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Markets are noisy again this week.
With momentum teetering between positive and negative, many investors are looking for a place to hide. The challenge is discovering which stocks are safe right now.
Far too many people are willing to leave the search for safe stocks up to the court of popular opinion.
Analysts are pushing investors into the big blue chips like FANMAG because they "feel" safe. These firms produce popular products that are always in demand.
But instead of relying on stocks that "feel" like they can only go up - which of course is too good to be true - I crunched some numbers and came up with a set of characteristics that define safe stocks.
After I outline how to find safe stocks, I'll actually show you the five best stocks that fit the bill...
How to Find Safe Stocks
Stocks that fit the "safe" profile fluctuate less than the broader markets.
First, safe stocks have a low beta, which is a measure of volatility.
The lower the number, the lower the stock volatility in comparison to the market.
A stock that only falls 0.5% when the S&P 500 falls by 1% has a beta of 0.5.
Second, safe stocks have higher-quality fundamentals than most.
To measure this, I used the 9-point Piotroski F score model to determine quality. The higher the score, the higher quality the company is at a given moment. Safe stocks have a score of 7 or higher.
Third, safe stocks have high dividend yields. Our tests showed that safe stocks have a yield of 4% or more.
Finally, safe stocks don't have ridiculously high valuations. Safe stocks generally trade for 20 times earnings or less.
Combining these factors produces an interesting list of safe stocks to buy right now.
A Classic Safe Stock
Star Group LP (NYSE: SGU) is a classic safe stock.
The company has rolled up mom-and-pop heating oil and propane companies in the Northeastern United States into a company that sells home heating oil and propane to approximately 453,000 full-service residential and commercial customers.
Star Group has been somewhat immune to the market's spats of volatility since formation back in 1995.
As a result, the stock has a beta of just 0.5.
Its price/earnings (P/E) ratio right now is 13, and it's yielding a solid 4.2%.
Star Group has an F Score of 7, so the fundamentals are in great shape as well.
Food Is Always a Solid Play
SpartanNash Co. (NASDAQ: SPTN) is a food business on my safe stock list right now.
The company distributes food products to grocery stores and military commissaries all over the country.
SpartanNash also owns 155 grocery stores around the United States. And it hits all the characteristics of a safe stock...
The stock's beta is just 0.52, and its P/E ratio is 13.
SPTN's F-score of 8 tells me that the company's fundamentals are in fantastic shape right now.
And finally, its 4.1% dividend yield right passes my safe stock hurdle as well.
2 High-Yield Dividend Stocks Offer Income and Upside
Both could see an earnings boost from the rollout of 5G over the next few years in addition to being an excellent "hiding place" for investors right now.
AT&T has a beta of just 0.6 and a P/E of 17 right now. The yield is over 7% at the current price, and its fundamentals are in great shape, as indicated by the stock's F-score of 7.
Verizon has a beta of just 0.39 and a P/E of 13. Its yield is lower than that of AT&T, but is still about 5.5%. And its F-score is also 7.
The Safest Stock to Buy Right Now
About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, and consultant with degrees from Northwestern, Johns Hopkins, Purdue, and Indiana University. He is a seasoned financial and political risk analyst, with a focus on stocks, hedge funds, private equity, blockchain, and housing policy. He has conducted risk assessment projects for clients in 27 countries, and consulted on policy and financial operations for some of the nation's largest financial institutions, including a $1.5 trillion credit fund, a $43 billion credit and auto loan giant, as well as two of the largest Wall Street banks by assets under management.
Garrett joined Money Map Press as an economist and researcher in 2011, specializing in alternative strategies with an emphasis on fundamental and technical analysis.