Zacks Investment Ideas feature highlights: Dollar Tree, Abbott Labs and Aqua
CHICAGO, Oct. 15, 2013
CHICAGO, Oct. 15, 2013 /PRNewswire/ --Today, Zacks Investment Ideas feature
highlights Features: Dollar Tree (Nasdaq:DLTR-Free Report), Abbott Labs
(NYSE:ABT-Free Report) and Aqua America (NYSE:WTR-Free Report).
3 Ultra-Safe Stocks… Just In Case
Tick, tock, tick, tock...
The U.S. Treasury Department warns that it is just days away from not having
enough money to pay its bills unless the debt ceiling is raised. While it
would seem obvious that debt payments would be prioritized over other
obligations if needed, Treasury Secretary Jacob Lew has claimed that this
might not be doable, stating that its "systems were not designed to not pay
While this sounds scary, if you look at both the stock and bond markets, they
seem pretty calm about the whole situation. The S&P 500 is trading above 1700
and within about 1% of its all-time high. And perhaps the best barometer --
the yield on the 10 year U.S. Treasury note -- is almost 30 basis points lower
than where it was in early September:
While it appears that investors still think the odds of a default is near 0,
keep in mind that the market also thought firms like Bear Stearns and Lehman
Brothers were fine just hours before they collapsed. In other words, sometimes
the market gets it wrong.
While a U.S. default seems unthinkable at the moment, shouldn't an investor
have a contingency plan just in case?
When Risk-Free Isn't Risk Free
In your typical financial crisis, investors flee to the safety of U.S.
government bonds. It happened during the financial crisis. It happened during
the European debt crisis. That's why Treasury bonds are often the proxy for
the "risk free" rate in finance.
But where do you go when risk-free is no longer risk free?
While an obvious answer would be "cash", if you're not willing to abandon
stocks altogether, then there should be a few corners of the market that would
likely weather the storm better than others. These would be stocks in the
Unsurprisingly, these are each defensive, low beta sectors that are high up on
consumers' lists of needs.
3 Ultra Safe Stocks
While the ultimate ramifications of a U.S. default are nearly impossible to
predict, these 3 stocks should at least hold up much better than the overall
Dollar Tree (Nasdaq:DLTR-Free Report)
Dollar Tree is a discount retailer with thousands of stores in all 48
contiguous states. The company benefited tremendously from consumers "trading
down" to their stores during the Great Recession, and it would likely see a
similar boost in foot traffic following a U.S. default as households tighten
their belts. It's tough to say exactly how the stock would perform, but if
2008 is any indication, it would be one of the few stocks to shift into.
Shares of DLTR surged +61% that year.
Abbott Labs (NYSE:ABT-Free Report)
This large-cap diversified healthcare company derives 70% of its sales from
outside of the United States and operates in relatively inelastic, stable
businesses like branded generic pharmaceuticals. With a beta of 0.25, shares
of Abbott are not highly correlated to the S&P 500 and should significantly
outperform during a market selloff.
Aqua America (NYSE:WTR-Free Report)
Is there anything human beings need more than H20? Aqua America is a water
utility serving approximately 3 million people in Pennsylvania, Ohio, North
Carolina, Illinois, Texas, New Jersey, Indiana, Florida, Virginia, and
Georgia. The stock has a beta of just 0.18 and currently yields about 2.5%,
which is close to what you would get on a 10-year Treasury note.
The Bottom Line
A U.S. default still seems unthinkable, but it is not impossible. Investors
looking for some safety without fleeing the stock market altogether should
consider these three ultra-safe stocks... just in case.
Tick, tock, tick, tock...
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