Filling your portfolio with stable, stalwart companies when the sun is shining provides a buffer against the rainy days that are sure to befall the broad market. Clorox (CLX 2.07%), Berkshire Hathaway (BRK.A 1.69%) (NYSE: BRK-B), and Johnson & Johnson (JNJ 1.13%) were identified as three stocks able to provide shelter from the storms that are sure to rain down on us. Read on to find out how they form an umbrella to help us weather the downpour.
Clean up with this Dividend Aristocrat
Demitri Kalogeropoulos (Clorox): When markets are declining, it's nice to trust that your investment income is in no danger of following indexes lower. Those cash returns provide a cushion against stock-price losses, and they also allow you to accumulate more shares in a stock that's probably become cheaper -- assuming you're taking advantage of dividend reinvestment plans.
Clorox shareholders know what I'm talking about. The consumer-products giant has raised its dividend each year since 1977 for a 40-year streak that spans several tough market downturns. Clorox recently closed the books on a solid fiscal year that funded a 5% dividend increase this year. Revenue rose 4% thanks to a healthy 6% spike in sales volumes. Acquisitions like the RenewLife franchise helped, but the company also achieved growth across each of its four organic operating segments.
Clorox is expecting its growth pace to slow a bit in fiscal 2018, while still remaining in solidly positive territory. Profits, meanwhile, should come in at between $5.52 per share and $5.72 per share as operating margin expands. That result would allow the company to easily meet its dividend commitment of $3.36 per share, with room left for additional market-beating increases in the years ahead.
Grab a bucket
Keith Speights (Berkshire Hathaway): Legendary investor Warren Buffett once made a statement about rain that everyone should heed: "When it rains gold, put out the bucket not the thimble." Buffett was talking about seizing opportunities. One of the best opportunities to seize upon is a stock that has been "raining gold" for quite a while: Buffett's own Berkshire Hathaway.
Berkshire's compounded annual return from 1965 through 2016 was a whopping 20.8%. By comparison, the S&P 500 gained an average of 9.7% annually during the period. So far in 2017, Berkshire Hathaway stock's performance lags behind its long-term average, but not by much.
Will Berkshire continue to trounce the market like it has in the past? Probably not by as much. However, if I could only buy one stock, Berkshire would be at the top of the list. Instead of an ETF (exchange-traded fund), Berkshire stock is what I'd call a "BTF" -- a Buffett-traded fund.
When you buy a share of Berskshire Hathaway stock, you get all of the businesses the company manages, which include major insurance company GEICO, paint manufacturer Benjamin Moore, and Burlington Northern Santa Fe railroad. On top of that, though, you also pick up exposure to 40 or so stocks in which Berkshire is invested. They include some of the biggest and best businesses on the stock market today.
The bottom line is that Berkshire gives investors great diversification -- and great growth. That's a good stock for a rainy day -- or any other day.
A brave new world
Rich Duprey (Johnson & Johnson): Johnson & Johnson is a leader in three different worlds: pharmaceutical, medical devices, and consumer products. In its just reported third-quarter earnings results, J&J said its pharmaceutical business continued to drive its strong performance, with sales surging more than 15% from the year-ago period, based in large part on sales of new products like multiple myeloma therapy Darzalex and blood and lymph node cancer treatment Imbruvica.
Additionally, established therapies like Stelara, Xarelto, and Zytiga were also strong. Its portfolio of top-performing drugs should allow Johnson & Johnson to deliver consistent earnings-per-share growth for the foreseeable future.
Its medical-devices division was helped by its acquisition of Abbott Labs' medical-optics business, and its consumer division was pushed forward by the enduring nature of Tylenol sales.
Relying so heavily upon its drug business entails some risk. Johnson & Johnson, of course, has always had competitors waiting in the wings for treatments to go off-patent, but its pharmaceutical division also has allowed the company to become something of a set-it-and-forget-it investment.
It doesn't hurt, either, that the company has paid a cash dividend to shareholders every year since 1944 and has increased its shareholder payout for 55 consecutive years, which currently yields 2.4%. Johnson & Johnson has truly become a stock you can buy for the rainy days and hold onto through the storms.