Market Volatility Have You Worried? 4 Stocks to Buy That Should Do Fine

As the historians celebrate the 10-year anniversary of the bull market, things are again starting to look a little dicey after the nice run from the late December lows. With growth slowing almost everywhere except the United States, it makes sense now to start looking for investment ideas that can hold up if the selling starts in earnest again.

One sector that always seems to hold its own is consumer discretionary, especially the restaurants, because despite the market’s ups and downs people still have to eat. A new Baird research report from stays positive on eight top companies, but we whittled that down to the four that should hold up best if things get rough again.

The Baird team said this about the industry:

The early read from our most recent survey suggests February industry comparisons slowed relative to January and fourth quarter levels, with trends likely hampered in part by lagging tax refund activity, some weather issues, and the initial cycling of last year’s consumer tax cuts (lower paycheck withholding’s began mid-February 2018). Looking ahead, we see potential for better trends in March, a scenario that many companies may need in order to achieve calendar- first quarter comparisons and EPS estimates.

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Here are four stocks rated Outperform at Baird that look like great ideas for nervous investors. Three of the four are of the fast-food variety, which are usually very strong in bad markets.

Dunkin’ Brands

It’s time to make the donuts, and it’s likely folks will still be eating them. Dunkin’ Brands Group Inc. (NASDAQ: DNKN), whose brands include Dunkin’ Donuts and Baskin-Robbins, is nearly 100% franchised. Core markets in the United States include New England and New York, while international core markets are South Korea and Japan. Currently operating in over 50 countries, Dunkin’ has significant unit growth potential, both domestically and internationally, with over 20,000 global units.

The company reported fourth-quarter adjusted earnings per share (EPS) that exceeded Wall Street’s expectations. Management also updated the long-term targets given at its Feb. 2018 Investor Day, including now 200 to 250 net new Dunkin’ Donuts stores in the United States per year.

Dunkin’ Brands shareholders are paid a tasty 2.09% dividend. The Baird price target on the shares is $74, while the Wall Street consensus target is $69.88. The stock closed Friday’s trading at $70.74 a share.

Jack in the Box

This is another top fast-food offering for investors to consider. Jack in the Box Inc. (NASDAQ: JACK) operates and franchises Jack in the Box restaurants, one of the nation’s largest hamburger chains, with more than 2,200 restaurants in 21 states and Guam. Additionally, through a wholly owned subsidiary, the company operates and franchises Qdoba Mexican Eats, a leader in fast-casual dining, with more than 600 restaurants in 47 states, the District of Columbia and Canada.

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Jack in the Box reported in late February fiscal first-quarter operating EPS above the consensus estimates, with lower selling, general and administrative expenses and tax rate driving the beat. Comparison sales tracked down 1% to 2% in the first seven weeks of the quarter but inflected after the company pivoted to a more value-oriented strategy. The Jack in the Box high-low promotion approach remains effective, with quarter-to-date comparisons running flat and improving in the past couple of weeks.

Jack in the Box shareholders are paid a 2.05% dividend. Baird has set its price objective at $93, and the consensus target price is $93. The shares closed at $76.87 apiece on Friday.

McDonald’s

This fast-food giant does a ton of business overseas but still remains a solid pick for investors seeking dividends and a degree of safety. 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.

McDonald’s shares have been positive recently as menu price increases and global growth fueled a strong fourth-quarter earnings report. EPS came in above the consensus forecast, though U.S. comparisons were a bit light at up 2.3%. Capital expenditures guidance for fiscal year 2019 was $2.3 billion, with just under $1 billion of that going toward 2,000 U.S. remodels.

McDonald’s shareholders receive a nice 2.57% dividend. The $196 Baird price target compares with a consensus price objective last seen at $197.69. The shares ended last week trading at $179.50.
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Starbucks

The retail giant has traded down some recently and is offering a very solid entry point. Starbucks Corp. (NASDAQ: SBUX) operates as a roaster, marketer and retailer of specialty coffee worldwide. Its stores offer coffee and tea beverages, packaged roasted whole bean and ground coffees, single-serve and ready-to-drink coffee and tea products, juices and bottled water.

The company also licenses its trademarks through licensed stores, as well as grocery and national foodservice accounts. The company offers its products under the Starbucks, Teavana, Tazo, Seattle’s Best Coffee, Evolution Fresh, La Boulange, Ethos, Starbucks VIA, Starbucks Doubleshot, Starbucks Refreshers and Starbucks Discoveries Iced Café Favorites brand names.

Shareholders of Starbucks are paid a 2.04% dividend. The Baird price objective is $74. The posted consensus price target is lower at $69.40, about the same as the most recent close at $69.36 per share.

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These four very well-known and loved brands offer investors some safety in a volatile market, and all pay decent dividends. While restaurants are very data dependent, and a deep recession could hurt traffic at some, they make good sense for investors in 2019 and beyond.