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All Contents © 2020The Kiplinger Washington Editors
By Maya Sasson, Contributing Writer
| March 11, 2020
A wide investor search is on for safe-haven stocks to buy.
We've plunged into a stock market correction that's nearing bear-market territory amid escalating coronavirus fears and a potential oil-price war. Some of the headline numbers have been eye-popping. The S&P 500 Index dropped roughly 18% in the course of two weeks – something it took nearly two months to do during the near-bear market in the fourth quarter of 2018. And oh, the volatility. The index has endured eight moves of 3% or more (in either direction) since Feb. 20, 2020. The last one before that came on Jan. 4 … of 2019.
Goldman Sachs analysts are calling for the end of the current bull market: "We believe the S&P 500 bull market will soon end," they write, projecting another 15% decline in stocks from here. However, Merrill Lynch strategists, led by Savita Subramanian, believe investors shouldn't panic-sell all of their holdings, arguing that while stocks will feel the effects, a bear market isn't imminent. "Negative headlines and panic selling are not good reasons to sell, but the coronavirus outbreak is now meaningfully impacting fundamentals," the firm writes.
This brutal market environment has investors seeking out "safe havens" – investments that are relatively more insulated if economic conditions worsen. Many safe-haven stocks boast products that people need regardless of the economic landscape (think health care, utilities and consumer staples). However, as the broader market finds itself further mired in the downturn, pinpointing the tickers that can hold up strong in the long run isn't easy. That's where TipRanks comes in.
Here are five save-haven stocks to buy on the current weakness. Using TipRanks' Stock Screener tool, we were able to zero in on five stocks the analyst community widely believes can maintain their bearings amid heightened levels of volatility. No stock is perfectly safe, but these companies are widely expected to come out on the other side better off than their peers.
Data is as of March 10. Stocks listed in order of analysts\' expectations for upside potential.
Market value: $78.7 billion
TipRanks consensus price target: $64.18 (17% upside potential)
TipRanks consensus rating: Strong Buy
For Mondelez International (MDLZ, $54.91), sweets are the name of the game. The company is the force beyond iconic snack brands such as Oreo, Cadbury, Sour Patch Kids and Toblerone. And companies that produce pre-packaged goods that can be consumed at home are among the most coveted safe-haven stocks out there right now.
Mondelez, one of analysts' top dividend stocks heading into 2020, is sitting on a less-than-1% loss year-to-date. That sounds bad … until you consider the stock is outperforming the S&P 500 by more than 10 percentage points.
MDLZ isn't completely out of the woods, of course. Investors have expressed concern that given the company's China exposure, its first-quarter results could take a hit. Jefferies' Robert Dickerson acknowledges that Mondelez's four facilities in the country aren't operating at normal capacity, which in turn has led to store shelves being less stocked than usual. However, he points out that its team in China believes that with respect to operating environment, the situation is on the mend.
Overall, Dickerson is bullish on MDLZ's long-term growth prospects, rating the company at Buy and giving it a $68 price target, implying 24% upside over the next 12 months.
Bank of America's Bryan Spillane (Buy, $65 price target) sees another possibility for upside potential: The ability to tap its equity holdings in Keurig Dr. Pepper (KDP) for funds it could use to make mergers and acquisitions (M&A).
A Strong Buy consensus rating breaks down into 15 Buys and 3 Holds, illustrating that most of Wall Street's pros view MDLZ among stocks to buy right now. See what other analysts have to say about Mondelez.
Market value: $374.2 billion
TipRanks consensus price target: $166.38 (17% upside potential)
Johnson & Johnson (JNJ, $141.64), at the ripe old age of 134, is one of the largest health care companies in the world, boasting numerous lines: pharmaceuticals, medical devices and consumer products such as Band-Aid and Tylenol. And like Mondelez, JNJ's defensive nature of delivering treatments and products that most people need no matter what, has it sitting on much smaller losses (3%) than the broader market.
Turning to the analyst community, Citigroup's Joanne Wuensch says that J&J's diverse product lineup makes the stock somewhat safer than the broader market. "Johnson & Johnson is an $82 billion revenue global behemoth that has slowly recreated itself through M&A, divestitures, internal R&D and partnerships," the analyst writes.
While Wuensch admits it might take some time before Johnson & Johnson enjoys the full fruits of some of these efforts, she believes JNJ has taken steps in the right direction. "While the results may not be instantaneous, there has been significant change. For example, five years ago the major drivers included diabetes management, Remicade, Zytiga, and Invokana, yet today they have been replaced by surgical and orthopaedic robotics, electrophysiology, Tremfya, Darzalex, and Erleada," she writes.
Johnson & Johnson’s status as a longtime Dividend Aristocrat, and a decent 2.8%, are other reasons to like the stock in a downturn.
