For most things in life, boring is quite simply boring, but in investing it can be the best way to put yourself on a path of long-term gains.
The first thing to remind ourselves regarding our investments is that wealth accumulation is a long-term game. Some investors get lucky and hit it rich quickly, but this type of investing requires a significant risk-tolerance and not something the average investor has.
While it is true that lower risk yields lower returns, it is very important to remember that in investing the most important tool an investor has is time. Safe, long-term investing in low risk stocks can produce fantastic results over time. It also limits the risk of big losses if and when the overall market corrects as we saw as recently as December.
There remains a lot of uncertainty in the market. Wall Street is unsure about the length and ultimate impact of the current trade war between the U.S. and China. Analysts are also unsure about the future of interest rates. Rates were expected to rise, then expected to remain flat, and now there are even some analysts calling for the Federal Reserve to cut rates again.
All the uncertainties create a volatile market, which is a perfect time to look for boring stocks to help weather the volatility and allow you to sleep at night without worrying about holdings.
Here are a few boring stocks to consider buying in the current market.
Waste Management (WM)
There are few sectors less boring than garbage and recycling. While the sector may be boring, leaders such as Waste Management (WM) enjoy powerful pricing power thanks to the high barriers of entry the sector enjoys. Waste Management and Republic Services (RSG) dominate the sector and face little risk of new competition. Waste is one of the few certainties in life, and as populations age and expand demand for waste services will rise accordingly. With consistent and rising demand and the huge barriers of entry for new competition in the market, waste stocks have been solid performers and will likely continue to trend higher. WM stock trades at 22 times future earnings with profits forecast to rise 8.5% over the next five years. The stock is trading at $107.21 with an average price target of $112.14. WM has a 1.93% dividend yield.
Auto parts retailer Autozone (AZO) is a boring, low volatility stock. AZO has a beta of just 0.78 and shares have trended steadily higher over the last two years. Americans are keeping their cars on the road longer than ever, and while some of this has to do with better manufacturing, older cars still need parts and service to remain road-worthy. Autozone has shown 12.6% annual earnings growth the last five years, and analysts expect profits to rise at an additional annual rate of 12.5% over the next five years. The company posted better than expected numbers in February and will next report on May 21 with analysts expecting earnings of $15.23 per share versus $13.42 during the same period last year. AZO stock trades at $977.80 with an average price target of $1,017.08.
Public Storage (PSA)
Public Storage (PSA) is a REIT with a focus on self-storage facilities. The stock has a very low beta of 0.13 and the stock is currently trading just shy of its 52-week high at 26 times earnings. The storage business is growing, and PSA has shown per annum earnings growth of 9.6% over the last five years and is expected to rise 17% annually over the next five years. The company has posted better than expected profits each of the last four quarters, with the most recent report at the start of May helping push the stock to a new 52-week high. PSA stock trades at $229.18 with an average price target of $206.09. The stock also offers a very attractive 3.5% dividend yield.
Credit card leader Visa (V) has a beta of 0.88 and has strongly outperforming the market in 2019 with a 23.5% gain year to date. Payment processors are growing rapidly as we move closer to a cashless society and Visa has enjoyed annual earnings growth of 20.8% over the last five years and analysts expect profits to continue to rise at an annual rate of 15.7% over the next five years. E-commerce continues to grow in importance, and as consumers continue to move more towards a cashless system credit card companies have a lot of upside. It is a very competitive sector, but also one that enjoys huge barriers of entry for leaders such as Visa and Mastercard (MA) to worry about. V stock last reported earnings on April 24, and extended its streak of positive earnings surprises to nine quarters. The stock trades at $162.88 with an average price target of $177.17. V has a modest 0.6% dividend yield.