7 Safest Stocks as Market Volatility Heats Up

NYSE: PFE | Pfizer, Inc.  News, Ratings, and Charts

PFE – Friday gave us a glimpse of the next wave for the stock market. That being a period of greater volatility. That is a call for investors to consider safer stocks like the ones featured in this article (ABBV, EPD, PFE, PM and more).

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Don’t worry. We are still very much in a bull market. I shared some fresh insight on that fact in this recent commentary: 1 Equation Keeps the Bear Market in Hibernation.

Unfortunately we now seem to be hitting a speed bump after the market has impressively run up 12% the past few months. Then add on top the convenient excuse of the coronavirus as a reason to finally sell stocks and take some of those recent gains off the table.

Add these things together and it certainly looks like we are entering a new phase for the market. One with more volatility and Flight to Safety (already very evident in the dramatic drop in the 10 year Treasury this past week).

The antidote is to overweight safer stocks that will be the market leaders going forward. I believe the 7 stocks featured in this article are excellent choices in this rockier environment. Here is the full list:

Company Ticker Market Cap ($mil) Avg EPS Surp % Last 4 Qtr Div Yield % Price Target Upside
   Enterprise Prod EPD $59,874 9.85 6.47 $27.35 $34.54 26.29%
   Pembina Pipeline PBA $21,187 32.65 5.02 $38.68 $43.61 12.75%
   Philip Morris PM $134,039 8.39 5.43 $86.15 $95.83 11.24%
   Host Hotel & Resort HST $12,249 3.16 4.68 $17.08 $18.81 10.13%
   Regency Centers REG $10,688 2.11 3.67 $63.79 $70.23 10.10%
   Abbvie ABBV $123,541 1.71 5.65 $83.54 $90.88 8.79%
   Pfizer PFE $220,369 8.73 3.62 $39.82 $43.00 7.99%

 

I want to highlight some of these 7 safe stocks below to provide more insight to their attractive qualities. Then at the end of the article I will share full details on the research study I ran to narrow down to these selections.

Pfizer (PFE - Get Rating) is the perfect stock for the times. It is the largest company on the board at $220 billion market cap. Plus, as you all know, PFE is a pharma company that is a safe bet in a Risk Off environment.

Beyond the hearty 3.6% dividend yield PFE also offers consistent performance each earnings season. Their report comes out this week, but since Pfizer hasn’t missed in the past 11 quarters, there is little concern buying ahead of the announcement.

Yes, PFE may only have a modest 8% upside to its fair value target of $43, but that is the “average” target of Wall Street analysts. Just a couple weeks back the analyst from RBC proudly put out a $46 target. And the street high for PFE is $47. That says Pfizer packs enough value to go along with steady earnings outlook and ample income.

Philip Morris (PM) This is the only consumer staples featured today. Yet we all understand why a tobacco centric company like PM is considered a stable choice in risky times. And for all those who are unsure about the future outlook of the industry, then let PM’s 7 straight earnings beats and 3X normal dividend yield of 5.43% make you feel at ease. Add that to 11% upside fair value and PM should provide a smoother ride to outperformance this year.

Abbvie (ABBV) On the surface ABBV has a lot in common with the aforementioned Pfizer. Both being large cap healthcare companies. But then the stories start to differentiate. ABBV has the much better history of year over year earnings growth. Plus only 1 earnings miss in the past 5 years. That is a level of operational excellence a notch above PFE. On top of that Abbvie also provides a superior dividend yield of 5.65%, about 50% better than by PFE.  But then they do come back to a similar outlook when it comes to the value picture with about 8% upside to fair value with some analysts expecting even more.

Which is the better stock ABBV or PFE? That is a matter of personal choice. But for me I would give the slight nod to ABBV given the superior earnings history and larger dividend.

Enterprise Products Partners (EPD) We end today’s stock search with a pipeline MLP that sports both the largest dividend yield at 6.47% and the most upside to fair value 26.29%. I need to be honest that I previously had EPD in the Reitmeister Total Return portfolio back in the summer when the market was tanking thanks to concerns about China trade. Even though my other defensive plays like Verizon outperformed at that time, I was a bit surprised at how poorly these shares stood up during the market downdraft.

The point is that EPD is a slightly riskier investment than the others noted today. But in return for that increased risk you potentially get more reward with EPD given greater dividend yield and value upside. In the short run, it is a coin toss which of these 7 stocks will do best. My gut tells me that over the long run EPD will probably outperform given these two attractive features of higher dividend and value.

Want more great stock picks? Then check out these additional resources:

List of Best High Yield Dividend Stocks

About POWR Ratings

Reitmeister Total Return portfolio

About the Research Study to Find the Safest Stocks

Here are the steps I took to narrow down to the 7 safest stocks likely to outperform in this newly volatile market environment:

  • POWR Rating of A or B = Best proof of a stocks timeliness & momentum
  • Large caps only ($10 billion market cap or higher). Larger = safer in this environment.
  • 3%+ dividend yield. We want it well above the S&P average dividend yield and 10 year Treasury yield. And thus a beacon for conservative investors seeking income. Note that we have 4 clocking in at over 5% dividend yield with EPD all the way up at 6.47%.
  • Defensive industries only: Consumer Staples, Medical, REITs and Utilities (includes telecom and pipelines). These are the ones that investors cling to when the “stuff hits the fan”.
  • Average earnings beat greater than 0% the past 4 quarters. This is meant to show a consistency of earnings quality with little risk of faltering in the future. This item is especially beneficial at this moment when 75% of companies have not yet reported earnings this quarter.
  • Minimum 8% upside from current price to average target price. You’d be surprised how much this criteria narrowed up the list because the low rate environment has led to many of these stocks being bid up beyond fair value. Yes PFE has only 7.99% upside…but I decided to round up because too perfect of a stock for this environment not to include in this list. The rest are nicely above 8% all the way up to 26% upside for EPD.

PFE shares closed at $39.82 on Friday, down $-0.89 (-2.19%). Year-to-date, PFE has gained 1.63%, versus a 2.15% rise in the benchmark S&P 500 index during the same period.


About the Author: Steve Reitmeister


Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
PFEGet RatingGet RatingGet Rating
ABBVGet RatingGet RatingGet Rating
EPDGet RatingGet RatingGet Rating
PBAGet RatingGet RatingGet Rating
PMGet RatingGet RatingGet Rating

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