Famed investor Jeremy Grantham says the next decline will be 'bigger and better' than anything in US history — here are 3 of his safe haven stock picks
Jeremy Grantham, legendary investor and pioneer of index fund investing, expects today’s sky-scraping stock market to come crashing back to earth.
Grantham recently told Bloomberg that investors, who enthusiastically drove the stock market to new heights during a global recession, are in for a shock.
“When the decline comes, it will perhaps be bigger and better than anything previously in U.S. history,” he warned.
Grantham predicted the dotcom collapse and the 2008 meltdown of the real estate market — he’s also in charge of about $60 billion as the investment chief at asset management firm Grantham, Mayo, & Otterloo — so he’s worth listening to.
Before Grantham’s predictions have a chance to come true, let’s look at a few safe haven stocks in GMO’s portfolio. One of them might be worth buying with some of your extra pennies.
United Health (UNH)
UnitedHealth’s quarterly dividend payout, currently $1.45 per share, and the performance of its stock, which is roughly 30% this year, suggest that the company is currently in strong financial shape.
But the insurance and healthcare leader is well positioned to weather any long-term financial tumult as well.
Regardless of what happens to the economy, Americans will still need healthcare. Millions of them are already UnitedHealth customers.
UnitedHealth is a diversified company. In addition to its thriving insurance business, it also provides software and information technology to a number of clinics and hospitals.
As the medical tech space continues to grow, so should UnitedHealth’s profits.
U.S. Bancorp (USB)
U.S. Bancorp is the parent company of U.S. Bank, one of the country’s largest banking institutions.
Betting on bank stock might seem counterintuitive when a stock market correction is expected to hammer investors’ finances, but banks tend to do well in rising interest rate environments: As rates increase, the profit margin, or spread, earned by banks widens.
Rather than turning itself into a casino through the kinds of risky derivative plays that tanked some of its competitors in 2007-2008, U.S. Bancorp has instead been focused on innovating and providing digital service for its customers.
The increased efficiency and lower operating costs that result should be music to investors’ ears.
Since the beginning of 2021, U.S. Bancorp stock has risen by about 31%. Of course, if you’re on the fence about jumping in at the current price, some apps might give you a free share of U.S. Bancorp just for signing up.
Despite the push for more healthy food and beverage consumption, Coca-Cola’s dominance of the soft drink market remains unmatched.
But the company’s offerings extend far beyond liquid sugar.
Coke also sells popular bottled water brands Dasani and Smartwater, big-name juices like Minute Maid and Simply, and international coffee products Costa and Georgia.
What makes Coca-Cola an interesting defensive play is the company’s consistently impressive profit margin, which has averaged 23.6% over the last decade. That’s largely the result of Coke’s ability to tinker with portion sizes and prices and having the capital to invest in greater productivity.
A faltering stock market shouldn’t change any of those dynamics.
This year, Coke’s quarterly dividend payout hit $0.42, almost double what it was a decade ago. The company’s stock is up roughly 4% since the beginning of the year.
Don’t forget inflation
Grantham says portfolios also need protection from inflation, which hit a 31-year high in October.
"This is the first time that inflation, the number one predictor of a market downturn since 1925, is being ignored,” he said.
At times of high inflation, investors often turn to real assets, which tend to hold their value. That’s why collectibles — diamonds, wine, fine art — are taking up an increasing amount of room in modern portfolios.
Investing in fine art no longer requires you to outbid a gaggle of millionaires at some stuffy auction house.
A new platform allows you to purchase shares of modern masterpieces by artists like Andy Warhol, Banksy, and even Claude Monet — without breaking the bank.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.