In this article we will take a look at the 10 safe stocks to invest in for the long term. You can skip our comprehensive analysis of the industry and go directly to the 5 Safe Stocks To Invest in For Long Term.
The unstable prices of many technology-related growth stocks have forced investors to turn to safe stocks for some long-term gain. These stocks generally comprise companies that have stable, established businesses, and steady revenues which provide a constant stream of dividends for shareholders. In times of recession, as the pandemic last year demonstrated, safe stocks can offer investors a way out of a financial crisis. While technology stocks hog all the attention, the smart money is still pouring into companies with a proven record for excellence.
For example, Warren Buffett, one of the leading investment minds in the world, has grown his business empire over the years by building his stakes in safe stocks. His company owns shares of Apple Inc. (NASDAQ: AAPL), Bank of America Corporation (NYSE: BAC), The Coca-Cola Company (NYSE: KO), and several other established giants of the business world. Buffett is worth more than $100 billion courtesy of his bets on these stocks. Most of the firms he invests in are not affected by market pressures and do well even in periods of slow growth around them.
Some of the factors that investors should consider while identifying safe stocks include steady revenues, dividend growth, and lack of cyclicality. In 2020, as pandemic hit sales, even established companies like The Walt Disney Company (NYSE: DIS), The Boeing Company (NYSE: BA), and Carnival Corporation & plc (NYSE: CCL) were forced to cut dividends as profits declined. One factor that could be decisive when looking for established firms that have uninterrupted flow of income is the competitive advantage they offer.
How To Find Safe Stocks?
Since high-flying technology firms usually reinvest their dividends to increase share value, it is becoming very hard to identify safe stocks that offer steady returns. There is even evidence to suggest that there is a bubble around technology stocks that will likely blow up and bring the market crashing down. The Panic/Euphoria Index of investment bank Citigroup was at its highest value on record last month, indicating that the market may be heading towards a breather after a strong bull run over the first quarter of this year.
Speculation around meme stocks earlier this year also affected investor confidence going into the second quarter, further strengthening a push towards safe stocks from growth stocks. In times of soaring valuations and huge market caps, like the recent public offering of Coinbase Global, Inc. (NASDAQ: COIN) demonstrated, there is a need to put in due diligence before placing money in inflated firms. The swing towards fintech from traditional banking seems to have facilitated this environment of uncertainty.
In fact, the entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY.. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
With this context and industry outlook in mind, let’s take a look at the 10 safe stocks to invest in for the long term.
Safe Stocks To Invest in For Long Term
10. Costco Wholesale (NASDAQ: COST)
Costco Wholesale (NASDAQ: COST) is a Washington-based firm that operates membership-only retail stores. It operates in the United States, Puerto Rico, Canada, the United Kingdom, Mexico, Japan, Korea, Australia, Spain, France, Iceland, China, and Taiwan. The products that the company offers include packaged foods, groceries, beverages, cleaning supplies, electronics, and countless other items. It has close to 800 warehouses around the world. It also has an e-commerce website for selling the same items online.
It has a market cap of more than $160 billion and posted more than $166 billion in annual revenue in August 2020, up from $152 billion in the previous year. The company was founded in 1976 and is placed tenth on our list of 10 safe stocks to invest in for the long term. Earlier this month, the company increased its dividend by 12.9% to $0.79 per share from $0.70 per share. Investment bank UBS last month said that it expected Costco stock to Outperform as the economy reopened following the pandemic.
9. Verizon Communications Inc. (NYSE: VZ)
Verizon Communications Inc. (NYSE: VZ) is a New York-based multinational telecommunications firm. It has stakes in the technology, information, and entertainment sector. The products that the company markets include postpaid and prepaid service plans, wireless equipment, and residential fixed connectivity solutions. The company has more than 94 million wireless connections and more than 7 million broadband connections. It was incorporated in 1983 and is placed ninth on our list of 10 safe stocks to invest in for the long term.
It has a market cap of over $238 billion and posted more than $128 billion in annual revenue in December 2020. Earlier this week, the company announced that it had expanded fixed 5G internet services to 21 more cities across the United States. The service had previously been available in Houston, Los Angeles, and Chicago. 5G internet is being marketed as an alternative to the traditional cable internet because of the speed benefit it carries in addition to its wireless capabilities. The company is offering a ten-year lock on price for consumers willing to subscribe.
8. American International Group, Inc. (NYSE: AIG)
American International Group, Inc. (NYSE: AIG) is a New York-based insurance company. It markets its products for commercial, institutional, and individual customers across the world. The firm offers protection against general liability, environmental, commercial automobile liability, casualty, and crisis management insurance products, as well as others. The company sells the products through insurance agents, financial advisors, banks, and broker-dealers. The company was founded in 1919 and is placed eight on our list of 10 safe stocks to invest in for the long term.
It has a market cap of more than $40.9 billion and posted more than $43 billion in annual revenue in December 2020, down from more than $49 billion in the previous year. Last month, the share price of company stock soared more than 3% on the back of reports that billionaire Warren Buffet was building a stake in the company. Buffet has long maintained that the success of his insurance business has driven the growth of his company to one of the largest in the world in the last few decades.
7. General Electric Company (NYSE: GE)
General Electric Company (NYSE: GE) is a Boston-based multinational company operating in aviation, healthcare, electronics, power, and other industries. The products that the company offers include gas turbines, independent power producers, boilers, generators, steam turbines, and air quality control systems; as well as advanced reactor technologies solutions. It has a renewable energy division working on wind, blades, hydro, storage, solar, and grid solutions.. The company is seventh on our list of 10 safe stocks to invest in for the long term.
It has a market cap of more than $119 billion and posted an annual revenue of close to $80 billion in December 2020. Last month, Bank of America retained a Buy rating on General Electric stock with a price target of $15. Analysts at the bank projected a positive outlook for the firm in 2021 predicted the investor base of the firm to broaden in the coming years. A few weeks before the Bank of America maintained the GE rating, Deutsche Bank raised the price target of the firm to $14 from $13.
6. Starbucks Corporation (NASDAQ: SBUX)
Starbucks Corporation (NASDAQ: SBUX) is a Seattle-based company that is famous for operating a chain of coffee stores worldwide. The products that the company makes include coffee and tea beverages, roasted whole bean and ground coffees, single-serve and ready-to-drink beverages, and iced tea; and various food products, such as pastries, breakfast sandwiches, and lunch items. It operates more than 32,000 coffee stores globally. It was founded in 1971 and is placed sixth on our list of 10 safe stocks to invest in for the long term.
The company has a market cap of more than $135 billion and posted more than $23 billion in annual revenue in September 2020, down from $26 billion in the previous year. London-based brokerage firm Atlantic Equities earlier this month named Starbucks among its top picks for the quarter and gave it an Overweight rating. The brokerage cited the expansion plans of Starbuck as one of the reasons behind the strong rating. The firm set a price target of $128 for SBUX.
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Disclosure: None. 10 Safe Stocks To Invest in For Long Term is originally published on Insider Monkey.