Any way you slice it, the market is way overbought and very expensive. While there is a huge tailwind from the continued stimulus, low interest rates and money markets stuffed with cash, there is an old Wall Street adage that should probably be considered now: Sell in May and go away. While pithy, and probably something that the Robinhood and WallStreetBets crowd have never heard, it may make sense for investors to heed now as we approach May.
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A new research report from Michael Hartnett, the outstanding investment strategist at BofA Securities, makes the case that the toxic combination of inflation, quantitative easing tapering and higher taxes could give a big jolt to the stock market. So the BofA Investment Clock, as it is referred to, suggests a rotation of capital away from momentum plays, bonds and technology to the defensive sectors like consumer staples and utilities The firm seed the move as a market hedge for the rest of the second quarter, and a macro hedge over the next six months.

We screened the BofA Securities equity research universe looking for consumer staples and utility stocks that are rated Buy and have the best volatility risk rating at the firm. We found four great ideas for investors looking to lighten up on portfolio risk. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Coca-Cola

This remains a top Warren Buffet holding and offers not only safety but also 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 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. Also remember that the company also owns 16.7% of Monster Beverage, which continues to deliver big numbers.

The analysts said this after the solid first-quarter report:

First quarter 2021 adjusted earnings-per-share of $0.55 versus BofA/Visible Alpha consensus of $0.50 with upside from higher sales and below the line items. Overall the quarter increases optimism related to the company’s sales and earnings getting back to pre-Covid levels. We slightly raise our fiscal year 21-23 earnings-per-share, reiterate our Buy rating and raise our price target.

Investors receive a dependable 3.08% dividend. The $56 BofA Securities price target for the stock was raised to $60. The Wall Street consensus target is $59.36. Coca-Cola stock closed on Friday at $54.47 a share.

Dominion Energy

Many of the Wall Street firms that we cover are still very positive on utilities, and this company is highly rated. Dominion Energy Inc. (NYSE: D) is an American power and energy company that operates through the following four segments:

• The Dominion Energy Virginia segment generates, transmits and distributes regulated electricity to residential, commercial, industrial and governmental customers in Virginia and North Carolina.
• The Gas Distribution segment engages in the regulated natural gas gathering, transportation, distribution and sales activities, as well as distributes nonregulated renewable natural gas. This segment serves residential, commercial and industrial customers.
• The Dominion Energy South Carolina segment generates, transmits and distributes electricity and natural gas to residential, commercial and industrial customers in South Carolina.
• And the Contracted Assets segment is involved in the energy marketing and price risk activities.

As of December 31, 2020, Dominion Energy’s portfolio of assets included approximately 30.2 gigawatts of electric generating capacity; 10,500 miles of electric transmission lines; 85,600 miles of electric distribution lines; and 94,200 miles of gas distribution lines. It serves approximately 7 million customers. The company sells electricity at wholesale prices to rural electric cooperatives and municipalities, as well as into wholesale electricity markets.

Shareholders receive a 3.17% dividend. The BofA Securities target price is $84, which compares with an $83.50 consensus target and Friday’s last trade for Dominion Energy stock at $79.38 per share.
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Kellogg

It should come as no surprise this solid company is included as a safe bet for the rest of 2021. Kellogg Co. (NYSE: K) is a multinational food manufacturing company. Its principal products include crackers, crisps, savory snacks, toaster pastries, cereal bars, granola bars and bites, ready-to-eat cereals, frozen waffles, veggie foods and noodles.

The company offers its products under the Kellogg’s, Cheez-It, Pringles, Austin, Parati, RXBAR, Kashi, Bear Naked, Eggo, Morningstar Farms, Choco Krispies, Crunchy Nut, Nutri-Grain, Special K, Squares, Zucaritas, Sucrilhos, Pop-Tarts, K-Time, Split Stix, Be Natural, LCMs, Coco Pops, Rice Krispies Squares, Kashi Go, Vector and Gardenburger brand names.

Shareholders receive a very solid 3.60% dividend. BofA Securities has a $76 price target, and the consensus target stands at $65.06. Kellogg stock closed most recently at $63.28 per share.

Mondelez

This is another consumer sector giant that makes good sense for conservative investors. Mondelez International Inc. (NASDAQ: MDLZ) manufactures and markets snack food and beverage products worldwide. It offers biscuits, including cookies, crackers and salted snacks; chocolates, and gums and candies; powdered beverages and coffee; and cheese and grocery products.

Its primary brand portfolio includes LU, Nabisco and Oreo biscuits; Cadbury, Cadbury Dairy Milk and Milka chocolates; Trident gum; Jacobs Kaffee; and Tang powdered beverages.

Mondelez sells its products to supermarket chains, wholesalers, supercenters, club stores, mass merchandisers, distributors, convenience stores, gasoline stations, drug stores, value stores and other retail food outlets through direct store delivery, company-owned and satellite warehouses, distribution centers and other facilities, as well as through independent sales offices and agents.

Holders of Mondelez International stock are paid a 2.12% dividend. BofA Securities has set its price target at $65 a share. The consensus target is in line at $65.76, and shares closed trading on Friday at $59.51 apiece.

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These three consumer staples giants and an outstanding utility are all rated Buy and have the highest and safest BofA Securities volatility ratings. While definitely the farthest ideas from the go-go momentum and mega-tech giants, they all pay dependable dividends and can soften the blow some if we see a big sell-off over the next six months. Remember: Sell in May and go away has been around for years, and there’s a reason. While not always correct, it has been in many years, and indeed it may be the case with this year’s very frothy market.

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