We're in a volatile stock market, so investors have to be even more careful about picking stocks right now. With many growth stocks likely in for a few rough months, more investors are taking closer looks at some value stocks, but that category of stocks might not provide enough upside to make them worth your while.
That means that right now is a great time to search for stocks that can thrive no matter what the market does from here. Let's take a closer look at three that might be worth your time.
1. Pfizer
Pfizer (PFE -0.19%) is one of those stocks that investors can buy and hold without worrying. Major pharmaceutical stocks like Pfizer have a few characteristics that make them interesting, regardless of market conditions. Like other healthcare stocks, they are considered less cyclical than other industries. Demand for medication is relatively stable, even if it can be impacted by recessions. Unlike many defensive stock sectors, growth in pharmaceuticals is expected to outpace the economy over the next few years. That gives Pfizer a great combination of stability and upside potential.
Image source: Getty Images.
Like most of its peers, Pfizer pays a dividend. That brings even more stability to your portfolio because it produces returns even if the market is down. Its 2.9% dividend yield is above average in today's market.
Pfizer has recently benefited from COVID-19 vaccination sales, which might not be a sustainable profit source. Branded drug companies are no stranger to rapidly declining sales of important products. As each of their products eventually loses patent protection, they tend to dwindle quickly as the competition takes market share. Pharmaceutical companies' long-term stability is generally determined by their product pipeline. If there are promising drugs in development and clinical trials, then they should be able to overcome some of their current moneymakers falling off.
Pfizer's pipeline is considered one of the strongest in the world. The company has identified nine drugs in late-stage development that could generate at least $1 billion in annual sales. Along with some other key product launches, the company forecasts that its next wave of approvals could generate $15 billion in annual sales. Pfizer maintains a strong pipeline by keeping one of the largest R&D budgets among its peers.
PFE Research and Development Expense (TTM) data by YCharts.
Pfizer isn't immune to volatility, and its stock price will probably sink if the market experiences a correction. However, the stock has strong long-term growth prospects, it provides relative stability in bad times, and it pays a nice dividend to create returns even when its stock price is down.
2. Microsoft
Microsoft (MSFT 0.37%) has a totally different investment narrative than Pfizer, but it's just as compelling. This tech giant can't match the stability of some of the blue chips or Dividend Aristocrats, but it can deliver higher growth. That said, it's a far cry from some of the high-risk, high-reward growth stocks that follow a more boom-and-bust cycle.
Microsoft is either a dominant leader or major competitor in:
- Remote collaboration and productivity software for businesses.
- Cloud computing.
- Gaming.
- Consumer software and hardware.
- Job search and professional networking.
- Web search and advertising.
That's a profitable tech empire that can't be dismantled quickly, so Microsoft has some staying power. Even with that level of diversification and market saturation, the company still managed to achieve 20% revenue growth in its most recent quarter. It's a resilient business that's also involved in several dynamic industries. That's helped the stock perform across all sorts of market conditions.
Microsoft stock has ventured into unreasonably high valuations in the past, so investors should be aware of this. However, the stock continues to reward shareholders -- even if they somehow only purchased shares on the worst possible days.
From the peak of the dot-com bubble, Microsoft moved back into positive territory before the next cyclical downturn.
MSFT Total Return Level data by YCharts.
If you happened to buy Microsoft stock at its peak before the Global Financial Crisis, all of those losses were erased by May 2013. After that, the stock went on an enormous run upwards.
MSFT Total Return Level data by YCharts.
Microsoft recovered from the COVID-19 market crash in four months. Even if you had the extreme misfortune of buying this stock at cyclical peaks, you still enjoyed some growth. It hasn't always been smooth, but Microsoft has nearly doubled the returns of the S&P 500 since the turn of the century. You can confidently add Microsoft to your long-term portfolio no matter what's going on in the market.
3. PepsiCo
PepsiCo (PEP 3.62%) isn't very exciting, but it's a quintessential defensive stock. The company owns a huge portfolio of popular soft drink and food brands. It operates all over the world, and its products are sold both to consumers and businesses. While PepsiCo operates in a competitive environment, its scale and breadth of offerings create an economic moat.
PepsiCo might not have much opportunity for rapid growth, but it's not going anywhere anytime soon. As we've seen over the past quarter, the stock holds up well during market downturns. Demand for its products is stable, and the company generates predictable cash flows. Investors have to accept that PepsiCo's growth prospects are limited, but the stock is a dividend rock star. It's about to deliver its 50th consecutive year of dividend growth. The stock currently pays a 2.5% dividend yield, so it will produce modest returns even if the stock price is sluggish.
PepsiCo might not be the best investment for patient investors with long time horizons. However, it's a great option for investors who can't endure volatility over a whole market cycle.
