Conservative Investors Seek Stability
By Joemoney
10/14/2001
Due to unfortunate events that occurred just over one month ago, the market has been very unstable and very unpredictable. Who would have thought we would gain back all our post-Sept. 11 losses within one month? I try to be as patriotic as I can, but I felt a sense of bearishness after the attacks. I’m glad I was wrong.
What conservative investors are looking for in today’s market, as any other, is stability. If in doubt about the market, stability will save you from unexpected market dips. Stability is usually found on the NYSE with older, more trusted companies.
Certain qualities of a stable stock that will provide safety and income in rough or uncertain times are stocks with high yield, and stocks that are a necessity to the economy, like food, drug, and energy companies. Other sectors can be included in the “stable” category, but only certain companies within those “other” sectors will provide stability.
Here I have gathered a list of stocks that I believe conservative investors who are unsure about the market should consider.
PepsiCo (NYSE:PEP) is a non-cyclical who has performed very reliable over the past five years. Every so often, the stock rallies and then takes a breather to prepare for another rally. It’s chart looks similar to stairs, which only identifies stable growth that almost ignores market downturns. Coverage by a broker on PEP was last seen on October 4th with coverage initiated at “outperform”. If you’re looking for aggressive returns, PEP is not for you. If you’re looking for a place to make small, but stable returns due to uncertainty, PEP is ideal.
Eastman Kodak (NYSE:EK) has really been a dog in the past five years, but management has recently increased dividends signaling positive expectations. How can such a company earn 2.55 per share and still fall like it has been? Dividends have been set to 1.80 in 2002, which gives it a 5.07% dividend yield. EK assures its investors that it can easily pay the dividends and believes its recent increase was a “modest” increase. Such a high dividend yield decreases risk substantially, and also gives EK the highest dividend yield within the Dow Jones Industrial Average. EK has low expectations from analysts and investors, which will magnify positive news. The key to growth is Kodak's digital and imaging businesses. Look for positive earnings growth late this year or early next.
JP Morgan Chase (NYSE:JPM) has been punished because of a poor market. However, it’s near future outlook is looking promising due to the rate cuts. Currently, I have seen 2002 earnings estimates for JPM at $3.49. It also has a 4.07 dividend yield, which is very attractive. With it currently trading at late 1998 levels, I see no reason why it wouldn’t be a great and safe buy.
That is my current list of conservative favorites. Focus on dividends, earnings, and past stability will encourage growth in a volatile and unstable market.
