Stocks for the cautious investor


Market optimism is high as we advance into the current earnings season but there are plenty of unknown that have a lot of investors feeling more than a little cautious this summer.

One the bright side, the economy remains on solid ground, and unemployment is very low. This bodes well for economic growth, but high oil prices, the real possibility of an all-out trade war, and a president as unpredictable as President Trump are reasons for concern.

Trump has made it a priority to flex his muscles on trade, in particular with China, that so far has been met with retaliation at every turn. Trump has also just ended a European tour during which he insulted and distanced key allies and put praise on cold war enemy Russia’s leader Vladimir Putin despite intelligence reports indicating Russia had meddled in the recent election and could easily repeat its actions in the upcoming mid-terms.

It is very understandable why some investors are cautious, but the underlying economy is strong enough to warrant keeping money in the stock market. The big takeaway is that you should keep playing the market, but perhaps take a more cautious approach just in case things do turn south.

Here are five stocks that are perfect for cautious investors.

Waste Management

Trash and recycling company Waste Management (WM) is a very boring stock that is perfect for the cautious investor. There are few things that maintain such a steady level of demand as garbage and recycling, and as populations expand that demand is sure to steadily rise. WM has been stuck in a sideways trend for the last several months, but the movement is more a reaction to an uncertain overall market. Analysts estimate that the company will manage to grow its earnings by an average 12.7% per year over the next five years, and for shares to rise from $83.68 to $93.83. WM has a dividend yield of 2.2%.

Public Storage

The public storage sector has been hot over the last year, and storage REIT Public Storage (PSA) has been a top performer. The stock has moved steadily higher since February, and currently trades just shy of its 52-week high. The company has fabulous brand recognition, and is a leader in key cities across the nation. Storage is not a sexy sector, but demand will remain steady regardless of overall economic conditions, and analysts expected decent growth moving forward. The company is expected to grow earnings by 17.0% per annum over the next five years. PSA trades at $222.24 with an average price target of $207.60. The stock has a dividend yield of 3.6%.


Membership retail club Costco (COST) is the world’s second largest retailer, with just Wal-Mart (WMT) boasting higher annual revenues. The company has yet to really tap into the mobile market, with online sales accounting for a very small 4% of its total sales last year. As the company builds its e-commerce business, the stock will become even stronger. Costco has grown earnings by 7.4% per annum over the last five years, and is expected to grow profits by 11.9% a year over the next five years. COST trades at $215.74 with an average price target of $215.88 and it offers a 1.06% dividend yield.

Automatic Data Processing

While it is certainly debatable whether or not President Trump deserves credit for the current employment picture, there is no denying that unemployment is very low in the U.S.right now at just 4.0%, and has been under 4% two months during the current year. Low unemployment leaders to high demand for human resource and payroll providers like Automatic Data Processing (ADP). The company has grown earnings by 8.2% per annum over the last five years, and is expected to grow earnings by an additional 14.7% a year over the next five years, making the stock very safe for cautious investors. Don’t expect huge stock gains, but the outlook is very favorable moving forward. The stock has a 2.0% dividend yield with a 43-year streak of dividend increases, trades at $137.39, and has an average price target of $136.46.

Invesco QQQ Trust

Technology has been incredibly strong in recent years, and with the sector appearing to be somewhat insulated from a potential trade war, tech stocks have continued to trend higher even as the broader market has struggled to find its direction in recent months. While picking individual tech stocks at this time is a bit risky since you are buying into so much strength, and investment in the exchange traded fund designed to track the Nasdaq 100, the Invesco QQQ Trust (QQQ) is more cautious since it spreads the investment over a basket of different stocks from different niches in the tech sector. Among its top holdings are Apple (AAPL), Facebook (FB), and (AMZN). While it is likely that one of today’s top tech stocks will encounter some selling pressure ahead, putting your money at work over the entire sector is a cautious move that allows you to enjoy future tech strength while protecting you against weakness in any one stock or even sector. QQQ trades just pennies below its all-time high at $180.08, versus an all-time high of $180.10). The fund has a modest 0.84% yield.

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.

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