Merrill Lynch Has 5 Safe Haven Stocks to Buy as Market Volatility Continues

By Lee Jackson Published Mar 11, 6:42AM EDT

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Merrill Lynch Has 5 Safe Haven Stocks to Buy as Market Volatility Continues — © Justin Sullivan / Getty Images

With Treasury yields having plunged to all-time lows, buying government debt now as a safe haven play looks like a losing hand. The incredible bond market rally has fed on itself as the sheer lack of inventory, huge demand and a degree of paranoia have driven prices higher and yields lower, and with the 30-year Treasury yielding 1.21% and the 10-year perched at 0.74%, the risk-reward for most investors is simply not worth it.

While the COVID-19 scare continues to manifest itself into all areas of commerce and life, those who took some profits when the market hit all-time highs in early February may be sitting pretty when it comes to putting a very small amount of that money to work.

We screened the Merrill Lynch research database looking for stocks that were rated Buy, paid dependable dividends and had the firm’s top risk-adjusted rating. We found five that investors may want to buy small entry positions in now.

McDonald’s

The fast-food giant continues to revamp both stores and the menu, and it is a solid pick for conservative accounts. McDonald’s Corp. (NYSE: MCD | MCD Price Prediction) is the world’s leading global food-service retailer with over 37,000 locations serving approximately 69 million customers in over 100 countries each day. More than 80% of McDonald’s restaurants worldwide are owned and operated by independent local businesspersons, and it is one of the most valuable brands in the world.

Fourth-quarter 2019 diluted earnings increased 14% (15% in constant currencies). Included in the results was $84 million ($0.11 per share) of income tax benefit due to new regulations issued in the quarter related to the Tax Act.

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Shareholders receive a 2.50% dividend. The Merrill price target for the shares is $240, while the Wall Street consensus target is $229.41. McDonald’s stock closed Tuesday at $199.86 a share, up almost 7% on the day.

NextEra Energy

With a very strong balance sheet, this company looks poised for a solid first half of 2020. NextEra Energy Inc. (NYSE: NEE) consists of two main business segments: the Florida Power & Light (FPL) regulated utility, and NextEra Energy Resources, a deregulated generator of predominantly wind, natural gas, nuclear and solar powered assets in North America. The company also holds a 65.1% share in the yieldco NextEra Energy Partners.

FPL announced last summer a groundbreaking “30-by-30” plan to install more than 30 million solar panels by 2030 and make the state of Florida a world leader in the production of solar energy. It and NextEra Energy Resources are already the world’s largest producers of renewable energy from the wind and sun. When this plan is completed, FPL expects to be the largest utility owner and operator of solar in America.

Investors receive a safe 2.19% dividend. Merrill’s $285 price objective is above the consensus figure of $267.63. NextEra Energy stock closed at $255.73 on Tuesday.

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PepsiCo

This top consumer staples stock fits the bill for worried investors. PepsiCo Inc. (NYSE: PEP) operates as a food and beverage company worldwide. Its Frito-Lay North America segment offers Lay’s and Ruffles potato chips; Doritos, Tostitos and Santitas tortilla chips; and Cheetos cheese-flavored snacks, branded dips and Fritos corn chips.

The Quaker Foods North America segment provides Quaker oatmeal, grits, rice cakes, natural granola and oat squares, as well as Aunt Jemima mixes and syrups, Quaker Chewy granola bars, Cap’n Crunch and Life cereals, and Rice-A-Roni side dishes.

Pepsi’s North America Beverages segment offers beverage concentrates, fountain syrups and finished goods under the Pepsi, Gatorade, Mountain Dew, Diet Pepsi, Aquafina, Diet Mountain Dew, Tropicana Pure Premium, Sierra Mist and Mug brands, as well as ready-to-drink tea and coffee, and juices.

Holders of PepsiCo stock receive a 2.85% dividend. The $160 Merrill price target compares with the $146.31 consensus target and the most recent close at $134.14, after a 3% gain on the day.

Procter & Gamble

The stock offers a very solid dividend and safety. Procter & Gamble Co. (NYSE: PG) is one of the world’s largest consumer products companies, and it operates in five segments: Beauty, Grooming, Health Care, Fabric & Home Care, and Baby & Family Care. Its many brands include Pampers, Tide, Bounty, Charmin, Gillette, Oral B, Crest, Olay, Pantene, Head & Shoulders, Ariel, Gain, Always, Tampax, Downy and Dawn. Some of these are among the most valuable brands in the world.

The company actually is innovative in its product development process and uses that to help ensure future growth and cash flow. This should provide investors years of steady growth and dividends.

Shareholders receive a 2.50% dividend. Merrill Lynch has set a $140 price objective. The consensus price target is $129.68, and Procter & Gamble stock closed at $120.55, after rising 3.8% on Tuesday.

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Visa

This top credit card issuer is becoming a huge leader in digital pay and is also one of the most valuable brands in the world. Visa Inc. (NYSE: V) operates the world’s largest retail electronic payments network. The company provides processing services and payment product platforms, including consumer credit, debit, prepaid and commercial payments, that are offered under Visa and related brands.

According to Nilson estimates, the company is the largest global credit network (as measured by volume) and the second-largest global debit network.

Visa is not a bank and does not issue cards, extend credit or set rates and fees for consumers. Visa’s innovations, however, enable financial institution customers to offer consumers more choices: pay now with debit, pay ahead of time with prepaid or pay later with credit products.

Shareholders receive just a 0.7% dividend. The Merrill price target is $228. The consensus target is in line at $227.82. Visa stock closed Tuesday at $182.60, just shy of a 7% gain for the day.

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These five top stocks all have the Merrill Lynch best rating for volatility risk and are far less likely to be caught up in momentum-related selling. The key for investors looking to add these top picks to portfolios is to nibble, to start with very small positions. While the coronavirus scare is similar to past health-related events, we still don’t know how things will play out, so better to be safe rather than sorry.

About the Author Lee Jackson →

Lee Jackson has covered Wall Street analysts' equity and debt research and equity strategy daily for 24/7 Wall St. since 2012. His broad and diverse career, which included a stint as the creative services director at the NBC affiliate in Austin, Texas, gives him unique insight into the financial industry and world.

Lee Jackson's journey in the financial industry spans over 30 years, with nearly two decades as an institutional equity salesperson at Bear Stearns, Lehman Brothers, and Morgan Stanley. His career was marked by his presence on the sell side during pivotal Wall Street events, from the dot.com rise and bubble to the Long Term Capital Management debacle, 9/11, and the Great Recession of 2008. This is a testament to his resilience and adaptability in the face of market volatility.

Lee Jackson’s practical financial industry experience, acquired from a career at some of the biggest banks and brokerage firms, is complemented by a lifetime of writing on various platforms. This unique combination allows him to shed light on the intricacies and workings of Wall Street in a way that only someone with deep insider experience and knowledge can. Moreover, his extensive network across Wall Street continues to provide direct access for him and 24/7 Wall St., a privilege few firms enjoy.

Since 2012, Jackson’s work for 24/7 Wall St. has been featured in Barron’s, Yahoo Finance, MarketWatch, Business Insider, TradingView, Real Money, The Street, Seeking Alpha, Benzinga, and other media outlets. He attended the prestigious Cranbrook Schools in Bloomfield Hills, Michigan, and has a degree in broadcasting from the Specs Howard School of Media Arts.