Investors have been flocking to safe stocks amid rising inflation. Three stocks that have been performing exceptionally well as a result are Henry Schein (HSIC -0.40%), Kroger (KR 0.14%), and ExxonMobil (XOM -0.14%). All are up more than 11% this year and have been soundly beating the S&P 500. But as well as they've all been doing, they could still be excellent investments to add to your portfolio. Here's why.
Image source: Getty Images.
1. Henry Schein
Henry Schein is a medical distribution company that serves health and dental offices around the globe; it has more than 1 million customers spanning 32 countries. The business makes for an attractive recovery stock to own as the healthcare industry scales back up and offices return to their normal, pre-pandemic operations.
In 2022, the company expects that its diluted earnings per share (EPS) will rise between 7% and 10%. Although the business normally generates modest profit margins of not much higher than 5%, Henry Schein has consistently remained in the black in each of the past five years. And with its shares trading at less than 20 times the company's trailing 12-month earnings, it's still a cheaper investment than the average stock in the Health Care Select Sector SPDR Fund, which trades at a multiple of more than 22.
Henry Schein's reasonable valuation, positive free cash flow of $631 million over the trailing 12 months, and potential to be one of the big winners in a return to normal are reasons why I expect the stock to remain a good buy for the foreseeable future.
2. Kroger
Grocery-store chain Kroger has been a popular defensive play this year. Its gain of 25% thus far in 2022 isn't the type of return you would normally expect from a business that's known for modest growth. But investors have been buying up the country's largest grocer, which has close to 2,800 stores in 35 states.
One of the reasons Kroger could continue to outperform this year is because the products it buys and sells are essentials; regardless of inflation, consumers are going to need to load up on food products. And that gives Kroger more flexibility to raise prices to cover higher costs.
Plus, it has more than 14,000 private label items in its stores which could be in high demand as consumers look for ways to cut down on their bills. The company's Our Brands products generated close to $28 billion in sales last year, representing more than one-fifth of its total revenue.
This year, the company expects its identical sales (without fuel) to grow between 2% and 3%. And at the same time, the company says it is being "disciplined" with respect to spending on capital. Those are all positives for investors that make the stock a safe investment to hold right now. Plus, Kroger pays a dividend that yields roughly 1.5%, which is a shade higher than the S&P 500 average, which is a little below 1.4%.
3. ExxonMobil
One of the hottest stocks of 2022 has been oil and gas producer ExxonMobil. With the shares up over 30% year-to-date, it's clear that rising commodity prices have had investors stockpiling oil and gas stocks. Due to the Russian invasion of Ukraine, there have been widespread concerns about the availability of oil, and that has led to prices hitting multi-year highs. It's a stark contrast to the negative oil prices that investors briefly saw during the early stages of the pandemic in 2020.
But even before the surge in oil prices, Exxon was already posting strong results. In 2021, the company's revenue totaled $285.6 billion, bouncing back from the $181.5 billion it generated a year earlier -- and higher than the $264.9 billion it reported in 2019 before the pandemic. Free cash flow was also an impressive $36.1 billion last year after falling into negative territory in 2020.
The company has clearly recovered from the initial stages of the pandemic. And 2022 could be another strong year for Exxon with pent-up travel demand potentially keeping oil prices elevated in the months ahead. The stock's resiliency to inflation and its high dividend yield of 4.1% make it one of the better investments to be holding right now.
