No stock investment is absolutely risk free. But buying some stocks is certainly much less risky than others for long-term investors. A handful of these companies may even deserve “sure hit” status, vulnerable only to the most unthinkable economic circumstances.
Here’s a closer look at three of these “safe” investments that would be at home in just about anyone’s portfolio.
1. Hormel Foods
You don’t earn points for style or emotion. What Hormel Foods (New York Stock Exchange: HRL) it lacks dynamism, however, it makes up for it with perpetual marketability.
Think about it. Consumers can opt for a stay over a vacation if money is tight. They might cancel cable TV or put off buying a new car. However, people will always want to eat and will pay almost any price to do so.
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That’s not to say that Hormel is completely immune to a constantly changing environment. While it has remained profitable in every quarter for several decades (and those earnings have generally increased), not every quarter has always been more profitable than the comparable quarter of the previous year.
Along with most of its peers, Hormel ran into a cost and pricing headwind in 2019, before the COVID-19 pandemic rocked the world. The consequences of the contagion of the coronavirus and the subsequent increase in inflation are actually proving to be fiscally beneficial for the company, at least so far. As suggested, like most other food companiesHormel can pass on many of its costs to its customers.
However, that is not even the key point. The bottom line is that by leveraging its established and beloved brands like Dinty Moore, Planters, Skippy, and of course Hormel (along with several others), this food company has proven that it’s here to stay.
2. American Express
On the surface, it seems like a stretch to call a credit card company American Express (New York Stock Exchange: AXP) a safe investment. Wouldn’t a sour economy or the advent of “buy now, pay later” alternatives pose a threat to this aspect of consumerism?
Actually, no, I wouldn’t.
Fact: The world is addicted to living with credit card debt.
While the average US consumer made some progress toward paying off credit card debt in the early days of the pandemic (when they had little opportunity to spend), most have rekindled their pre-investment spending habits. the pandemic. The Federal Reserve Bank of New York reports that total credit card debt within the United States peaked at $930 billion in the last quarter of 2019, down to $770 billion in the first quarter of 2021 and recovered to $860 billion at the end of last year. Add in all the (higher-priced) homes purchased in the past two years, and total US consumer debt is once again breaking records.
One would think that this situation poses problems for intermediaries like American Express, which eventually become lenders. This time, however, is different from the trouble the lending industry had in 2007. This time, consumers are much more credit worthy and their credit scores continue to improve while loan delinquencies continue to decline.
That’s the ideal backdrop for credit card companies, assuming an entire generation of spenders doesn’t want to fall into the same kind of trouble many people found themselves in after the subprime collapse.
Oh, and if you want to know why AmEx outperformed Visa and MasterCard to earn a spot on the list of must-have values, it’s because the company is second to none when it comes to building an ecosystem of cardholder benefits. That’s why projected gross growth of 18.5% this year and 12.1% next year isn’t terribly unusual.
Finally, it’s a predictable choice, but add Apple (NASDAQ:AAPL) to your list of investments you’ll be glad you bought today in a few years.
Apple is, of course, the name behind the world’s most popular smartphone, the iPhone. Global Stats stat counter indicates that Apple’s flagship device once again captured the majority of the total mobile market from Samsung in the latter part of last year, despite, according to CounterPoint Research, the iPhone’s (much) higher average selling price of $825 each.
It’s a testament to how willing Apple’s loyal fans are to open up their wallets and purses. There may come a time when smartphone saturation and competition finally catch up to Apple’s iPhone, but that time is not now or in the foreseeable future.
The thing is, even when the iPhone finally runs its course, Apple is ready. It’s building an ecosystem of apps and digital entertainment of its own, which may not be a huge hit within the industry yet, but it’s becoming an important part of the company’s business. Digital services accounted for nearly 19% of gross revenue in the last fiscal year, but made up more than 31% of the company’s profit. Even a little more growth for your service business could lead to an outsize advantage for your bottom line. Better yet, unlike much of its hardware business, high-margin service revenue is sustainable and repeatable. A large part of this is entirely subscription based.
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American Express is an advertising partner of The Ascent, a Motley Fool company. james brumley has no position in any of the mentioned stocks. The Motley Fool owns and recommends Apple, Mastercard, and Visa. The Motley Fool recommends the following options: $120 long calls in March 2023 at Apple and $130 short calls in March 2023 at Apple. The Motley Fool has a disclosure policy.