• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar

Stock Trend Alerts

Essential Market Ideas and Investing Strategies

  • Newsletter Reviews
  • Hot Stocks
  • Technology
  • Financial News
  • Secrets of the Pros
  • Analysis
Home » 3 High Quality Stocks for the Cautious Investor

3 High Quality Stocks for the Cautious Investor

The average stock in the S&P 500 index is selling for 22 times earnings expected by analysts in the upcoming year, which is higher than at any time since the dot-com crash of 2000-2002. The market's valuation has some investors nervous now. If you're looking for stocks with lower risk, you're not alone.

No one really knows how the market will move next, but investors can avoid a lot of risk by simply being patient, buying stocks of strong businesses, and holding for the long term. The longer an investor holds shares, the more the quality of the business overshadows fluctuations in valuation.

Here are three high-quality stocks that should appeal to investors who want growth but are concerned about a downturn. The shares of these companies could go down in a market correction along with almost everything else, but their low-risk businesses should outperform in the long run, rewarding patient shareholders.

Abbott Laboratories

Healthcare stocks tend to be “defensive,” meaning that their businesses tend to hold up well during downturns in the economy. Abbott Laboratories (NYSE:ABT) is one of the most consistent growth stocks you'll find in the sector. The highly diversified seller of medical devices, diagnostics, pharmaceuticals for emerging market countries, and nutrition products puts together one solid quarter after another and hasn't had an earnings disappointment in over a decade.

[Exclusive: Man Who Made EIGHTEEN 1,000% Recommendations Unveils #1 Stock]

Abbott's fourth-quarter results got a big boost from COVID-19 testing. Sales growth of 28% over the period a year ago would be flat if you subtracted the $2.4 billion of sales related to coronavirus testing. But sales of routine diagnostics and medical devices were depressed during the quarter as medical procedures around the world dropped due to the late-year surge in the pandemic. Abbott thinks the demand for COVID-19 testing hasn't peaked yet and will remain strong beyond 2021. Meanwhile, a rebound in routine medical procedures will cause the rest of its business to bounce back, and sales of its FreeStyle Libre continuous glucose monitor are growing more than 40%.

Looking forward, Abbott expects 2021 earnings per share of $5.00, a level that analysts hadn't projected the company to hit until after 2023, and it thinks it will continue to grow profits from there, even after the pandemic. The company continued its streak of 49 years of dividend hikes when it recently boosted the payout by 25%, resulting in a yield of 1.5% and helping investors in this blue chip stock sleep at night.

Prologis

The pandemic accelerated the shift in retail from brick-and-mortar stores to e-commerce, and one consequence has been a boom in demand for warehouse space. That trend created a tailwind for Prologis (NYSE:PLD), a real estate investment trust that's the global leader in logistics real estate. Stable long-term cash flows had made the company an attractive choice for low-risk investors long before that.

[Extra: They Laughed, Yet FIVE of the Stocks He Named Went on to Soar Over 1,000%]

Prologis owns almost a billion square feet of logistics real estate housed in 4,700 buildings in 19 countries. The value of the goods passing through its properties represents fully 2.5% of the world's gross national product. That produces a huge and stable base of rents that grows as space in key locations becomes more valuable and the company develops new properties. Core funds from operations per share grew 15% in 2020 and the dividend rose 9.4%, with shares now yielding 2.3%.

An economic recovery aided by stimulus checks and vaccines means that warehouse space will remain in high demand in 2021. Prologis says that inventory levels compared with sales are near record lows and that there are signs that businesses are restocking their inventories to prepare for higher consumer spending and more growth of e-commerce.

The pandemic exposed weaknesses in global supply chains, and Prologis thinks that long-term investments to position goods closer to consumers and make supply chains more resilient will result in incremental demand for 200 million square feet of logistics space in the U.S., a trend that will take several years to play out.

The strong trends fueling Prologis' growth and the durable nature of its cash flows make the business attractive to risk-averse investors.

Generac Holdings

A glance at a chart of the share price of Generac Holdings (NYSE:GNRC) over the last couple of years might lead you to believe that the company is a high-flying tech stock. Shares rose 226% in 2020 and are up 38% already this year. But the maker of industrial equipment for over 60 years is in the sweet spot of some important trends and gives investors the opportunity to tap into long-term growth with less risk than you'd have in many tech stocks.

[Read On: Legendary Stock-Picker May Have Cracked the Code to 1,000% Gains!]

Generac is the leader in backup generators for home and industrial use. Sales of those products surged during the hurricanes and wildfires of 2019, got a boost from the working-from-home trend in 2020, and will surely benefit from the massive grid failure in Texas this month. The aging U.S. electrical grid and a greater urge to invest in disaster readiness among consumers are powerful tailwinds for the business that should last for years. Residential sales boomed 55% in the fourth quarter, leading to 29% top-line growth and a 39% increase in net profit.

