Uh oh, rates are rising, and so is the volatility index (VIX), as the market is teetering on the brink as we roll into the huge third-quarter earnings reports. After Wednesday’s beat-down, you can bet that investors are looking for the door. The problem is that stocks are still probably the best play, and while the overextended momentum FANG darlings are being trampled, some other top companies may offer a safer harbor to move to.
Defensive sectors like consumer staples, utilities and real estate investment trusts (REITs) are boring but are good areas to be in if the market decides to continue blowing up. We screened the top stocks in those sectors in the Merrill Lynch research universe database and found five stock rated Buy that you can probably sleep at night with.
AT&T
This stock has been absolutely hammered and may be a great total return play. AT&T Inc. (NYSE: T) is the world’s largest provider of pay TV, with TV customers in the United States and 11 Latin American countries. In the United States, the AT&T wireless network has the nation’s self-described strongest 4G LTE signal and most reliable 4G LTE.
The company also helps businesses worldwide serve their customers better with mobility and highly secure cloud solutions. Trading at a very cheap 8.9 times estimated 2019 earnings, the company continues to expand its user base, and strong product introductions from smartphone vendors have not only driven traffic but increased device financing plans.
The telecom giant reported mixed second-quarter results. However taking into account new assets from the Time Warner acquisition, AT&T raised its full-year earnings guidance to the high end of the $3.50 range, versus the $3.40 analysts had estimated.
AT&T shareholders receive a 6.09% dividend. Merrill Lynch has a $37 price target, and the Wall Street consensus target is $35.36. Shares closed trading on Wednesday at $33.32.
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Coca-Cola
This top Warren Buffet holding not only offers safety but an incredibly strong worldwide brand with 40% overseas sales. Coca-Cola Co. (NYSE: KO) is the world’s largest beverage company, refreshing consumers with more than 500 sparkling and still brands.
Led by Coca-Cola, one of the world’s most valuable and recognizable brands, the company’s portfolio features 20 billion-dollar brands including Diet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater, Powerade, Minute Maid, Simply, Georgia and Del Valle. Globally, it is the number one provider of sparkling beverages, ready-to-drink coffees and juices and juice drinks.
Through the world’s largest beverage distribution system, consumers in more than 200 countries enjoy Coca-Cola beverages at a rate of more than 1.9 billion servings a day. With coolers getting packed for picnics, parades and vacations you can bet that they will be stuffed with products from this iconic American company. Also remember that the company also owns 16.7% of Monster Beverage, which continues to deliver big numbers.
Coca-Cola investors receive a 3.42% dividend. The Merrill Lynch price target for the stock is $52, while the consensus target is $50.89. The stock closed Wednesday at $45.68.
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Duke Energy
Duke Energy Corp. (NYSE: DUK) operates as a regulated utility company in the United States and is based in Charlotte, North Carolina. The company operates regulated electric utilities in the Midwest, Florida and the Carolinas and supplies electric service to approximately 7.5 million residential, commercial and industrial customers. Duke owns 50,000 megawatts of capacity.
The regulated gas utilities serve more than 1.6 million customers in the Carolinas and Ohio. A commercial arm owns contract renewables and pipelines across the United States.
Shareholders receive a 4.53% dividend. The $86 Merrill Lynch price target compares with the $84.69 consensus price target. Shares closed Wednesday at $81.88.
Kraft Heinz
This leading global food company was formed almost three years ago by the merger of H.J. Heinz and Kraft Foods Group. Kraft Heinz Co. (NYSE: KHC) had $29 billion of annual revenues generated by well-known brands such as Kraft, Heinz, Oscar Meyer and Maxwell House.
It is the third largest food and beverage manufacturer in North America and derives 76% of revenues from that market and 24% from elsewhere. Additional brands include ABC, Capri Sun, Classico, Jell-O, Kool-Aid, Lunchables, Ore-Ida, Oscar Mayer, Philadelphia, Planters, Plasmon, Quero, Weight Watchers Smart Ones and Velveeta.
Shareholders receive a 4.49% dividend. The Merrill Lynch price target is $83. The consensus target is $67.05, and shares closed Wednesday at $55.74.
Simon Property
Simon Property Group Inc. (NYSE: SPG) invests in the real estate markets across the globe. It engages in investment, ownership, management and development of properties. The company primarily invests in regional malls, premium outlets, mills and community/lifestyle centers to create its portfolio.
Through its subsidiary partnership, it owns or has an interest in about 230 properties in the United States and Asia. The company also has a 28.9% interest in Klepierre, a European REIT with over 260 shopping centers in 13 countries.
One key driver of growth will include the more than $1.0 billion of development/redevelopment planned over the next few years. Merrill Lynch also feels that the company’s high-quality portfolio has weathered the retail storm much better than most.
Shareholders receive a 4.49% distribution. Merrill Lynch has set its price target at $203. The consensus target is $189.47, and shares ended Wednesday at $172.62.
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These five top companies are liquid, pay big dividends and look like safe havens as the market volatility continues to churn. Needless to say, a continued massive market sell-off will take everybody down, but these five will weather the storm better than momentum darlings.
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