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Exxon Mobil Corporation (XOM), PepsiCo, Inc. (PEP): Fed Sees Risk Fears Lingering, Buy What You Know

Fear sown by the 2007 market crash is likely to recede slowly, says Narayana Kocherlakota, President of the Federal Reserve Bank of Minneapolis. Don’t let fear keep you away from investing, buy what you know.

In Brief

In a short weekend article, Bloomberg highlights Kocherlakota’s thoughts about the psychological impact of the 2007 crash. Of course you can add the 2000 tech crash and the housing debacle to make a longer list of negative feedback. Big events tend to stick in people’s minds for a long time, particularly when they have a notable impact on day to day life. Taken as a whole, this trio certainly has.

The same fears followed the Great Depression. An entire generation looked at life differently. This will probably be true today, too. However, it’s important that people keep investing. Even if it means dipping a toe in the water instead of jumping in. A good place to start is to invest in what you know. Here are three companies to start with:

Exxon Mobil Corporation (NYSE:XOM

Oil Giant

Exxon Mobil Corporation (NYSE:XOM) is one of the world’s largest integrated energy companies. It does everything from pull oil out of the ground, to refining, to filling people’s gas tanks. The company’s three major brands, Exxon Mobil Corporation (NYSE:XOM), and Esso, are known the world over.

Although the company’s top and bottom lines can be quite variable since it deals with commodity items, the stock has traversed a fairly steady upward course over its history. It dipped during the recession, like most others, but its dividend has been increased annually for decades.

Those steady dividend hikes are something to focus on during the bad times. Another nice thing about the stock is that its beta, a measure of volatility relative to the broader market, is low at 0.8 or so. That means it tends to move about 0.8% for a 1% market move.

You can buy companies with lower betas, but Exxon Mobil Corporation (NYSE:XOM)’s size and recognition give it an edge in business and in tracking the company. The stock recently yielded around 2.8%.

Soda and Chips

PepsiCo, Inc. (NYSE:PEP) is another easy to follow company. However, it is much more than just a soda company. It is also one of the world’s largest salty snack makers with its Frito Lay line of products. In addition to that pair, it owns Tropicana, Gatorade, Quaker Oats, and a host of smaller, but well known, food brands like Rice-a-Roni. Keeping track of PepsiCo, Inc. (NYSE:PEP) is as easy as taking a trip to the grocery store.

The company’s top and bottom lines have headed irregularly higher over the last decade. However, 2012 was a relatively difficult year. That’s led to a recent share pullback. The stock price has been on a steady ascent for more than thirty years, though, so history suggests that any price weakness will be made up for over time. Meanwhile, the stock recently yielded around 2.8% and has a long history of annual dividend increases.

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