But Generac is moving into new markets in the energy security business that should open up important new opportunities for growth. The company has created a residential clean energy solution that combines solar power generation with high-capacity batteries, the industry's largest inverter for converting direct current to the alternating current that the grid uses, and a load management system. The company's PWRcell energy storage system keeps a whole home functioning off the grid during outages, and when integrated with generators later this year, will be able to keep a home powered indefinitely during grid failures. Sales went from zero to $115 million in 2020 and the company expects 50% to 75% growth in 2021.

Generac also has an opportunity during the global 5G roll-out to sell more power backup systems for cell tower installations, where it's the leader in market share in the U.S. Longer term, the company aspires to help utilities meet peak demand through “virtual power plants,” the ability to remotely turn on commercial and residential standby generators and feed power back into the grid, earning income for their owners from assets that sit idle most of the time.

Shares of the stock aren't cheap at 37 times expected 2021 earnings, but Generac's dominance of its niche gives low-risk investors a rapidly growing but easy-to-understand business that has a long runway ahead.

[Exclusive: Man Who Made EIGHTEEN 1,000% Recommendations Unveils #1 Stock]

Jim Crumly owns shares of Abbott Laboratories, Generac Holdings, and Prologis. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Read more from Jim Crumly at Fool.com

You Might Also Like...

  • The Next Great Opportunity for Energy Investors?
  • 7 Reliable Mega-Cap Stocks for Uncertain Times
  • Will the Global Chip Shortage Mean Boom or Bust for these Silicon Stocks?
  • Economic Recovery Sets the Stage for this Trio of Value Stocks to Outperform

Reader Interactions

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Primary Sidebar

Subscribe to Stock Trend Alerts

By submitting your email address, you give Stock Trend Alerts permission to deliver investment research to your email inbox. Privacy Policy | How It Works

Popular Posts

  • Martin Weiss Docket No. OP–1670: 12 Inflation-Beating Stocks
  • Jim Rickards – The Return of American Energy: Profit from the Green Lie
  • Andrew Zatlin: Biden’s Puppet Master Exposed and How to Opt Out of the Digital Dollar
  • Why 2023 Could Kick Off a “Cash Frenzy” in Stocks
  • Dylan Jovine 21st Century Battlefield: 4 Companies Changing Warfare
  • Infinite Energy Stock: The Tiny Company Dominating Tesla in the Trillion-Dollar Green Energy Race
  • Dylan Jovine Search & Destroy: 3 AI Software Stocks Revolutionizing Warfare
  • BREAKING: Military to spend billions on “Living Missile”

Recent Posts

  • 25 Super-Woke Companies You Do Not Want in Your Portfolio with Alexander Green
  • Jeff Clark Trader: The Currency Trading Retirement Blueprint
  • Jason Williams Blue Gas: The Tesla Killer Fuel Cell Revolution
  • Andrew Zatlin: Biden’s Puppet Master Exposed and How to Opt Out of the Digital Dollar
  • The AI Takeover: Jason Bodner’s Quantum Edge Trader Smart Tech

Topics

AAPL Advertorial Amazon AMZN Artificial Intelligence Battery Bear Market Biotech Bitcoin Blockchain Clean Energy Cloud Computing Coronavirus COVID Creative Cryptocurrency Dividends E-Commerce Electric Vehicles Elon Musk Energy Ethereum Gold Growth Stocks Inflation Interest Rates International Jeff Brown Louis Navellier Market Crash MSFT Oil and Gas Options Prediction President Biden Recession Retirement Russia Semiconductor Supply Chain Tesla The Fed TSLA Volatility Warren Buffett

Copyright © 2023 · Stock Trend Alerts - Essential Market Moves and Investing Ideas

Nothing on this website should be considered personalized financial advice. Any investments recommended here in should be made only after consulting with your personal investment advisor and only after performing your own research and due diligence, including reviewing the prospectus or financial statements of the issuer of any security.

Stock Trend Alerts, its managers, its employees, affiliates and assigns (collectively "The Company") do not make any guarantee or warranty about the advice provided on this website or what is otherwise advertised above.

The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. The Company is not affiliated with, nor does it receive compensation from, any specific security.

To the maximum extent permitted by law, the Company disclaims any and all liability in the event any information, commentary, analysis, opinions, advice and/or recommendations provided herein prove to be inaccurate, incomplete or unreliable, or result in any investment or other losses.

About Us | How it Works | Privacy Policy | Terms and Conditions | Contact Us