Recs

12

5 Stocks to Get You Back Into the Market

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

If you ever want to reach your financial goals, you know that 0.01% rates on your savings account aren't going to get you there. No matter how scary they may seem, stocks and other higher-risk investments are what you need to produce the returns that will boost even modest savings into substantial sums over the long haul.

But after an extremely strong quarter for the stock market to begin 2012, you may feel like it's too late to get into the market. The last thing anyone wants to do is to buy at the end of a big run-up, only to watch their shares lose value right after they get up the courage to invest.

One solution is to pick strong, stable stocks that don't move around as much as some of their peers. These stalwarts don't rise as much during big bull moves, but they also do a better job of avoiding losses during down markets. That might be just the ticket if you've been reluctant to get your money invested in stocks since the market's big meltdown three years ago.

Tiptoeing back into the market
Searching for stocks with conservative attributes isn't as hard as you might think. As a simple starting point, I ran a quick screen that looked for large-cap stocks with three particular traits: a dividend yield of 3% or more, at least 15% return on equity, and a beta less than 0.5.

The value of a nice dividend is easy to understand, and return on equity tells you how effective a company is in managing its capital. But beta is something that many investors aren't familiar with. Beta is a measure of stock-price volatility; the lower the beta, the less a company's shares move in response to changes in the market. It doesn't mean the stock won't move independently, but all other things being equal, low-beta stocks aren't tied as closely to market moves as high-beta stocks are.

Finally, I eliminated stocks that were within 5% of their yearly highs. Let's take a look at the companies that made it through those tests.

PepsiCo (NYSE: PEP  )
The beverage and snack giant needs no introduction even to beginning investors. With a strong presence in the U.S., Pepsi has looked to emerging markets for new growth opportunities. Carrying a 3% dividend yield and 30%+ returns on equity, Pepsi has held up well during market declines and has room to run as the global economy stabilizes.

Exelon (NYSE: EXC  )
Utilities have already seen strong runs. But Exelon largely got left out of the boom as it has particularly high exposure to nuclear power, which has come under fire ever since last year's Japanese reactor failure after the earthquake and tsunami that hit the island nation. With a yield of nearly 4% and a stock that's now nearly 15% below its highs, Exelon could be a value bargain, especially if you believe in the long-term necessity of nuclear power generation.

Kinder Morgan Energy Partners (NYSE: KMP  )
Again with an energy theme, Kinder Morgan has a wide array of pipelines carrying oil and natural gas to where they're needed. Its impending takeover of El Paso will only add to its arsenal, and as a master limited partnership, unitholders share in lucrative distributions of profits. Less vulnerable to energy price fluctuations than oil producers, Kinder Morgan makes a worthy addition to a diversified portfolio.

Kellogg (NYSE: K  )
Consumer staples are an obvious pick for a defensive portfolio. But Kellogg has gotten aggressive lately, buying the Pringles division of Procter & Gamble as the cereal maker swooped in after Diamond Foods failed in its controversial bid for the snack unit. With a 3% dividend and growth prospects, Kellogg looks like a smart part of a balanced portfolio.

Campbell Soup (NYSE: CPB  )
Again following the food theme, Campbell shares Kellogg's strong return on equity in the 60% to 70% range, and slightly beats out the cereal maker with a 3.4% yield. With a beta of just 0.17, Campbell is not a stock that reacts much to the market, instead responding to its own growth prospects and cost headwinds.

Don't wait
The longer you stay on the sidelines, the more time you'll lose in your quest for a comfortable retirement or whatever nearer-term financial goals you may have. These stocks won't be tomorrow's multibaggers, but they will give you a chance at better returns than your savings account -- and that's never been more important than it is now.

You can never have too many ideas for strong stocks with great long-term prospects. The Motley Fool's latest special report shows you how you can retire rich by revealing three great stock names. It's free, but don't wait: Grab your copy today while it's still available.

Fool contributor Dan Caplinger knows how hard it is to invest when you're scared. You can follow him on Twitter here. He doesn't own shares of the companies mentioned in this article. The Motley Fool owns shares of PepsiCo. Motley Fool newsletter services have recommended buying shares of Procter & Gamble, Exelon, and PepsiCo, as well as writing a covered strangle position in Exelon and creating a diagonal call position in PepsiCo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy gives comfort in turbulent seas.


Read/Post Comments (0) | Recommend This Article (12)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1854200, ~/Articles/ArticleHandler.aspx, 11/26/2014 12:49:07 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Dan Caplinger
TMFGalagan

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

Today's Market

updated 2 hours ago Sponsored by:
DOW 17,814.94 -2.96 -0.02%
S&P 500 2,067.03 -2.38 -0.12%
NASD 4,758.25 3.36 0.07%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

11/25/2014 4:01 PM
CPB $44.64 Up +0.05 +0.11%
Campbell Soup CAPS Rating: ***
EXC $35.18 Down -0.07 -0.20%
Exelon CAPS Rating: ****
K $65.14 Up +0.02 +0.03%
Kellogg Company CAPS Rating: ****
KMP $100.05 Up +0.20 +0.20%
Kinder Morgan Ener… CAPS Rating: *****
PEP $98.93 Up +0.25 +0.25%
PepsiCo CAPS Rating: ****

Advertisement