Mostly thanks to overvalued AI equities, the market was already struggling to make any forward progress. With the S&P 500 (^GSPC 0.61%) making a series of lower highs and lower lows since late January, however, it seems stocks are outright succumbing to worries that the conflict in the Middle East will escalate, threatening the global economy as a result.
The matter isn’t quite as black and white as that, though. If you look closely, you’ll sense a growing “risk-off” attitude is at work, paired with subtly rekindled interest in safety and certainty.
With that as the backdrop, although they’ve not made major gains just yet, here’s a rundown of three safe stocks investors could soon flock to as the prevailing mindset shifts away from risk tolerance to risk aversion.
Image source: Getty Images.
1. Procter & Gamble
It’s such a commonly suggested defensive pick that it’s almost become a cliché. Nevertheless, Procter & Gamble (PG +0.03%) offers the sort of certainty that could become monumentally important if most everything else continues unraveling.
You’ve heard of the company, but are you truly aware of how many leading brands are in this consumer staples giant’s family of products? Pampers diapers, Tide laundry detergent, Charmin toilet paper, Gillette razors, Dawn dishwashing liquid, and Crest toothpaste are just a small sampling of what’s in P&G’s portfolio. While Procter must work hard to remain competitive, it’s got the advantage of working with many of the best-known brands in several key categories of goods that consumers continue buying regardless of trouble here or abroad.
Today’s Change
(0.03%) $0.05
Current Price
$150.55
Key Data Points
Market Cap
$350B
Day’s Range
$150.19 – $152.50
52wk Range
$137.62 – $174.80
Volume
342K
Avg Vol
11M
Gross Margin
51.11%
Dividend Yield
2.81%
Yes, this company’s fiscal Q2 revenue missed estimates. Although per-share profits of $1.88 were up from the year-ago comparison of $1.78 as well as better than estimates of $1.86 per share, flat revenue of $22.21 billion fell short of the $22.28 billion that analysts were expecting. Investors were caught a bit off guard.
Just don’t read too much into last quarter’s numbers. As CFO Andre Schulten commented during the earnings conference call, “We’ve now completed what we fully expect will be the softest quarter of the fiscal year.” That’s the chief reason PG stock actually rallied immediately following the revenue shortfall.
The recent pullback is mostly just in response to the fresh conflict with Iran. But Procter’s household goods are largely unimpacted by this geopolitical tension as it stands right now. This dip simply further de-risks ownership of this name.
2. Nice
Given that it’s an artificial intelligence company, it would be easy to assume Nice (NICE 0.82%) is one of the names that most investors are looking to avoid now rather than step into. And to be sure, some of this stock’s weakness since the middle of last year can be attributed to being in the wrong industry at the wrong time.
If things turn truly troubling for the market, though, investors may finally figure out that this company’s business is actually rather resilient.
In simplest terms, Nice provides AI-powered customer service solutions. Its CXOne platform is being used by brands like Visa, Pfizer, American Airlines, Walt Disney, and about 25,000 others, turning a mountain of digital data into a tool that’s capable of serving customers and employees alike.
And it’s an ideal solution. Technology consulting and industry research outfit Gartner rates Nice’s CXOne as the very best option in the contact-center-as-a-service market, while calling Nice’s Cognify one of the best in the conversational AI space, alongside Alphabet‘s Google and above SoundHound AI.
Today’s Change
(-0.82%) $-0.97
Current Price
$117.39
Key Data Points
Market Cap
$7.2B
Day’s Range
$116.17 – $119.99
52wk Range
$94.65 – $180.61
Volume
394K
Avg Vol
873K
Gross Margin
66.41%
Nice is doing a great job of monetizing this superior solution, too. Last year’s revenue of just under $3.0 billion (most of which was recurring revenue) was up 8% year over year, while operating income improved to the tune of 14%, extending long-lived growth trends for both measures. Nice is looking for comparable progress this fiscal year as well. It’s a testament to just how much its customers like what it offers, and how willing they are to continue paying for access to this technology once they have it.
This obviously hasn’t prevented the stock from easing into a prolonged slump. The market’s likely to eventually recognize, however, that this recent weakness is largely the result of broad fatigue of AI stocks in general. Continued growth will fix that soon enough.
3. Berkshire Hathaway
Last but not least, add Berkshire Hathaway (BRKA 0.24%)(BRKB 0.38%) to your list of safe stocks that could soar if the shift away from higher-risk growth names and toward safer options continues to firm up.
The start to the Greg Abel era has been somewhat frustrating — to Berkshire shareholders as well as Abel himself. While he’s only been at the helm as CEO since the beginning of this year and Berkshire Hathaway today is pretty much the same as it was when Warren Buffett stepped down at the end of last year, Berkshire shares continue to lag the broad market. Abel’s decision to tap the company’s enormous cash hoard to repurchase shares of itself — while responsible — doesn’t seem to be what most stakeholders were hoping for.
Today’s Change
(-0.38%) $-1.89
Current Price
$490.00
Key Data Points
Market Cap
$1.1T
Day’s Range
$489.79 – $494.35
52wk Range
$455.19 – $542.07
Volume
145K
Avg Vol
4.9M
Gross Margin
23.63%
But if safety becomes a must-have for investors’ portfolios in the foreseeable future, Berkshire offers it in a big way. And it’s got everything to do with what this conglomerate actually is.
See, you may be most familiar with Berkshire Hathaway as a manager of a large portfolio of stocks. That’s hardly the whole story, though. Roughly one-third of its current market cap reflects the value of all the privately held businesses it also owns, like insurer Geico, Duracell batteries, Shaw flooring, railroad BNSF, Pilot Travel Centers, and Dairy Queen, just to name a few. Not only do most of these wholly owned cash cows continue contributing cash flow to their parent regardless of the economic environment, since they’re not publicly traded, their value (and therefore Berkshire stock’s value) isn’t inherently undermined by marketwide weakness.