During stock market sell-offs, folks often flock to what they deem to be safe stocks to avoid further losses. But that short-term mindset leaves a portfolio vulnerable to missing out on opportunities when the market does eventually rebound.
No one knows when the next bear market will come or how long it will last. If you piled into safe stocks during the spring 2020 COVID-19 sell-off, you probably missed out on monster gains from sectors of the economy with more growth. Conversely, if you overbought pandemic winners above energy, industrial, or utility stocks, you missed out on the market-beating performance many names in those sectors have since enjoyed.
Instead of bobbing and weaving in and out of what's working or not working, a better strategy for outlasting a stock market sell-off is to own companies that you can count on from a variety of sectors -- including safe stocks, value stocks, and growth stocks.
When your back is against the wall and your screen is painted red with crashing equity prices, you want a combination of companies that can land consistent jabs, and a few with upside potential for knockout punches. Here are 10 stocks worth considering now.
The consumer staples play
Going all-in on safe stocks is a bad idea. But owning a few top safe stocks can be a great way to round out a diversified portfolio.
Procter & Gamble (PG -0.39%) is the quintessential recession-resilient dividend stock. Demand for P&G's products stays consistent despite market cycles, which typically results in low-to-mid-single-digit organic growth during good times and bad.
P&G rakes in tons of free cash flow that it uses to buy back its own stock and pay and raise its dividend, which it has been doing for 65 consecutive years. For investors looking to lock down a solid income stream, P&G is the stock you want in your corner during a bear market.
The consumer discretionary play
Starbucks (SBUX -1.61%) stock is hovering around a 52-week low as fears of inflation, uncertainty with the CEO position, unionization, and a suspended share buyback program clash with broader market volatility. Starbucks now has a price-to-earnings (P/E) ratio of 21.5, whereas the median P/E ratio over the last 10 years has been 31.5. Starbucks is generating record revenue and recovering nicely from the pandemic, and has tons of ways to grow its business as it leans into grab-and-go ordering off the strength of the Starbucks Rewards program. With a dividend yield of 2.5% to boot, Starbucks stock is a compelling buy.
The financials play
JPMorgan Chase (JPM 0.73%) is the largest bank stock by market cap. It has a P/E ratio of 8.5 and a dividend yield of 3.1%, and is arguably the bank with the best CEO in Jamie Dimon. JPMorgan has it all. And it has a reputation for navigating volatility and recessions.
Higher interest rates tend to help banks. But JPMorgan's corporate and investment banking division prefers lower interest rates, so the impact of rising interest rates isn't as good as it may seem at first glance.
Still, JPMorgan is a long-term winner and one of the safest all-around financial services companies out there.
The communications play
Like many stocks on this list, Walt Disney (DIS -0.62%) stock is hovering right around its 52-week low. The investment thesis for Disney has dramatically changed in the last three years, and investors are still getting used to it. Disney went from an incredibly profitable media business that paid a dividend to a non-dividend-paying stock that isn't making as much money as it used to as it invests heavily in streaming through Disney+.
Granted, the COVID-19 pandemic disrupted Disney's business -- even more than the 2008 financial crisis -- so the company will need more time to get back on its feet. However, the data so far indicates that folks are flocking in droves to Disney's parks, and reception of the content it has produced for Disney+ has been favorable. Given that Disney stock is lower now than before it launched Disney+, Disney seems like a good buy now.
The industrials play
Caterpillar (CAT -0.78%) makes equipment for oil and gas, marine and rail transportation, the agriculture industry, construction, mining, and other industries. Its exposure to the global economy means its results tend to ebb and flow based on economic cycles. But what makes Caterpillar uniquely positioned for the cycle we are in now is that it is benefiting from higher oil and gas prices and higher commodity prices. Higher commodity costs, whether that's for base metals or energy, are among the driving forces contributing to inflation right now. If the economy does enter a recession in the near-term, inflation will probably be a primary cause of it. And because Caterpillar's business units are essentially contributing toward higher inflation, not a victim of it, Caterpillar is well-positioned for short-term headwinds in the broader economy.
