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3 Great Stocks for Low-Risk Investors

By Keith Speights - Apr 21, 2020 at 7:02AM

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There's no such thing as a risk-free stock. But these stocks have lower risk levels than most.

Most people don't like risks. They prefer sure things. If you want to invest in stocks, though, there's no such thing as a sure thing. An element of risk-taking is baked into the underlying premise of investing.

However, there are stocks that are notably less risky than others. These stocks can still experience downswings, but they're built to survive and thrive even during difficult times. Here are three especially great stocks for low-risk investors.

Wooden blocks spelling risk with a person's hand turning a last block to show Low instead of High

Image source: Getty Images.

1. Dollar General

Shares of Dollar General (DG 1.43%) fell as much as 18% from their highs set earlier this year in March. However, the plunge didn't last very long. Dollar General stock is now up around 15% year to date.

Last October, well before the coronavirus crisis hit, I named Dollar General as my top stock to ride out a recession. My thinking now is the same as it was then. The discount retailer sells the kinds of products that people need no matter how good or bad the economy is. And it sells those products at affordable prices that rival those of bigger discount chains.

Dollar General has been in business for 81 years. The company has weathered plenty of storms through the years and is still going strong. In fact, Dollar General recently reported its 30th consecutive year of increasing same-store sales

One major key to Dollar General's success has been its expansion strategy. The company has placed stores across the U.S. close to where people live. Even with the economic uncertainty resulting from the COVID-19 pandemic, Dollar General still expects to open 1,000 new stores and remodel 1,500 existing stores in fiscal year 2020. I think that any company that can continue to execute its strategy in both good and bad times is a company that's on the right track.

2. Johnson & Johnson

Johnson & Johnson (JNJ 0.03%) stock sank 28% at one point during the coronavirus-fueled market meltdown in March. But it didn't take long for investors to realize that the healthcare stock was greatly oversold. J&J's share price is now in positive territory for the year.

Sure, the COVID-19 pandemic is having some impact on J&J's business. The company reported a decline in medical device revenue in the first quarter of 2020 due primarily to hospitals pushing back non-emergency surgeries. However, sales soared in Q1 for Johnson & Johnson's consumer health and pharmaceuticals businesses.

This diversification across the healthcare spectrum is one of the main reasons why J&J is a relatively low-risk stock. When one area experiences headwinds, the company has others that can take up the slack. Over the long run, though, all three of J&J's segments should be winners as aging demographic trends drive demand for healthcare products and services.

Johnson & Johnson's strong financial position enables the company to invest in research and development as well as make key acquisitions to stay at the forefront of healthcare innovation. It also allows the company to pay one of the most reliable dividends around. J&J recently boosted its dividend payout for the 58th consecutive year.

3. Walmart

Like Dollar General and Johnson & Johnson, Walmart (WMT -0.37%) stock wasn't immune to the coronavirus sell-off. Shares of the retail giant briefly slipped 13% off previous highs in March. But that was only a temporary blip. Walmart's shares are now at an all-time high.

Some of the same rationales for buying Dollar General also apply to Walmart. The company sells products that customers need regardless of what's happening in the broader economy. And Walmart's size gives it economies of scale and purchasing power that most of its rivals don't have, which allows the company to offer low prices on the products it sells.

Walmart has been very effective at adapting its operations during the COVID-19 outbreak. It has restricted the number of customers allowed in its stores at one time and established a morning pick-up hour for at-risk customers. The company's online grocery business has especially flourished, with March sales doubling from the prior-year period. The Walmart Grocery app is the most downloaded app for online grocery shopping, according to market researcher App Annie.

My view is that Walmart has done a good job at adapting to changing market dynamics on an overall basis, not just during the current crisis. While many retailers haven't been able to compete against internet behemoth Amazon.com, Walmart has invested heavily in e-commerce over the last few years -- and has been largely successful. When a company the size of Walmart with its huge revenue stream and tremendous profits can remain nimble, it's going to be less risky than most others. 

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Stocks Mentioned

Wal-Mart Stores, Inc. Stock Quote
Wal-Mart Stores, Inc.
WMT
$121.92 (-0.37%) $0.45
Johnson & Johnson Stock Quote
Johnson & Johnson
JNJ
$176.99 (0.03%) $0.05
Dollar General Corporation Stock Quote
Dollar General Corporation
DG
$247.05 (1.43%) $3.47
Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$108.92 (1.42%) $1.52

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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