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Johnson & Johnson (JNJ), The Procter & Gamble Company (PG): How To Invest Despite Long-Tail Risk Part II


McDonald’s Corporation (NYSE:MCD) also has a yield in the 3% area and a very low beta. However, as a fast food giant, it may be at the exact opposite side of the health spectrum.

The burger giant has well over 30,000 locations across almost 120 countries. About 80% of its restaurants are franchised. It has a leading position in developed markets and is building its business in emerging markets. Note that the franchise model reduces risk, as the company functions as a toll taker for franchisees taking on the store opening risks. A big benefit in emerging markets.

McDonald’s isn’t new to emerging markets, however. While mid-priced and expensive restaurants are a tough sell in relatively poor countries, the Golden Arches sells meals that are fairly inexpensive. This has allowed the company a first-mover advantage. Moreover, quick serve burgers are desirable across the entire wealth spectrum. So, as emerging markets become wealthier, McDonald’s top and bottom lines should benefit.

Although McDonald’s shares aren’t cheap, it is a great company and still offers a notable dividend yield backed by a long history of dividend increases.

Procter & Gamble

The Procter & Gamble Company (NYSE:PG) has been taking heat lately for an ill fated attempt to push into emerging markets. Unlike McDonald’s, the company primarily sells premium products. That’s a hard sell in countries where most of the population is relatively poor.

That said, the company is an industry leader in the consumer products space. For example, it has 25 brands that each generate more than $1 billion a year in sales. Moreover, it is broadly diversified across product categories and has a long history of innovation. It’s got problems, but its far more likely to figure them out than succumb to them.

A low beta, a dividend yield a little under 3%, and a restructuring plan to deal with its recent issues should interest most investors.

Preparing for the Worst

While you can’t fully protect yourself from a market decline, buying industry leaders with low betas can help soften the blow. Each of the companies here fits that bill. Read Part 1 of this two part article for more low-beta ideas.

The article How To Invest Despite Long-Tail Risk Part 2 originally appeared on and is written by Reuben Brewer.

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