Safe Haven Stocks: A Refuge Amidst Market Turmoil
With recession fears swirling and worrisome economic growth indicators, investors are seeking shelter amidst a volatile stock market. As the Dow Jones Industrial Average took a plunge of nearly 500 points on Thursday, followed by a further dip on Friday, anxieties about the Federal Reserve’s interest rate strategy and a potential recession are rising. In this turbulent market landscape, CNBC Pro identified a collection of stocks exhibiting characteristics that can help investors weather the storm. These stocks, characterized by low volatility, robust dividend yields, and consistent earnings growth, offer a potential haven for those seeking stability in uncertain times.
Key Takeaways
- Amidst market volatility, CNBC Pro identified a group of stocks demonstrating resilience and potential for safety.
- These stocks are characterized by low volatility (beta less than 1), providing stability in turbulent markets.
- Additionally, these stocks boast dividend yields exceeding 2%, offering a source of passive income.
- With consistent earnings growth over the past three years, these companies present a track record of financial strength.
McDonald’s: A Value-Oriented Haven
McDonald’s (MCD) has captured the attention of investors seeking safe havens. Although shares have retreated over 9% in 2024, the fast-food giant’s stock exhibits significantly lower volatility than the broader market, boasting a beta of 0.71. This suggests the stock is less susceptible to market swings. Despite a weaker-than-expected second-quarter performance, Morgan Stanley Wealth Management has added McDonald’s to its dividend equity portfolio, citing its attractive valuation and the company’s strategy to focus on value offerings.
Analyst Daniel Skelly highlights the company’s response to the mixed consumer spending environment: "With rising prices amid a mixed consumer spending backdrop, MCD has experienced pressure on its comps, weighing on earnings and valuation. However, we believe management’s plan to lean into ‘value’ is credible and supported by historical precedent. With the stock trading at a reasonable valuation, we believe this offers a compelling opportunity to add a quality and defensive consumer franchise to the model."
Equinix: Riding the Data Wave
Equinix (EQIX), a digital infrastructure firm, also emerges as a beacon of stability. Although the stock has climbed only about 1% in 2024, it has seen strong momentum with a gain of over 7% in the past month. The company’s 2.1% dividend yield stands out, placing it second only to CVS Health’s 4.43% on the list.
Wells Fargo upgraded Equinix to "overweight" from "equal weight" in late July, driven by optimism about accelerating data center demand in 2025. Analyst Eric Luebchow describes Equinix’s attractive risk-to-reward profile: "[W]hile there are still some questions as to whether [Equinix] can stabilize (or improve) revenue growth into 2025, positive gross bookings commentary out of Q1 and an expectation for improving cabinet additions in 2H’24 should lead to an inflection in revenue in 2H’24 and into 2025. With sentiment/expectations relatively low, we like the set-up, as we suspect EQIX can maintain constant-currency revenue guide and accelerate revenue growth in 2H’24."
L3Harris Technologies and Omnicom Group: Industry Leaders
Rounding out the list of potential safe havens are L3Harris Technologies and Omnicom Group, representing different sectors within the economy.
L3Harris Technologies, a leading provider of aerospace and defense technology, possesses a robust business model supported by government contracts and a consistent track record of earnings growth. This stability provides a strong foundation for income generation and potential appreciation in value.
Omnicom Group, a global advertising and marketing services company, boasts a diversified portfolio of clients across various industries. This diversification offers resilience in the face of economic headwinds, minimizing dependence on any single sector.
A Comprehensive Strategy for Navigating Volatility
While these stocks hold promise for navigating market turbulence, it is crucial to acknowledge that no investment is immune to risk. Each stock presents its own unique set of factors that investors should consider before making a decision. Diversification remains a key principle in portfolio management, spreading risk across different asset classes and sectors.
Investors seeking safe havens in the current market environment may want to consider incorporating these stocks into their portfolios. However, it is essential to conduct thorough research, consider personal investing goals, and consult with a financial advisor before undertaking any investment actions.
