Billionaire Ray Dalio is one of the most respected investors out there. Bridgewater Associates, the hedge fund he founded, is generally considered to be the largest hedge fund in the world, with assets under management topping out at $168 billion in 2022.
The 75-year-old is known for his "all-weather" portfolio, including gold, balancing risks across asset classes to build a portfolio that can perform well in virtually any economic scenario. He pays close attention to the macro environment, and after a career that spans 50 years, it's fair to say that the Bridgewater founder has seen his share of market crashes.
So it was notable when Dalio gave a stark warning recently about the economy. On NBC's Meet the Press, Dalio said: "Right now we are at [a] decision-making point and very close to a recession, and I'm worried about something worse than a recession if this isn't handled well."
Dalio also said: "We're witnessing a classic breakdown of the major monetary, political, and geopolitical orders. This kind of breakdown happens only once in a lifetime, but it has happened many times in history when similarly unsustainable conditions were in place."
There's no doubt that economic uncertainty has spiked in recent weeks. The CBOE Volatility Index has soared. Stocks crashed when President Donald Trump made the "Liberation Day" tariffs announcement, and Treasury yields have risen, a sign that even the benchmark "risk-free" investment may no longer be seen that way.
In times like these, it's hard for investors to escape the volatility, but some stocks are well-designed to do just that. Let's take a look at two worth buying today.
Image source: Getty Images.
1. Philip Morris International
Few stocks have the credibility that Philip Morris International (PM 2.02%) does when it comes to riding out global uncertainty.
Including its history before it separated from Altria, Philip Morris is a Dividend King, having raised its dividend every year for more than 50 years. Tobacco has historically been recession-proof, as smokers and other consumers use it regardless of the state of the economy.
But Philip Morris has more than just history and tobacco in its favor. The company does nearly all of its business outside of the U.S., and it tends to produce its products in the markets where it sells them, making it relatively protected from the U.S.-driven trade war. Even the products that it does sell in the U.S., like Zyn, the oral nicotine pouch, are generally produced there.
NYSE: PM
Key Data Points
Philip Morris has reported strong results recently, bucking the conventional trend in the tobacco industry. It's delivering solid growth on the strength of smoke-free products like Zyn and IQOS, its heat-not-burn product. The smoke-free category now makes up 40% of its revenue. It's also growing quickly, with organic revenue up 17% in 2024. Even its combustibles segment continues to grow, with revenue up 5.9% on a slight increase in cigarette volumes.
With its limited exposure to the U.S. market, the resilience of tobacco products, its growth opportunity in the smoke-free category, and its history of growing profits and dividends, Philip Morris looks like a great choice for the current volatile environment.
2. Dollar General
Dollar General (DG +0.28%) has struggled over the last three years. Consumer discretionary spending has been weak, it's lost market share to Walmart, and it's struggled with operational errors.
However, the dollar store chain is outperforming the S&P 500 by a wide margin. It's up 23% this year (through April 18). Investors have recognized the stock as a good choice in the current macro environment due to its strong performance in past recessions, its plan to improve the business, and its relatively cheap price. It currently trades at a price-to-earnings ratio of 18.
Dollar General looks like a promising stock to own right now for several reasons. The company is relatively insulated from tariffs, as most of its sales come from consumer staples products like fresh food, packaged food, paper products, and cleaning products that are sourced in the U.S.
NYSE: DG
Key Data Points
The retailer also has a history of thriving in recessions as its business is countercyclical, meaning people tend to trade down to Dollar General during tough times. For instance, its comparable sales jumped between 9% and 10% in 2008 and 2009 during the early stages of the financial crisis. It also has a long track record of growth, delivering positive same-store sales growth each year for 35 years (except in 2021, when the pandemic-driven boom led to a pullback).
Finally, Dollar General's "Back to Basics" turnaround plan looks promising. The company is working on improving out-of-stocks, ensuring the checkout area is adequately staffed, and closing temporary storage facilities, which should help improve profitability. Management also guided to earnings growth this year, and the beaten-down stock price offers opportunity.
If the stock follows its historical pattern in weak economies, it should do well over the next year or two.
