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7 Safe Stocks to Buy for Solid Returns in Uncertain Times

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·7 min read
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Although some positive sessions in the equities sector have optimists excited about the red ink coming to an end, investors should approach this dynamic conservatively. True, no one wants to be around negative people spreading negative energy. At the same time, we need to be realistic about the economic underpinnings, meaning that it’s time to focus on safe stocks to buy.

For one thing, the inflation rate has gotten out of control in this country. Still extremely elevated at 8.3% in April 2022, the Federal Reserve really needs to raise the benchmark interest rate above the rate of inflation. Otherwise, the central bank would merely be toying with escalating prices.

However, being serious about inflation may then cause a recession, putting the Fed between a rock and a hard place.

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Second, the purchasing power of the dollar has been rapidly eroding during the new normal. The longer this erosion continues, the likelier it is that an increasing number of households will start tightening their belts.

Such an action would crimp the discretionary retail sector while perhaps sparing the most necessary and relevant of businesses, boding well for safe stocks to buy.

Ticker

Company

Current Price

IBM

International Business Machines Corporation

$139.27

MUSA

Murphy USA Inc.

$254.41

DUK

Duke Energy Corporation

$114.40

CPB

Campbell Soup Company

$48.21

AWK

American Water Works Company, Inc.

$151.76

AXP

American Express Company

$169.60

CLX

The Clorox Company

$148.71

Safe Stocks to Buy: International Business Machines (IBM)

Photo of IBM (IBM) building as seen through the canopy of a tree. IBM logo is in large letters on side of building.
Photo of IBM (IBM) building as seen through the canopy of a tree. IBM logo is in large letters on side of building.

Source: shutterstock.com/LCV

For many years, technology giant IBM (NYSE:IBM) operated as an afterthought in an industry moving to exciting arenas such as cloud computing. Though IBM was always relevant, it historically was tied down to legacy businesses. However, with a renewed effort and concentration on advanced market segments such as cloud, artificial intelligence, machine learning, cybersecurity and the blockchain, just to name a few, IBM is starting to look exciting.

However, it’s still not quite getting the respect it deserves, meaning that it’s one of the best safe stocks to buy that’s flying under the radar. On a year-to-date basis, IBM is up 4%, hardly an exciting figure in and of itself. However, when you consider that the tech-centric Nasdaq composite is down nearly 23% YTD, suddenly, “Big Blue” looks a lot more attractive.

Now, you’ll probably have to be patient with IBM as it’s a slow mover. Still, without much hype associated to the brand, this may be a reliable name you can trust.

Murphy USA (MUSA)

Murphy USA gas station and convenience store located on an out parcel of a Walmart Supercenter
Murphy USA gas station and convenience store located on an out parcel of a Walmart Supercenter

Source: Lawrence Glass / Shutterstock.com

Although operators of retail gasoline stations like Murphy USA (NYSE:MUSA) qualify as safe stocks to buy due to their ties to core infrastructures, they can also be vulnerable to the whims of the economy. But in these extraordinary circumstances, MUSA appears to be a clear winner.

Mainly, crude oil prices appear to only have one logical trajectory, up. The industry suffers from a perfect storm of three major catalysts: Russia’s invasion of Ukraine which sparked massive sanctions, reduced production figures due to capacity constraints and the debilitating impact of skyrocketing inflation. So, unless these circumstances are about to turn positively for the consumer, an environment of higher oil prices seems the most credible.

Unfortunately, that’s going to mean significant pain at the pump. However, you can mitigate some of this shock by electing MUSA as part of your safe stocks to buy. Basically, if you can’t beat ’em, join ’em.

Duke Energy (DUK)

The logo for Duke Energy (DUK) is seen on a sign at one of the company's offices.
The logo for Duke Energy (DUK) is seen on a sign at one of the company's offices.

Source: Jonathan Weiss / Shutterstock.com

When it comes to safe stocks to buy, utility firms like Duke Energy (NYSE:DUK) should be at the top of your list. As I’ve said many times before, bad things happen when people flip the switch and no light appears. What’s more, the broader integration of digitalization and tech-based platforms means that society is extremely dependent on energy firms.

For astute, forward-thinking investors, Duke is especially enticing because of migration trends. Per its website, the company offers energy services to approximately 7.4 million customers in the Carolinas, Florida, Ohio, Kentucky and Indiana, and retail natural gas services to more than 1.5 million customers in the Carolinas, Ohio, Kentucky and Tennessee. These states are among the most popular millennial destinations, making Duke supremely relevant.

