I hate saying it.
But markets are an absolute disaster.
With Russia’s invasion of Ukraine, inflationary threats, a potential recession, and likely interest rate hikes on the way, investors are terrified. Plus, with oil prices now above $110 a barrel, there are concerns pump prices could substantially curb consumer spending.
“History shows that a 100% increase in oil prices over a year usually triggers a recession (1990, 2000, 2008). We’re not quite there yet, but we are getting closer by the day,” Nicholas Colas, co-founder of DataTrek Research said, as quoted by Barron’s.
Fear is palpable. In fact, we can see that in the Volatility Index (VIX), which popped from a 2022 low of about 15 to nearly 38.
And unfortunately, no one is quite sure what comes next.
While it would be easy to run for the exits, sit tight, and protect your portfolio until the tension fades. The last thing you want to do is run from markets that are historically resilient.
Here are five ways to protect your portfolio right now.
Opportunity No. 1 – Pro Shares Ultra VIX Short-Term Futures ETF (UVXY)
Since the start of 2022, the Volatility Index more than doubled to a high of 38.
As the VIX popped, so did the UVXY ETF.
In fact, since the start of 2022, the ETF ran from a low of about $11.16 to a recent high of $19.85. From here, the Volatility Index and the UVXY ETF could see higher highs. All thanks to uncertainty about what could possibly happen next.
For those of you that are new to the UVXY, the ETF was designed to match two times (2x) the daily performance of the S&P 500 VIX Short-Term Futures Index. As the VIX moves higher, the UVXY typically follows.
Opportunity No. 2 — NextEra Energy (NEE)
Should markets pull back, some of the most stable investments can be found in utility stocks. After all, demand for utility services will always remain intact, even in the worst of times.
Look at NextEra Energy, for example.
For one, the company provides a basic need service –electricity. Plus, since demand for electricity doesn’t change a lot from one year to the next, the company is insulated. Two, the company has generated a positive total for investors in 19 of the last 20 years. Three, the company carries a dividend yield of 2.12%.
In addition, according to the company:
“The board of directors of NextEra Energy declared a regular quarterly common stock dividend of $0.425, an approximate 10% increase versus the prior-year comparable quarterly dividend. This increase is consistent with the plan announced in 2020 of targeting roughly 10% annual growth in dividends per share through at least 2022, off a 2020 base. The dividend is payable on March 15, 2022, to shareholders of record on March 1, 2022.”
Analysts seem to like the NEE stock, too. BMO Capital analysts for example raised their price target on NEE to $98 from $89 with an outperform rating on the stock.
Opportunity No. 3 – Costco Wholesale (COST)
Another safe stock to consider in market downturns in Costco Wholesale.
With a dividend yield of 0.61%, COST sells needed products that consumers must have no matter how well or how poorly the economy is doing. In fact, no matter how steep of a downturn, consumers still need soap, detergent, toothpaste, toilet paper, food, etc. All can help provide a steadier and far more predictable cash flow for COST.
Even better, earnings are solid.
For its second quarter, the company saw EPS of $2.92 on sales of $51.9 billion. That was better than expectations for EPS of $2.76 on sales of $51.53 billion. Same store sales were up 11.1%.
In addition, as reported by Barron’s: “’Near-term, the market may be underestimating the strength of Costco’s position with higher inflation’ wrote Jefferies analyst Stephanie Wissink, given that the overall results confirmed the company’s ability to handle this and other supply-chain related headwinds. She has a Buy rating and $650 target on the stock.’”
Opportunity No. 4 – PepsiCo (PEP)
Another strong stock to consider is PepsiCo – which just increase its dividend.
According to a company press release, the company “declared a quarterly dividend of $1.075 per share of PepsiCo common stock, a 5 percent increase versus the comparable year-earlier period. This dividend is payable on March 31, 2022 to shareholders of record at the close of business on March 4, 2022. PepsiCo has paid consecutive quarterly cash dividends since 1965, and 2021 marked the company’s 49th consecutive annual dividend increase.”
Better, PEP is still seeing good demand for its beverages – including Pepsi, Mountain Dew, and Gatorade – and food – including Lay’s, Doritos, Quaker Oats, and Cheetos, for example.
Plus, investors view PEP as a “safe haven,” says Credit Suisse analyst Kaumil Gajrawala, who just raised his price target to $166 from $157. And, as noted by TheFly.com, the analyst says, “Pepsi’s solid pandemic execution sets it up well versus competitors navigating the turbulent sourcing and labor environment, the analyst contends, noting that investors see it as a ‘safe haven’ amid macro and secular volatility.”
Opportunity No. 5 – Newmont Mining (NEM)
With a good deal of uncertainty and fear in the market, gold prices are rocketing higher.
Since 2022 began, gold soared from about $1,813 to a recent high of $1,966. From here, we could see $2,150, says Goldman Sachs. “The recent escalation with Russia creates clear stagflationary risks to the broader economy, driven by higher energy prices, which reinforce our conviction in higher gold prices in coming months and our $2,150/toz (troy ounce) price target,” the firm said, as note by Kitco.com.
That’s been – and should continue to be a strong catalyst for gold stocks like Newmont Mining, which just raised its quarterly dividend to 55 cents. It’s payable on March 24, 2022 to holders of record at the close of business on March 10, 2022.
In addition, according to Barron’s, “At the same time, the U.S. trade deficit might be peaking, and gold was a beneficiary the last time that happened, in the early 2000s. Even more impressive: Gold has been strong even as the Fed gets set to increase interest rates.”