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2 Cheap Stocks to Protect Your Retirement Plan

By Demitri Kalogeropoulos – Sep 30, 2020 at 10:00AM

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These global giants provide stability with the added bonus of market-beating sales growth.

The coronavirus pandemic has produced a turbulent 2020 for investors so far. If you held on through the historic collapse in March, then you likely saw many of your holdings soar by 50% or more in the months that followed as the stock market raced right back to new highs before pulling back in recent weeks.

That volatility can be wild, but it's exactly the kind of situation that retirement-focused investors aim to protect against by constructing a portfolio of great businesses, and then holding on for many years.

Below, we'll look at two attractive examples of stocks that can help anchor any long-term portfolio today.

A young man and woman holding cash.

Image source: Getty Images.

Procter & Gamble is a winner

There isn't much debate about why Procter & Gamble (PG 0.18%) is considered a top blue chip stock. The consumer staples giant, through hit brands like Tide, Pampers, and Crest, dominates the global market for a wide range of essential products that consumers use each day, including paper towels, diapers, and laundry detergent.

Investors are aware of P&G's world-class brands, efficient marketing and supply chains, and dominant industry positions. But the stock still isn't priced to preclude solid long-term returns from here. Shares are only modestly outperforming the market so far in 2020, up 11% through late September compared to the S&P 500's 4% increase and the 7% boost for rival Kimberly-Clark.

That seems like a deal considering P&G just closed an especially strong fiscal year by trouncing management's targets on growth, cash flow, and earnings as consumers stocked up on its products. Sure, the company is predicting a slowdown for fiscal 2021. But investors should still see strong returns over the next few years thanks to improving profitability, a growing dividend, and continued organic sales gains.

Apple has room to grow

Retirement investors know that cash is a key part of any portfolio. But holding too much of it can be detrimental to your long-term returns. So why not invest in a strong business that has plenty of cash it can direct to shareholders, while it also enjoys productive market opportunities it can target with those resources?

Apple's (AAPL -1.96%) growing dividend has put the consumer tech giant on more income investors' radars in recent years. And that prospect for direct cash returns is just one good reason to like the stock today. Sure, it's a stretch to call the iPhone maker "cheap," given its rally in 2020 and its premium valuation compared with expected growth over the next few years.

But Apple's shift toward a more service-oriented business has the potential to make it more profitable over time while reducing volatility in both earnings and sales. At the same time, hit new-product releases in recent quarters confirm that the company's innovation engine is in no danger of stalling.

That deep product pipeline is good news for the upcoming 5G refresh of the titanic iPhone business. But it's also a great reason to consider owning this tech giant as part of a diversified retirement portfolio that can weather a wide range of market volatility. The pandemic's influence on the global economy might be significant in late 2020 and beyond. But investors can gain more stability by having top-tier dividend payers like these in their holdings.

Demitri Kalogeropoulos owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Apple Stock Quote
$148.11 (-1.96%) $-2.96
Procter & Gamble Stock Quote
Procter & Gamble
$146.72 (0.18%) $0.27

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

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