Wall Street was hit by a storm in the past several weeks and some strong momentum stocks such as Facebook and Liknkedin was badly hit, and the money flowed to stable companies like Comcast and Disney.
This is considered as one of the “safe rotation” of the money in Wall Street. Investors are looking for stocks that have a good track record of bringing in money in earnings as well as dividends. According to Capital IQ chief investment strategist Sam Stovall, the stocks to invest in right now are somehow boring, but these are very stable ones.
Stovall made a list of stable stocks to invest in right now. The 20 best stocks to invest in according to Stovall include AmerisourceBergen, Baxter International, C.R. Bard, Chevron, Comcast, Gap, Mattel, McKesson, Mylan, Norfolk Southern, Qualcomm, Quest Diagnostics, Ross Stores, Stryker, T. Rowe Price, Target, Travelers, United Technologies, Walt Disney and VF Corp.
Stovall said, when seas become rough, investors usually choose the companies that have higher earnings and more stable price returns. He began his search by hunting letter grades given by S&P, which are based on the consistent growth on earnings and dividends from these companies for the past decade.
128 grade A companies underperformed some of their peers for the last year. These stable stocks offered a 16.9% average return, while below average companies like B, B- and C companies, offered 21.7% returns.
As B and C companies provide higher returns, investors are sceptical about these companies’ ability to continue to grow. That is the essence of investing anyway – taking risk and the bigger the returns, the higher the risks.
One way of making calculated risk is to look at the price-to-earning ratio of the companies and Stovall said B and C companies have 26.6, while above average stocks only have 16. 9.