Noted economist Paul Samuelson once said, "Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas."
Of course, that's doesn't mean investing can't be exciting. To the contrary, it's a great feeling to watch your due diligence pay off over time as an investment thesis comes to fruition. That said, it's a safe bet Samuelson would agree that your investments shouldn't keep you awake at night.
On one hand, some of us have no problem weathering the extreme ups and downs of more speculative, high-beta growth stocks. After all, with greater risk comes greater reward, right? On the other hand, other investors would rather put their money to work in larger, stronger, well-established companies. While the potential reward may not be as great, you can be sure your chances of losing a substantial sum of money are much lower.
With that, here are three solid businesses with which any sleep-deprived investor might find relief:
|Company||Market Cap||Beta||Dividend Yield||CAPS Rating (out of five)|
|Costco (NASDAQ:COST)||$45 billion||0.44||1.1%||*****|
|Verizon (NYSE:VZ)||$136 billion||0.36||4.4%||****|
|Diageo (NYSE:DEO)||$75.4 billion||0.80||1.9%||
Profits in bulk
First up, consider loading your cart with warehouse specialist Costco Wholesale. Compared with traditional stores such as Target or Walmart, Costco generally stocks a fraction of the number of items in its locations at any given time with a general emphasis on bulk purchases. Thanks to its no-frills locations and reasonable annual membership fees, Costco is also able to generate plenty of cash while consistently offering rock-bottom prices on products to its fanatically loyal customer base.
In addition, while Costco maintains a core group of products in its stores -- I can't remember, for example, the last time I bought diapers, milk, or butter anywhere else -- it also maintains a sort of "treasure hunting" atmosphere in an effort to lure consumers into buying not-so-common items that may not be around the next time they visit. As a result, rather than being frustrated with Costco for not stocking any given item, shoppers are generally disappointed they didn't buy when they had the chance.
In the end, I can't help but wonder whether potential investors might suffer a similar disappointment if they don't buy shares of Costco, especially considering the fact the company offers a solid 1.1% dividend, repurchased 7.3 million of its shares last year, and plans to continue expanding its store count by building 30 new locations in 2013.
Big red for the win
If Costco's not your bag, maybe I can talk you into buying shares of Verizon Communications. Why, you ask, would any conservative investor want to purchase stock in a company with a trailing price-to-earnings ratio north of 150? In short, as fellow Fool Tim Brugger recently pointed out, things weren't exactly as they seemed during Verizon's latest earnings report, thanks primarily to massive non-operational charges of $1.86 per share -- including a $1.55-per-share charge to account for pension liabilities.
Putting those charges aside, Verizon's adjusted earnings per share actually came in at a respectable $0.38, even after including a $0.07-per-share write-down from Hurricane Sandy damages. In fact, Verizon remains as solid as ever, from its best-in-class infrastructure -- which nicely positions the company to benefit from the coming onslaught of new 4G mobile consumers -- to the potential for Big Red to eventually acquire the remaining 45% of its Verizon Wireless subsidiary, which is currently controlled by Vodafone.
Even so, in the meantime investors can happily collect Verizon's huge 4.4% dividend while they wait for their shares to appreciate.
If mobile phones and warehouse shopping don't put you to sleep, I'm betting spirits specialist Diageo will.
Diageo enjoys an industry moat as wide as they come as the producer of 17 of the top 100 global premium distilled spirits brands, including Baileys, Captain Morgan, Jose Cuervo, Smirnoff, and Crown Royal. If that weren't enough, Diageo also owns wine brands including Chalone, Blossom Hill, Sterling Vineyards, Justerini & Brooks, and Dom Perignon.
Still not convinced? Consider the fact that more than one-fifth of Diageo's sales last year came from its beer brands, which include Guinness, Red Stripe, and Harp Lager.
With that fortress-like moat of powerhouse brands, it's hard to imagine the day Diageo's business wanes. Even so, its recently approved deal to take a 27.4% stake in India-based United Spirits shows the industry behemoth still isn't content to rest on its laurels.
Whether you'd like to benefit from the thriving spirits business, shopping in bulk, or unrivaled opportunities in the mobile space, even the most conservative investors can comfortably resist the wider market's ebbs and flows by owning any of three of the aforementioned companies.