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The Coca-Cola Company (KO), The Procter & Gamble Company (PG), The Kroger Co. (KR): How to Handle Market Volatility

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The Coca-Cola Company (NYSE:KO)In a market sell-off, one of the most tempting things to do is to sell. It’s an emotional impulse, and almost everyone has difficulty fighting it. The news comes out, and we read headlines like, “Dow down 200 points.” Investors get spooked and pull money out of the stock market. It happens in every market correction.

The bond market has been a difficult place for investors to be in. Precious metals have had a disastrous effect on wealth. Investors now have to look outside of bonds and precious metals in order to earn a reasonable return on investment.

What to do about it

This article is for the investor who is losing money in bonds and precious metals. I will focus on three companies that are likely to grow in the future, without all the unnecessary risk. These three companies will grow earnings, pay a dividend, and trade at a reasonable valuation. The business model has to be resistant to economic uncertainty and global risk.

The Coca-Cola Company (NYSE:KO) the freshest way to start

The Coca-Cola Company (NYSE:KO) is one of my favorite investment opportunities right now. The company is well positioned to grow with bottling operations positioned all over the world. The company’s products are non-cyclical because of government subsidies for food (food stamps).

The company pays its investors a 2.82% dividend yield, which is superior to ten-year treasuries. The company is projected to grow earnings by 8.3% on average over the next five years. The company hopes to double its system revenue by 2010 and 2020. Data over the past two years indicates that the management team is well on track to meeting its 2020 vision.

The company trades at a 20.8 earnings multiple, slightly above the 19.8 industry average. The company’s valuation is justified when considering the low amount of risk, and the long-term growth rate. The company currently has a 0.5 beta, which indicates that the stock trades at half the volatility of the stock market.

The company has an attractive mix of growth, valuation, and income. The stock is also resistant to market fluctuations, and its product portfolio is resistant to economic recessions. This is an ideal investment for the risk averse.

Proctor & Gamble goes about business as usual

The Procter & Gamble Company (NYSE:PG) markets a strong portfolio of products that perform well in any economic environment, including laundry detergent, bathroom tissues, dishwashing detergent, shampoo, diapers, etc. The company is also fairly resistant to market fluctuations (0.4 beta), which indicates that the stock trades at less than half the volatility of the stock market.

The management team’s primary growth strategy is to cut back on costs right now. The company is also heavily dependent on emerging market economies for growth. The company forecasts that between 2010 and 2020 the middle class will increase by 1.4 billion, and 98% of that will come from the emerging markets. The Procter & Gamble Company (NYSE:PG) is well positioned for growth.

Source: The World Bank

Based on the above figure, developing countries will grow by 6% in 2014 and will follow that with 6% growth in 2015. Assuming that’s correct, we can anticipate The Procter & Gamble Company (NYSE:PG) to continue to prosper based on the economic outlook.

The company currently generates $10.7 billion in net income. The company plans to cut $10 billion in costs by 2016, which will total $20.7 billion in net income. If that is the case, then earnings will double. A double on earnings means that there could be a compelling investment thesis for the company. The company could grow earnings by more than 25% per year. The company also compensates investors with a 3.11% dividend yield. The stock is cheap relative to its future growth potential.

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