Caterpillar could very well have a record year when 2022 is all said and done. And even if it doesn't, Caterpillar is a Dividend Aristocrat that has paid and raised its dividend for 27 consecutive years, making it a reliable holding with upside potential. A Dividend Aristocrat is an S&P 500 component that has paid and raised its dividend for at least 25 consecutive years.
The utilities play
NextEra Energy (NEE -0.84%) is the largest regulated electric utility by market cap. It has spent decades investing in solar, wind, and hydroelectric energy as it plays its part in decarbonizing the grid. But NextEra and its subsidiaries still operate substantial natural gas assets, giving it a diversified power portfolio from both fossil fuels and alternative sources.
Stable contracts allow NextEra to gradually grow its business and support its dividend. NextEra is one of the newest members of the list of Dividend Aristocrats, and has a dividend yield of 2%
The energy play
Few oil and gas companies are as well-rounded as Chevron (CVX 0.04%). Chevron is a Dividend Aristocrat with a dividend yield of 3.5%. It can achieve free-cash-flow breakeven when oil is $40 per barrel, and make a lot more money when it is higher. It operates throughout the entire integrated oil and gas value chain of upstream, midstream, and downstream. It's also investing in renewable natural gas, renewable diesel, and other forms of both alternative and renewable energy. Natural gas and diesel in and of themselves are nonrenewable resources. But natural gas produced from landfill gas from a waste facility and renewable diesel produced from a refinery that uses soybean feedstocks instead of petroleum feedstocks are renewable sources of energy. That means Chevron could be a relevant player in a low-carbon future -- so its long-term investment thesis is no longer tied solely to oil and gas.
The materials play
Sherwin-Williams (SHW -0.31%) is a well-known residential paint company. But it also makes coatings and paints for commercial and industrial customers. Additionally, it sells many of its products under brands that don't carry the Sherwin-Williams label, making it a much larger company than most people realize. These brands fall under its consumer brands segment. The consumer brands segment and performance coating segment combined for $844.8 million in 2021 operating income, compared to $2.24 billion in operating income from Sherwin-Williams' name-brand Americas segment.
Sherwin-Williams stock is down 30% from its all-time high as the housing sector shows signs of cooling off, which impacts demand for its products. But Sherwin-Williams is a Dividend Aristocrat that has been through economic cycles before. And as the leader in its industry, there's reason to believe Sherwin-Williams can keep growing its business for decades to come.
The healthcare play
Over the last five years, investors have rarely gotten the opportunity to buy shares of robotic surgical systems maker Intuitive Surgical (ISRG -1.07%) on sale. But with the stock down around 24% from its all-time high, now looks to be a good time to scoop up shares of Intuitive Surgical.
The company generates the majority of its revenue from recurring sources, but its growth has been impressive too. Over the past five years Intuitive Surgical has grown revenue by 82%, and net income by 154%. Intuitive Surgical should play a leading role in pushing the healthcare sector forward as specialists increasingly turn to the advantages of robotics and automation.
The technology play
Around 28% of the S&P 500 is in tech stocks. And as tech becomes a larger part of the U.S. economy, it has also become a larger part of people's investment portfolios. Folks want different things out of a tech stock. Some want hypergrowth. Others want industry leadership and value from stable free cash flows. One of the few companies that has it all is Adobe (ADBE -1.29%).
Adobe is well-known as the brand behind the Creative Cloud software suite. In many ways, these applications are essential for modern-day marketing campaigns, film production, advertisements, graphic design projects, and all aspects of digital media. Adobe's growth has come down in recent years, but its free cash flow and net income make the company more profitable than ever before. Adobe is a monster growth stock that could remain unstoppable for decades to come. Down 40% from its all-time high, Adobe is an excellent buy for investors looking for a company that demonstrates a balance of growth, free cash flow, and profit.
10 companies you can count on
Investing in equal parts of all 10 stocks on this list gives an investor exposure to different sectors of the economy. It also provides a 1.6% dividend yield -- even though three stocks out of the 10 on this list don't pay dividends.
Each company on this list is a leader in its respective industry. All 10 companies are also profitable and generate sizable free cash flow that can be used to pay dividends, buy back stock, or reinvest in the business. When times get tough, it's important to have companies you can count on in your corner. No matter what the economy or the market throws at you, there's reason to believe you can depend on the long-term success of all 10 companies on this list.