Citigroup's analyst is optimistic about JNJ's long-term growth prospects, and cites it among her stocks to buy. She has a $163 price target on the stock, implying another 15% upside from here within the next year or so. And her take is largely in line with the rest of the analyst community; eight out of eight pros that have sounded off on the stock call it a Buy. Check out who else is behind Johnson & Johnson's Strong Buy rating at TipRanks.
Market value: $81.6 billion
TipRanks consensus price target: $89.30 (43% upside potential)
Pharmacy chain CVS Health (CVS, $62.60) also belongs among safe-haven stocks to buy now, just given its diversified and interconnected collection of health-care assets: health insurance plans, pharmacy benefits, retail and specialty pharmacy, retail clinics, telemedicine and home care. Deutsche Bank analyst George Hill says this de-risks CVS should it encounter headwinds that are facing the rest of the industry.
When it comes to vertical integration, CVS leads the pack. The managed care organization owns not only self-managed pharmacies, but also PBMs (pharmacy benefit managers). Hill believes this integrated care delivery stands to not only cut costs but also enhance beneficiary access. "Benefit design and beneficiary steerage should help bend the cost curve," he writes.
Hill also cites an attractive risk-reward profile and "highly compelling" valuation relative to its peers. He rates the stock Buy with a $109 price target, which would be a massive 74% gain from current levels.
The rest of the Street is a little more conservative about their price targets, but still heavily in the bull camp. Of 11 analysts sounding off in recent months, nine say Buy while the other two say Hold. That puts CVS among safe-haven stocks with a Strong Buy consensus rating. You can learn more about the analyst community's views on CVS via TipRanks' consensus breakdown.
Market value: $322.0 million
TipRanks consensus price target: $14.33 (45% upside potential)
Avadel Pharmaceuticals (AVDL, $8.57) isn't what you'd call a typical safe-haven stock. This is a small-cap specialty pharmaceutical company with a handful of approved products, including muscle strengthener Bloxiverz and nervous system stimulant Akovaz.
Avadel's relatively small size means it's still going to move strongly on headlines related to its clinical trials. However, given that nature, AVDL's trading is fairly disconnected from the broader market – not a bad trait to have right now. Indeed, shares are up 14% year-to-date, and their future looks bright amid a "REST-ON" Phase 3 study examining FT218, which treats excessive daytime sleepiness (EDS) as well as cataplexy in narcolepsy patients.
"We believe that the majority of the value of AVDL is the FT218 program which has completed enrollment and on track to read out in 2Q20," writes Ladenburg Thalmann analyst Matthew Kaplan, who has a Buy rating and increased his price target from $8 per share to $14. "Our price target increase is driven by progress with the FT-218 program with the completion of REST-ON study enrollment in December 2019."
"Given the FT218 pharmacokinetic profile … combined with the known efficacy profile of sodium oxybate, we believe there is a high probability of success for the REST-ON pivotal study," he continues.
There's only a small cohort of analysts covering this stock, which is to be expected of a small cap. But three pros have written opinions on the stock over the past month, and each of them has Avadel among their stocks to buy. Discover how other analysts rated AVDL.
Market value: $293.3 million
TipRanks consensus price target: $7.75 (56% upside potential)
Chances are you haven't heard of iClick Interactive Asia Group (ICLK, $4.96), a Hong Kong-based marketing technology platform. But it's quickly turning into one of the best stocks of 2020.
ICLK helps marketers from all over the world reach audiences in China, offering its innovative platform to provide data-driven insights. And unlike the broader market, its prospects have only ripened since the start of 2020, with shares up a whopping 59% year-to-date.
iClick has become one of the top online marketing names thanks to its superior AI and machine learning-based technology. It has amassed a wealth of consumer data that covers more than 800 million users with active profiles.
It doesn't hurt that iClick has managed to attract some heavyweights as partners. For instance, it is a platinum partner with internet giant Tencent (TCEHY) in social advertising, and is one of Tencent's top partners for performance and brand advertising. While iClick offers its solutions to about 2,500 other advertisers, Tencent contributes about 60% to 70% of iClick's gross billings. That level of single-client dependency is a real risk should the relationship hit turbulence, but Jefferies' Thomas Chong argues that for now, the partnership has set up ICLK for much more upside.
"We estimate marketing solution revenue to grow at 20% year-over-year and 18% year-over-year in 2019 and 2020, benefiting from the secular trend of Tencent's social advertising," writes Chong, who has a $7.96 price target on shares (60% upside potential). "We consider iClick as an independent marketing technology player benefiting from the unique marketing environment in China."
Like Avadel, iClick isn't exactly teeming with analyst coverage. But it has received four Buys across the four analysts writing about the stock over the past six months, and its completely online presence makes ICLK one of the best potential safe-haven stocks to buy amid the coronavirus outbreak. Investors interested in learning more can see additional ICLK analysis on TipRanks.
Maya Sasson is a content writer at TipRanks, a comprehensive investing platform that tracks more than 5,000 Wall Street analysts as well as hedge funds and insiders. You can find more of their stock insights here.