[Editor’s Note: “7 Safe Stocks to Buy on the Coronavirus Dip” was originally published in February 2020. It is regularly updated to include the most relevant information.]
Financial markets across the globe are rebounding sharply on data which increasingly shows that the novel coronavirus outbreak won’t be as big, bad, and scary as initially feared.
This is true. The coronavirus pandemic is plateauing in many countries well ahead of schedule, and at peaks much lower than feared. Recent antibody testing also implies that the true death rate of Covid-19 isn’t much higher than the seasonal flu.
But, it’s important to remember that we haven’t beaten the coronavirus pandemic yet. We still don’t know how the economy will fare when we finally do re-open things, or how the virus will react once we ease social distancing measures. As such, it’s still a good time to look for safe stocks to buy to weather the coronavirus storm.
Fortunately, there’s lot of good options out there.
First, though, let’s understand the bigger picture here. If, like me, you believe that the base case scenario for the coronavirus pandemic is near-term pain followed by a second-half rebound, then the investment game-plan is simple. Do two things:
- Dollar cost average into long-term winners. Near-term coronavirus headwinds are dragging down long-term winning stocks. Once these headwinds pass, those stocks will get back to winning. So gradually roll into the dip for the long haul.
- Buy safe stocks. In order to create a buffer for your portfolio amid the coronavirus outbreak, it’s probably best to buy safe stocks that are immune to (or benefiting from) the virus hysteria.
I’ve already put together a list of strong, long-term growth stocks to buy on the coronavirus dip. Now, it’s time to put together a list of safe stocks to buy. Together, these two groups of stocks should create a dynamic, strong, and alpha-generating portfolio during this pandemic.
That list of safe stocks to buy amid Covid-19 includes:
- Gilead (NASDAQ:GILD)
- Kroger (NYSE:KR)
- Costco (NASDAQ:COST)
- Walmart (NYSE:WMT)
- Ring Central (NYSE:RNG)
- American Water Works (NYSE:AWK)
- Netflix (NASDAQ:NFLX)
Safe Stocks to Buy on the Coronavirus Dip: Gilead (GILD)
Bio-pharma giant Gilead has created a nice buffer for itself amid broader coronavirus turbulence because the company is the leading candidate for developing a Covid-19 treatment.
A lot of biotech companies have rushed to develop a Covid-19 vaccine or treatment. Many believe they have done so, and are now putting their solutions through various trials.
But, of all those potential vaccines and treatments, Gilead’s anti-viral drug, remdesivir, is widely considered to be the most likely one to pass trials and actually work, at scale, in fighting the coronavirus. Case-in-point: leaked data from the University Chicago of Medicine shows that remdesivir could actually work wonders in treating severe Covid-19 patients.
I expect full-scale Phase 3 clinical trial data released in May to corroborate this leaked data. If so, this GILD stock — which has been winner so far amid the coronavirus pandemic — will stay on a strong uptrend.
One of the safest stocks to buy amid the coronavirus market meltdown is Kroger.
That’s because, if there’s one thing consumers haven’t stopped doing, it is grocery shopping. If anything, consumers are actually grocery shopping more now, as they are increasingly opting for dinners in as opposed to dinners out.
The plain and simple here is consumers need to eat, regardless if everyone in America is 100% healthy, or if everyone has coronavirus. Consumers still need to eat. And because consumers don’t want to go out as much, so long as coronavirus hysteria sticks around, grocery store shopping will pick up.
That’s great news for Kroger, America’s largest grocer. It should be no surprise, then, that Kroger reported identical retail supermarket sales growth of 30% in March.
So long as U.S. consumers continue to stockpile, Kroger will keep reporting huge growth numbers. So long as they do, KR stock will remain resilient.
Consumers are panic bulk buying in preparation of the coronavirus getting much worse in the United States, and there’s no place in America that’s better to panic bulk buy at than Costco.
Yes, it’s largely just hysteria. For most Americans, the coronavirus will hit them no harder than a flu (if that), so most Americans don’t need to panic bulk buy.
