Equity investors shaken by the biggest pullbacks in years are seeking stocks that have demonstrated the ability to grow profits through bull or bear markets. These stocks must have unusual resilience, their large scale enabling them to navigate economic or geopolitical shocks. And they must do it as the Federal Reserve continues to raise rates in 2019 albeit at a slower pace. “We will be defensive in the sense of investing in companies that can control their own destiny,” said Melda Mergen, deputy global head of equities for Columbia Threadneedle Investments, in a Fortune special report. “We’re not going to buy things [just] because they are cheap.”
After extensive research, the magazine has come up with 30 such stocks from diverse sectors including aerospace, gaming, tech and retail. In this first of two articles, we look at five of these companies, cited below; a second article on five additional stocks will be out on Thursday.
5 Stocks to Weather the Storm
What it Means for Investors
The recent market sell-offs have made these household names look a lot cheaper than during the most of the bull market, and thus worth a hard look. Their relative cheapness, and the quality of these companies’ management and business models, makes them attractive over the medium to long term.
Technology. Tech stocks have been badly beaten up in recent months. But within that space, Fortune says video game companies like Activision Blizzard should continue to grow along with the burgeoning demand for home entertainment. Chip companies such as Texas Instruments also are likely to be resilient as the company provides semiconductor chips for video games and to computing technology in general. Texas Instruments, which is trading around 20% below its peak, also offers a dividend yield higher that it has been in years.
Retail. While consumer spending remains strong, investors want to own retail companies that will be less affected by a downturn. While not typically considered a consumer staple stock, Tiffany’s sales of engagement rings comprise more than 25% of total sales. Constellation Brands, whose U.S. beer market share is growing, is also expected to see additional growth from its recently acquired $4 billion stake in Canadian medical marijuana company Canopy Growth.
Many of these stocks may not bear fruit immediately. For example, investors are diversifying internationally into markets that may be at a different stage of the economic cycle than the U.S. Europe’s Airbus, for one, may be about a year and half behind its U.S. rival Boeing in terms of earnings growth. That suggests there is space for those earnings to fly higher.