The Coca-Cola Company (KO), The Procter & Gamble Company (PG) & Johnson & Johnson (JNJ): Three Safe Haven Stocks in Today’s Market

Page 1 of 2

The bond market hasn’t been the greatest place to be for the average investor. Anyone who had invested in bonds is now seeing coupon values decline (especially on the longer-dated securities). A flight to safety should involve a mix of cash and stocks.

Investors should look to hold lower beta (beta is a measure of stock price volatility) names like The Coca-Cola Company (NYSE:KO), The Procter & Gamble Company (NYSE:PG), and Johnson & Johnson (NYSE:JNJ).

The Coca-Cola Company (NYSE:KO)

Before we talk stocks, let’s talk about the economy

Th Federal Reserve has been increasing the size of its balance sheet through the purchase of bonds and mortgage backed securities for quite some time. Currently, the Federal Reserve has around $2 trillion in mortgaged back securities and Treasury securities.

Source: Ycharts

The Federal Reserve had stated in a recent announcement that it may consider tapering of its bond purchase program towards the end of the year. This bond tapering is heavily dependent upon whether or not the economy can meet the short-term targets set by the Federal Reserve. The Federal Reserve will only end its quantitative easing bond purchase program if the economy were to grow in a 2.3% to 2.6% range, and if the PCE inflation were to reach 2%. For now, the economy isn’t generating that much inflation, or that much growth, but in the future, it eventually will. Because of this, bond investors are exiting in droves.

Right now, the Federal Reserve is purchasing $45 billion worth in longer-dated treasury bonds per month. Over the next five months, the Federal Reserve will buy $225 billion in bonds. All those bond investors who have sold their bond positions will most likely purchase stocks. The types of stocks that will be purchased will be the non-cyclical, low-beta, income earning stocks.

Three winners

Source: Ycharts

Currently, The Coca-Cola Company (NYSE:KO) has an 18.6 forward earnings multiple, Johnson & Johnson (NYSE:JNJ) has a 15.84 forward earnings multiple, and The Procter & Gamble Company (NYSE:PG) has a 19.10 forward earnings multiple. The earnings multiple of these three companies is higher than the S&P 500 forward P/E ratio of 14.6. The stocks are trading at a premium due to the overwhelming demand for safe stocks. Unlike other industry experts, I believe that the demand for these safe haven stocks will go even higher, driving the prices of these three companies to greater all-time-highs.

Investors will get a compelling mix of stock appreciation and dividend yields when buying these three companies.

Refreshing, isn’t it?

Coca- Cola is projected to grow earnings by 8.3% per year over the next five years. The stock also compensates investors with a 2.79% dividend yield. The company’s growth will be driven by raising the prices on its Coke and chips products, increasing the area of distribution and introducing new bottled beverages (Diet Coke was a real hit remember?). Management remains optimistic of the company and believes in its 2020 vision of doubling system sales. If that is the case, then we can expect a consistent stream of revenue and net income growth.

The company has a large presence in emerging markets, and according to the World Bank, the GDP growth of emerging markets, excluding China and India, will be 4.5% over the course of 2014 and 2015. Based on macroeconomic indicators, and management’s forecasts, we can assume that The Coca-Cola Company (NYSE:KO)’s growth will be on track.

Don’t forget the toilet paper

The Procter & Gamble Company (NYSE:PG) is one of my most favorite investment opportunities right now. The company sells everything from Duracell batteries, Charmin paper, Gillette shaving cream, Tide laundry detergent, Dawn dish-washing detergent, etc. The company’s products are more recession proof than a can of Coke (but to be fair a can of The Coca-Cola Company (NYSE:KO) goes far).

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Countries with the Highest Suicide Rates

The 10 Most Technologically Advanced Countries in the World

The 10 Safest Countries in the World to Live in Peace

The 10 Top Selling Smartphones in the World 2014

The 12 Biggest Shopping Centers in the World

The 10 Friendliest Countries in the World

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!