But that’s not how Americans live life. Americans live life with a constant exclamation point. So if news outlets are saying the virus is coming to town, they will rush into Costco and buy up the whole store.
That’s exactly what they did in March. Costco reported that comparable sales for its U.S. locations rose 12.1% in March.
This is just the beginning. So long as the coronavirus keeps spreading in America, consumers will keep overreacting, and Costco will keep benefiting from panic bulk buying.
That makes COST stock an solid stock to buy to weather the coronavirus storm.
Much like Costco, Walmart should benefit from panic bulk buying so long as coronavirus hysteria dominates the consumer mindset. Also, much like Kroger, Walmart should benefit over the next few weeks to months from an uptick in grocery shopping and grocery delivery.
Even further, consumers may start to become more price-conscious now as their worries extend beyond the coronavirus and into the health of the economy, the labor market, and their jobs. If so, you will see an influx of consumers into low-price channels. Walmart is the king of low-price shopping.
All in all, then, Walmart is actually in a great position amid the coronavirus outbreak. Bulk buying, heavier grocery shopping, and an increase in consumer price sensitivity should all have a positive impact on Walmart’s operations over the next few weeks to months.
Early data speaks to this. According to the Wall Street Journal, Walmart’s U.S. store sales rose 20% in March, while sales on Walmart.com are up 30% over the past eight weeks.
That’s why WMT stock has weathered the coronavirus storm. Shares are up 3% over the past month. This resilience will persist so long as coronavirus hysteria sticks around.
The coronavirus-related bull thesis on Ring Central is pretty simple.
Most businesses in major urban areas across the world are now telling their employees to work-from-home. In a work-from-home environment, digital work solution tools like Ring Central’s cloud communication platform are of paramount importance.
Instead of walking into your ten o’clock meeting, the new norm will be to dial into a RingCentral meeting. Instead of running down the office hall to run an idea past your boss, the norm will be to message your boss over RingCentral.
Because of this dynamic, so long as the Covid-19 outbreak keeps employees at home, demand for Ring Central’s solutions will grow, and RNG stock will perform better than peers.
It already has. RNG stock is up almost 30% year-to-date.
American Water Works (AWK)
Consumers may start cutting back on buying new clothes at the store, eating out, going to the movies, and doing anything that generally involves being around crowds.
But one thing they won’t cut back on is their at-home water usage, and that’s great news for water infrastructure supplier American Water Works.
The story at American Water Works before the coronavirus outbreak was very good. This was a company that was upgrading America’s very old water pipe infrastructure, and was in the first few innings of doing so (implying sustained big growth for a lot longer).
The story after the outbreak is pretty much the same. That’s because, regardless of where consumers are, they will still need water. So long as demand for water remains robust, demand for upgrading America’s old water pipe infrastructure will remain robust, too.
As such, American Water Works should be just fine in the near term. AWK stock should continue to show impressive resilience.
The most growth-like company on this list, Netflix, also doubles as one of the safest stocks to buy on coronavirus fears.
Why? Because if consumers across the globe are staying home more often, then they will be watching more Netflix.
It’s that simple. And first quarter numbers from Netflix confirmed as much. The streaming platform added a record 15.8 million subscribers in January, February, and March — more than double what Wall Street was expecting.
So long as the virus keep spreading, consumers will keep signing up for Netflix in droves, and NFLX stock will weather the coronavirus market storm.
Of note, though, NFLX stock is fully valued, and the economy is starting to re-open. That combination isn’t a winning combination. As such, if economic normalization does go as progressed, the full valuation on NFLX stock may keep this stock from going much higher for the foreseeable future.
Luke Lango is a Markets Analyst for InvestorPlace. He has been professionally analyzing stocks for several years, previously working at various hedge funds and currently running his own investment fund in San Diego. A Caltech graduate, Luke has consistently been recognized as one of the world’s top stock pickers by various other analysts and platforms, and has developed a reputation for leveraging his technology background to identify growth stocks that deliver outstanding returns. Luke is also the founder of Fantastic, a social discovery company backed by an LA-based internet venture firm. As of this writing, he was long NFLX.