stock doesn’t receive a lot of attention, but it should. The products this beauty retailer sells seem to be holding up well in the downturn. Additionally, its operations are clearly strong with a supply chain strategy that suggests it can continue to thrive.
The company’s quarterly results so far this year were impressive. The company reported record sales of $2.3 billion in Q1 and continued the trend in Q2. Equally important, its gross profit is rising in a time when many other retailers see their margins declining.
Those impressive results bolstered management confidence enough that it raised fiscal-year 2022 sales guidance twice so far this year. Its estimate increased from a range of $9.05 to $9.15 billion prior to Q1 to between $9.65 and $9.75 billion as of Q2.
Further, the company noted merchandise inventories increased from $1.44 billion to $1.67 billion year-over-year by the end of the second quarter. That suggests the company shouldn’t have problems with supply-side constraints. Since demand appears strong, Ulta Beauty looks to be in an overall solid position.
Louis Vuitton (LVMUY)
Investing in Louis Vuitton (OTCMKTS:LVMUY) stock makes sense given the expansion of the global middle class. I’ve already mentioned the elite aren’t going to be affected by any recession in the same ways the rest of us will. If you believe in the notion the wealthy will benefit while the rest suffer, LVMUY should pique your interest.
But it isn’t only the one percent who buy Louis Vuitton products — it’s also the expanding global middle class. They want to be seen in Christian Dior or Fendi while wearing Hublot and Bulgari watches and drinking Chandon, as well.
The point here is this month could well kick off a renewed round of recession fears. Rather than making luxury stocks less attractive, it makes them more attractive, according to UBS. Louis Vuitton is a strong company and it doesn’t seem worried about broader issues based on share buybacks announced in May.
On the date of publication, Alex Sirois 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.