5 Safe Stocks to Buy Amid Plummeting U.S. Consumer Sentiment
Wall Street has been fraught with volatility for the past two and a half months. The latest catalyst for volatile trading is the tumbling U.S. consumer sentiment. On Oct 13, the University of Michigan reported that the preliminary index for Consumer Sentiment in October came in at 63, missing the consensus estimate of 67.4. The final reading of the index for September was 68.1. October marked the third consecutive month of the index’s decline and the largest monthly decline since May.
The Present Situation Index — based on consumers’ assessment of current business and labor market conditions — fell to 66.7 in October from 71.4 in September. The Expectations Index — based on consumers’ short-term outlook for income, business, and labor market conditions — declined to 60.7 in October from 66 last month. Both indexes were the lowest in five months.
Expectations for the one-year inflation rate rose to 3.8% in October from 3.2% in September, marking its highest reading since May. Long-run (5 years) inflation expectations edged up from 2.8% last month to 3.0% in October.
According to Joanne Hsu, the Director of the Survey, "Assessments of personal finances declined about 15%, primarily on a substantial increase in concerns over inflation, and one-year expected business conditions plunged about 19%. However, long-run expected business conditions are little changed, suggesting that consumers believe the current worsening in economic conditions will not persist."
In a similar kind of study, on Sep 26, the Conference Board reported that the Index for U.S. Consumer Confidence in September came in at 103, missing the consensus estimate of 105.5. The metric for August was revised upward to 108.7 from 106.1 reported earlier.
At this stage, investment in low-beta stocks with a high dividend yield and a favorable Zacks Rank may be the best option. If markets regain momentum, the favorable Zacks Rank of these stocks will capture the upside potential. However, if the downtrend continues, low-beta stocks will minimize portfolio losses and dividend payments will act as a regular income stream.
Our Top Picks
We have narrowed our search to five large-cap (market capital > $10 billion) low-beta (beta >0 <1) stocks with a solid dividend yield. These companies have strong growth potential for 2023 and have seen positive earnings estimate revisions in the last 60 days. Each of our picks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
The chart below shows the price performance of our five picks in the past month.
Image Source: Zacks Investment Research
International Business Machines Corp. IBM is witnessing sales growth in the software segment driven by healthy hybrid cloud adoption and solid demand trends across RedHat, automation, data in AI and security. A strong foundation of research and innovation, a broad portfolio that caters to various industry requirements and a diverse global market presence set IBM apart from its competitors.
IBM is also poised to benefit from the Watsonx platform. The buyout of Apptio will likely bolster IBM’s IT automation capabilities, empowering enterprise leaders to generate incremental value across the technology domain.
International Business Machines has an expected revenue and earnings growth rate of 1.6% and 3.3%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last 60 days. IBM has a beta of 0.85 and a current dividend yield of 4.70%.
PepsiCo Inc. PEP reported robust third-quarter 2023 earnings. The results reflected strength and resilience in its diversified portfolio, modernized supply chain, improved digital capabilities, flexible go-to-market distribution systems and robust consumer demand trends. Resilience and strength in the global beverage and food businesses also aided results.
PepsiCo raised its core EPS guidance for 2023. PEP reaffirms its organic revenue growth prediction of 10% for 2023. PEP expects a core EPS of $7.54 for 2023 compared with the $7.47 mentioned earlier. This suggests an 11% increase from the core EPS of $6.79 reported in 2022 compared with 10% growth expected earlier.
PepsiCo has an expected revenue and earnings growth rate of 6.3% and 10.9%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.7% over the last seven days. PEP has a beta of 0.55 and a current dividend yield of 3.20%.
The Kraft Heinz Co. KHC is gaining on solid pricing initiatives. This was seen in the second-quarter 2023, wherein the top and the bottom lines rose year over year. KHC’s sales grew in the North America and International regions and results continued to gain from strength in the foodservice, emerging markets and U.S. Retail Grow platforms. KHC is on track with AGILE@SCALE to enhance shareholders' value. We expect net sales growth of 2%, with an organic sales increase of 4% in 2023.
Kraft Heinz has an expected revenue and earnings growth rate of 2.6% and 4%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.7% over the last 60 days. KHC has a beta of 0.66 and a current dividend yield of 5.19%.
Camden Property Trust CPT is one of the largest publicly traded multifamily companies in the United States. Structured as a REIT, CPT is engaged in the ownership, management, development, redevelopment, acquisition, and construction of multifamily apartment communities.
Camden Property has an expected revenue and earnings growth rate of 19% and 4.6%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last 30 days. CPT has a beta of 0.81 and a current dividend yield of 4.14%.
VICI Properties Inc. VICI is a real estate investment trust. VICI is primarily engaged in the business of owning, acquiring and developing gaming, hospitality and entertainment destinations. VICI’s operating segment consists of real property business and golf course business.
VICI Properties has an expected revenue and earnings growth rate of 38% and 10.4%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.5% over the last 60 days. VICI has a beta of 0.94 and a current dividend yield of 5.75%.
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International Business Machines Corporation (IBM) : Free Stock Analysis Report
PepsiCo, Inc. (PEP) : Free Stock Analysis Report
Camden Property Trust (CPT) : Free Stock Analysis Report
Kraft Heinz Company (KHC) : Free Stock Analysis Report
VICI Properties Inc. (VICI) : Free Stock Analysis Report
