Navigating Market Volatility: Finding Safe Havens in Healthcare and Beyond
In a market characterized by volatility and uncertainty, investors are increasingly seeking safe havens – companies that offer consistent growth and stability even amidst economic headwinds. This week, the market witnessed a wild swing, with the three major U.S. indexes initially tumbling due to concerns about the Federal Reserve’s interest rate policy and weak economic data. However, the market ultimately bounced back, fueled by hopes for a potential easing of rate hikes. Against this backdrop, CNBC Pro has identified a set of large-cap companies – particularly in the healthcare sector – that could serve as potential safe havens for investors. These companies exhibit low share price volatility over the past five years, have outperformed the S&P 500 in terms of total return, and have demonstrated resilience in the recent market downturn.
Key Takeaways:
- Low Volatility, High Returns: These companies have displayed remarkably low share price volatility over the past five years, indicating their ability to weather market storms.
- Outperforming the S&P 500: They have consistently delivered total returns exceeding the S&P 500’s performance over the past five years, showcasing their ability to generate consistent growth.
- Resilience in Recent Downturn: Despite the recent market turbulence, these stocks have held their ground, even experiencing positive gains in the past three months.
- Attractive Valuations: Their forward price-to-earnings ratios remain below the broad market index’s, suggesting they are undervalued relative to their growth potential.
Healthcare: A Safe Haven in Unsettled Times
The healthcare sector, known for its stability and consistent demand, features prominently among these safe havens. Let’s delve into the specific examples identified by CNBC Pro:
AbbVie: A Pharmaceutical Giant with Strong Momentum
AbbVie, a pharmaceutical company, stands out with a staggering 262% gain over the past five years, making it the top performer in this group. Its stock has gained 22.6% year-to-date, and has seen an impressive 18.7% gain in the past three months. The company’s recent success is fueled by strong momentum in its immunology portfolio, effectively mitigating the decline in Humira sales, its flagship drug, due to competition from cheaper biosimilars. "The company’s strong recent momentum in immunology effectively bridges lost Humira revenues, setting the company up for strong EPS growth over the medium-term," noted Morgan Stanley Wealth Management, which recently added AbbVie to its U.S. model portfolio. While Humira sales have seen a decline, AbbVie’s immunology treatments, Skyrizi and Rinvoq, are gaining traction, with the company’s management expecting a shift in patients toward these newer offerings.
Amgen: A Steady Grower Despite Recent Challenges
Amgen, a biotechnology powerhouse, has delivered a steady 5-year total return of 104%, albeit the slowest among the listed safe havens. Shares have gained nearly 12% this year. The company recently tightened its full-year earnings outlook and reported weaker-than-expected second-quarter profits, citing increased operating expenses, particularly those related to its experimental obesity drug MariTide. While this has led to some concerns, the company’s long-term prospects remain strong, with MariTide holding significant potential. Wells Fargo analyst Mohit Bansal downgraded Amgen shares to equal weight, but acknowledged that analysts are already factoring in MariTide’s success, reflecting the company’s recent outperformance.
UnitedHealth Group: A Dominant Force in Healthcare
UnitedHealth Group, a leading health insurer, boasts a five-year total return of 169% and has gained over 18% year-to-date. The company’s dominance in the health insurance market, coupled with its growing presence in healthcare services and technology, makes it a compelling investment option. As the U.S. population ages and healthcare costs continue to rise, UnitedHealth Group’s services are in high demand, ensuring its continued growth in the coming years.
Beyond Healthcare: Finding Stability in Other Sectors
It’s important to note that safe havens are not exclusive to the healthcare sector. Other industries offer companies with stability, growth potential, and a low-volatility profile.
T-Mobile: A Telecommunication Giant with Strong Growth Prospects
T-Mobile, a leading mobile network operator, has a 5-year price volatility of 6.2 and has delivered a 152% gain over the past five years, consistently exceeding the market’s returns. Shares have gained over 21% year-to-date. The company’s strong second-quarter earnings report, exceeding both revenue and profit estimates, further cemented its status as a solid performer. T-Mobile also raised its full-year customer addition forecast, demonstrating its continued strong subscriber growth. Several analysts, including those at TD Cowen and Barclays, raised their price targets on T-Mobile, citing the company’s consistent operational excellence and conservative subscriber guidance. "The company continues to outperform operationally and its subscriber guidance is conservative," stated Barclays analyst Kannan Venkateshwar, who raised his price target by $20 to $200.
AutoZone: A Reliable Player in the Automotive Aftermarket
AutoZone, a leading automotive replacement parts retailer, provides essential goods and services to a broad customer base, making it a relatively recession-proof business. The company has a five-year total return of 184% and has seen a strong share price performance in recent months. AutoZone’s focus on providing quality parts and excellent customer service has contributed to its consistent growth and makes a compelling case for investors seeking stability in a volatile market.
Aflac: A Sound Insurance Company with a Long History of Success
Aflac, a major supplemental insurance provider, offers products that can help individuals manage unexpected healthcare expenses, making it a reliable choice for investors seeking long-term value and stability. Despite its relatively low growth rate, Aflac has consistently delivered steady profits and shareholder returns, making it a sound investment option for those seeking a reliable and stable income stream. The company has a five-year total return of 139% and has demonstrated resilience in recent market swings.
A Prudent Approach to Navigating Uncertainty
While these companies offer attractive investment prospects, it’s crucial to remember that no investment is without risk. Before making any investment decisions, it’s essential to do your own research, consider your individual risk tolerance, and seek advice from a qualified financial advisor. These companies present a compelling selection of safe havens for investors seeking to weather the storm of market volatility, but careful due diligence and a well-defined investment strategy remain essential for achieving success.
