Fretting About The Worst Selloff Since 1987? 5 Safe Stocks
Zacks Investment Research | Mar 16, 2020 10:04PM ET
Wall Street’s fear index has hit its highest level in history, with all major bourses tanking at least 12% on Mar 16 after coronavirus fears spooked investors. The deadly virus that originated in China has now spread across the world, compellng investors to ditch risky assets like stocks. The virus is expected to weight on corporate profits and disrupt supply chains throughout the world.
Nevertheless, the CBOE Volatility Index (VIX) that measures expected volatility in the coming 30-day period, jumped almost 44% in a single trading session to close above the 82 mark, marking its highest finish in history. In fact, the index had climbed above the 80 mark only two times during the 2008 financial crisis.
By the way, the VIX generally has an historic average between 19 and 20. And it tends to rise when stocks plummet. And markets primarily tumbled yesterday after U.S. President Trump issued a new set of guidelines for dealing with the pandemic. He categorically said that public gatherings should be fewer than 10 people and children should stay at home.
Such a statement came in after several schools across the country were shut down, major sporting events were suspended and local governments took necessary steps to prevent the gathering of people in public places. What’s more, he said that the outbreak might stretch till July, thereby squashing hopes of the threat ending once the weather conditions get warmer.
The Dow saw its second worst one-day decline, while the tech-laden Nasdaq registered it’s worst one-day decline in history. For the S&P 500, the index suffered its third worst day since inception. Even though circuit breakers briefly halted trading, the indexes dropped sharply.
Coming to the broader S&P 500 index, 491 stocks declined on March 16. To top it, 64 stocks in the S&P 500 nosedived at least 20% yesterday. Predominantly shares of energy companies, airlines, cruise lines, and casino and hotel operators declined the most, while some apparel retailers were hit hard too.
This certainly shows that economic support to fight the outbreak isn’t boosting equities. The Fed and the ECB did apply monetary measures to calm markets but that did little to soothe investors. After all, interest rate cuts and easy access to credit doesn’t address issues caused by a pandemic that has kept consumers from traveling, shopping and gathering at public places.
Meanwhile, Trump failed to quell worries about the possible economic slowdown from the coronavirus. He had earlier promised to offer “a payroll tax cut or relief” to both business houses and hourly wage earners.
Buy These 5 Ultra-Safe Stocks Now
With the markets witnessing a major pullback, investing in stocks that provide excellent risk-adjusted returns seems judicious. The best way to go about doing this is by creating a portfolio of low-beta stocks, which are inherently less volatile than the markets they trade in. In this case, a low beta ranges from 0 to 1.
These stocks are also dividend payers which boast immense financial strength and are immune to market vagaries. Such stocks reflect solid financial structure, healthy underlying fundamentals and better-quality business. Further, they boast a Zacks Rank #1 (Strong Buy) or 2 (Buy).
AGNC Investment Corp. (NASDAQ:AGNC) operates as a real estate investment trust. The company currently has a beta of 0.33 and a Zacks Rank #1. The company has a dividend yield of 15.99% and its five-year dividend yield is 11.79%.
The Zacks Consensus Estimate for its current-year earnings has moved up 6.1% over the past 60 days. The company’s expected earnings growth rate for the current quarter and year is 7.7% and 4.6%, respectively.
ASE Technology Holding Co., Ltd. (NYSE:ASX) provides a range of semiconductors packaging and testing. The company currently has a beta of 0.97 and a Zacks Rank #2. The company has a dividend yield of 2.57% and its five-year dividend yield is 2.39%.
The Zacks Consensus Estimate for its current-year earnings has risen 2.9% over the past 60 days. The company’s expected earnings growth rate for the current year is 44%.
CNA Financial Corporation (NYSE:CNA) provides commercial property and casualty insurance products. The company currently has a beta of 0.69 and a Zacks Rank #1. The company has a dividend yield of 4.17% and its five-year dividend yield is 2.72%.
The Zacks Consensus Estimate for its current-year earnings has moved up 6.7% over the past 60 days. The company’s expected earnings growth rate for the current year is 15%. You can see Zacks Investment Research
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