Five great boring stocks

 

The market has gotten off to a rocky start in 2016, with volatility creeping into the market as a result of concerns over slowing growth in China, weak oil prices, and uncertainty surrounding future interest rate increases by the Federal Reserve.

The market has attempted to recover on a couple of occasions, but so far we have yet to see any meaningful recovery in stocks.

The problems that have plagued the markets so far this year are unlikely to subside any time soon. China will continue to dominate headlines, and while we will likely get sporadic signs that the nation’s economy is not slowing as much as some analysts fear, there will always remain a thread of doubt as to whether or not the numbers being put forth by the Chinese government are reliable. This will keep volatility in the markets.

Oil will also weigh on the markets for the foreseeable future. Iran is boosting its output, and while we are starting to see signs of production cuts by U.S. producers, the cuts have not been as deep as analysts forecast, which should keep oil prices under pressure through at least the first part of the year.

With the market correction during the first half of January, it now appears unlikely that the Federal Reserve will boost interest rates again in the next few months, but more rates are coming, its just a question of when. The markets previously expected four interest rate hikes this year, but that number now seems a little high considering recent trading activity, but the Fed will boost rates again in 2016, and that could keep volatility in the market.

With so much uncertainty in the market right now, it is a good time to take a very boring approach to investing. Slow and steady will win the race this year, so we want to focus on stocks that are less volatile than the overall market, but also have good valuations and strong earnings growth estimates.

Each of the following stocks meet our criteria, and are great choices for investors wanting to take a boring approach to the market in 2016.

Cigna Corp.

Cigna Corp. (CI) is a healthcare insurance provider, and the stock has an incredibly low valuation, with a beta of only 0.31. The stock did trend lower at the start of the year, but the general trend over the last seven or eight months has been a tight sideways trend. The stock has a P/E of 16.5, and analysts forecast earnings growth of 9% during the current year. I am bullish on the insurance sector at this time, as rising interest rates allow insurance companies to boost their interest income, which is very important to insurance companies. Cigna is a pretty boring company, but the low volatility, attractive valuation, and upbeat earnings growth estimate makes it a very attractive stock in the current market.

ci160126

Chart courtesy of www.stockcharts.com

Foot Locker

Athletic footwear and accessories retailer Foot Locker (FL) has benefited in recent years from the “athleisure” fashion trend. The stock has been trending higher since mid-2008, and the stock has a low volatility reading, with a beta of just 0.67. The stock is currently trending higher, but its valuation remains attractive with a P/E of 17.3. Foot Locker’s valuation is in-line with the industry average, but with analysts forecasting earnings growth of 19.1% in 2016, there is plenty of upside potential for the stock. FL is currently trading at $66.35, and analysts have an average price target of $76.17 on the stock. The price target suggests the stock has 14.8% upside potential.

fl160126

Chart courtesy of www.stockcharts.com

Honeywell Int’l

Honeywell International (HON) is a diversified machinery company, providing parts and engines for the airline industry and defense sector. The stock has a beta of 0.92, making it slightly less volatile than the overall market. The stock ran into problems at the start of the year, trending lower with the overall market, but shares appear to have bottomed out, and are starting to bounce. The recent pull back in the stock has pulled the P/E down to 16.9, which coupled with earnings expected to climb 8% during the year should drive shares higher. HON is currently trading at $98.44, but analysts have an average price target on the stock of $115.20, which indicates 17% upside potential.

hon160126

Chart courtesy of www.stockcharts.com

McDonald’s

After years of disappointing news, things are looking up for fast food leader McDonald’s (MCD). The company is starting to see growing sales in the U.S., boosted in part by the recent move to offer a limited all-day breakfast menu. While the rest of the market has struggled at the start of 2016, MCD is trading just shy of its all time high. Following the company’s upbeat Q4 report, MCD is now trading 0.7% below its all-time high. While MCD has risen to a record high, the valuation remains OK with a P/E of 25.8. The valuation is not too high to keep shares from appreciating as long as the company is able to grow earnings 11% for 2016 as analysts expect. MCD’s volatility remains acceptable, with a beta of 0.75. McDonald’s has done a good job changing up its menu and making the necessary changes to once again return to growth in the U.S. During its most recent quarter, the company enjoyed 5.7% same-store sales growth in the U.S., which eased investors concerns about its ability to prosper while appetites shift towards healthier menu offerings. I like the stock, and expect good things to come as the company’s continues to implement its turnaround program.

mcd160126

Chart courtesy of www.stockcharts.com

Lockheed Martin

The defense and aerospace sector is far from boring, but Lockheed Martin (LMT) stock is pretty boring, with a beta of just 0.60. The stock is currently trending lower with the overall market, but the long-term trend is definitely positive, and with a P/E of 18.7, and analysts forecasting 8% earnings growth for 2016, I see the stock regaining its footing once stability returns to the market, and quickly erasing recent losses. There is a lot of instability in the world today, which bodes well for defense contractors. I like the sector, and believe Lockheed Martin is a great play for investors with some defense exposure.

lmt160126

Chart courtesy of www.stockcharts.com

Symbols: CI FL HON LMT MCD
Michael Fowlkes

Michael Fowlkes

Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va.

You May Also Like