As well, DUK provides a robust balance between upside return potential and passive income (with a current dividend yield of 3.5%). Frankly, it’s a no-brainer among safe stocks to buy during this anxiety-filled market cycle.

Safe Stocks to Buy: Campbell Soup (CPB)

A variety of Campbell's soups in a grocery store. CPB stock.
A variety of Campbell's soups in a grocery store. CPB stock.

Source: Sheila Fitzgerald / Shutterstock

As a processed food and snack company, Campbell Soup (NYSE:CPB) commands strong year-round demand due to its indispensable industry. Irrespective of technological advancements, humans need to eat. Plus, the company is popular, a component of the American cultural experience. That might play a strong role should we encounter a market downturn.

Another factor that bolsters CPB is prioritization of purchasing behaviors. Under duress, most rational households will have no problems cutting back on discretionary purchases, such as luxury goods or extraneous experience-based purchases such as eating out. However, grocery store fare like Campbell will be the last category to experience cuts in consumer demand.

To be fair, CPB stock isn’t without risks. Since the fiscal year ended July 31, 2020, Campbell’s revenue trajectory has been steadily declining. That’s not the most encouraging sign although if a recession hits, more demand could cynically swing back to the company.

American Water Works (AWK)

A photo of water being poured into a glass that's sitting on a table.
A photo of water being poured into a glass that's sitting on a table.

Source: HQuality/ShutterStock.com

On paper, American Water Works (NYSE:AWK) should easily qualify as one of the safe stocks to buy for solid returns. A public utility providing water and wastewater services in the U.S., the company covers approximately 1,700 communities in 14 states. Altogether, it serves around 3.4 million active customers.

Despite the positive attributes, Wall Street has been less than enthused about AWK stock this year. Since the beginning of January, shares have declined by over 19%, a conspicuous erosion. Some of the bearishness isn’t totally unjustified. For instance, its first quarter of 2022 results were disappointing, with revenue of $842 million being down 5.2% against the year-ago quarter.

Still, over the long haul, AWK is one of the safe stocks to buy and trust. Essentially, for residents living in its coverage map, few alternatives exist. As well, water services represent the absolute last sector that households will cut from their budget.

American Express (AXP)

an American Express (AXP) credit card sticking out of someone's pocket
an American Express (AXP) credit card sticking out of someone's pocket

Source: Shutterstock

Before I get into my argument for American Express (NYSE:AXP), I should point out that in general, the credit card business isn’t necessarily a great one to be in when faced with recessionary pressures. According to data compiled by LendingTree.com, though some recent improvements can be seen in total credit card debt, the statistic is still high by historical standards.

As well, rampant inflation and subsequent plans to raise interest rates will exacerbate this dynamic, putting hard-hit consumers even deeper into a financial hole. On surface level, then, the situation doesn’t seem favorable to AXP as one of the safe stocks to buy.

However, American Express distinguishes itself from the competition by catering to a more affluent user base. While normal folks may be hurting with inflation, those with Amex cards may not view it as an existential crisis thanks to higher income levels and greater wealth. Ultimately, such a backdrop affords cardholders more options.

The Clorox Company (CLX)

Clorox (CLX) bleach bottles lined up on a store shelf.
Clorox (CLX) bleach bottles lined up on a store shelf.

Source: TY Lim / Shutterstock.com

While virtually all publicly traded companies suffered a severe and extended loss of market value during the spring doldrums of 2020, a few notable standouts avoided the ignominy. One such firm is Clorox (NYSE:CLX). As a manufacturer of household goods, in particular disinfectant products, Clorox represented a gold mine during the pandemic.

Indeed, it was a strange sight to see CLX rocket higher like a hot tech firm rather than one of the safe stocks to buy. But as fears of the coronavirus started to fade, so too did Clorox’s valuation. At the current juncture, CLX has given up basically all of its Covid-19-related gains.

However, we have another health scare in the form of monkeypox infections. While health agencies have stressed that Covid-19 is the greater threat, I think people are a bit skeptical about government warnings these days. But the Centers for Disease Control and Prevention did point out that household disinfectants can kill the monkeypox virus so perhaps CLX may enjoy second wind.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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