After the market's performance over the past few months, no one can blame investors for having an increased interest in less risky stocks. That's even more true when one considers that the unpredictability of oil prices coupled with slowing economic growth in China will continue to inject volatility and uncertainty into global markets. While less risky stocks lack the excitement of high-growth options, these three companies are great places to start if you're looking to protect and grow your wealth more slowly. After all, slow but steady often wins the race.
Daniel Miller: When looking for great stocks for investors with low risk tolerance, General Electric (NYSE: GE) will likely always remain on my short list. This has become all the more true since the conglomerate sold off its GE Capital assets. The entity is now much healthier than before the recession, and it's more focused on its industrial businesses than it has been in a long time.
In addition to de-risking GE Capital, the company is well diversified, with its business segments reaching into power, energy connections, renewable energy, oil & gas, transportation, appliances & lighting, healthcare, and even aviation. Sure, business in its oil & gas segment is currently hurting, but when looking for a low-risk stock to own, a massive company with its hand in many cookie jars is a great play. Plus, investors can sleep at night knowing much of GE's business revolves around powering the world, and the world will almost certainly always need more power and electricity.
One factor worth tracking for low-risk investors is a company's backlog of orders, which is reassuring in the event of a downturn. GE's backlog has consistently grown over time, despite a small hiccup during the third-quarter of 2015, and has surged with its Alstom acquisition folded in.
Granted, 2016 might be a bumpy year for General Electric, along with many diversified industrials with a footprint in the oil and gas business, but this is a company plenty strong enough to withstand near-term macroeconomic pressure. With a more focused industrial portfolio, the absence of GE Capital, and a growing backlog of orders, this is a great company for low-risk investors to own.
Tim Green: You can't completely avoid risk when investing in individual stocks, but Warren Buffett's Berkshire Hathaway (NYSE:BRK.B)(NYSE:BRK.A) is about as close as you can get. Berkshire has grown to become one of the largest companies in the world, with $210 billion of annual revenue, $24 billion of annual net income, and a market capitalization nearing $340 billion.
Berkshire is a conglomerate, comprised of various insurance operations, dozens of unique businesses ranging from a major railroad to a furniture retailer, and an enormous equityportfolio. Buffett, now 85 years old, won't be around forever, but the company he's built over the decades should stand the test of time thanks to both its diversification and Buffett's insistence on only acquiring top-notch companies.
Over the past 50 years, Berkshire stock has generated a 20.8% annualized returns, handily beating the 9.7% annualized return of the S&P 500. That stellar performance is unlikely to be repeated, given Berkshire's size, but the company can still outperform by sticking with Buffett's strategy of buying businesses with durable competitive advantages and holding them indefinitely.
For those wanting to park their money in only the safest of stocks, Berkshire Hathaway is a no-brainer.
Dan Caplinger: The electronic payments space has seen industry-changing innovation in recent years, and the rise of mobile-based payment systems has revolutionized the way people buy things. Many might see Visa (NYSE:V) as the established player whose business model is getting disrupted rather than as a low risk stock, but Visa's multi-faceted approach toward the space has kept it at the cutting edge of new advances in payments.
Visa's leadership role in the existing card-network infrastructure gives it a huge foundation on which to build innovative new offerings to the merchants it serves as well as the end-users of its payment systems. Working together with other credit card companies, Visa has sought to build mobile solutions that will take full advantage of its existing network capabilities, but in a way that expands their use to accommodate changing demands among end users. At the same time, international growth opportunities abound to gain greater acceptance of non-cash transactions, and Visa's move to buy out Visa Europe is just the latest in a series of strategic steps to take advantage of those opportunities.
Visa isn't entirely free of risk, but its potential growth makes the risk-reward proposition for investors look attractive.