[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.]
With financial markets across the globe in free fall on concerns that the coronavirus from China is turning into a pandemic, investors are naturally looking for safe stocks to buy to weather the coronavirus storm.
Fortunately, there are plenty of good options out there.
First, though, let’s get one thing clear. The base case for the coronavirus pandemic is for it cause a sharp but short downturn in the U.S. and global economy.
That is, the global economy has come to a screeching halt at the end of the first quarter. It will remain shutdown for the next few weeks. But, in the three countries where this virus hit hardest and hit first — China, South Korea, and Italy — strict social distancing measures have worked to thwart spread. The rest of the world is following in their footsteps, and implementing similar social distancing measures.
Assuming such measures produce similar outcomes, then the virus should be largely “under control” by May. Once it is under control, the global economy should rebound, on the back of enormous fiscal and monetary stimulus.
Important note: this is simply my “best guess”, as no one really knows what will happen here.
But, if like me, you believe that temporary pain is the base case scenario here, 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 on coronavirus concerns includes:
- Gilead (NASDAQ:GILD)
- Kroger (NYSE:KR)
- Costco (NASDAQ:COST)
- Walmart (NYSE:WMT)
- Zoom Video (NASDAQ:ZM)
- 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.
So long as this remains true, then GILD stock — which is actually up 10% over the past month — will keep rising amid the coronavirus outbreak.
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 KR stock is up about 22% over the past month.
This strength in KR stock will persist so long as consumers suffer from coronavirus hysteria, making the stock an attractive safe stock to buy for buffer against Covid-19.
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 common cold (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.
In other words, 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.
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.
Zoom Video (ZM)
The coronavirus-related bull thesis on Zoom Video 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 Zoom’s video conferencing tools are of paramount importance.
Instead of walking into your ten o’clock meeting, the new norm will be to dial into Zoom Video and have a video conference call at ten o’clock.
Because of this dynamic, so long as the Covid-19 outbreak keeps employees at home, demand for Zoom Video’s solutions will grow, and ZM stock will perform better than peers.
It already has. ZM stock is up 25% over the past month. It will continue to do so, so long as the outbreak persists (which could be for another few weeks to months).
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.
Netflix is the world’s best at-home entertainment option. Current subscribers will watch more Netflix while they sit at home, giving Netflix more data. Non-subscribers will get bored sitting at home all day, every day, so they will sign up for Netflix, giving Netflix more subs and more revenue.
In other words, Netflix may actually benefit from the coronavirus. So, owning NFLX stock here could be a good thing if you’re looking for protection against coronavirus-related volatility.
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.