10 Stocks That Refuse to Die

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published 1 January 2012

Mr. Market often takes investors for a wild ride that instills them with fear and drives them away from stocks. But giving in to your market-phobia means missing out on big wins and losing out to future inflation.

Instead, add a more-reliable brand of stock to your portfolio. Here are ten low-volatility stocks that will deliver consistent returns over the long haul without all the drama. They all have betas of less than 1, which suggests that their moves are less than the market's (beta is a measure of volatility compared with a particular market, in this case the U.S. stock market, as measured by Standard & Poor’s 500-stock index).

Topics

ExxonMobil (XOM)

Year company was founded: 1882 (ExxonMobil merger was in 1999)

But the company’s functional and geographical diversity, along with deep pockets and extensive expertise, give it unparalleled muscle to compete globally. Analysts at International Strategy & Investment call the company’s balance sheet a “fortress,” strengthened with $13 billion in cash. Exxon has a long policy of returning cash to investors via share buybacks and dividends, and analysts speculate that Exxon is poised to boost the dividend significantly.

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General Mills (GIS)

Year company was founded: 1856 (as Minneapolis Milling Company)

The brands of consumer food giant General Mills are strong enough to withstand competitive pressures from cheaper generic brands. Is there really any substitute for Cheerios? Other brands include Lucky Charms, Progresso soups, Green Giant vegetables and Betty Crocker baking mixes. A weak economy and high commodity prices are challenges. A slightly muted outlook for the fiscal year that ends May 2013 in part reflects increased spending to shore up the company’s recently acquired Yoplait yogurt division, a laggard in the trendy Greek yogurt category. But General Mills is cutting costs elsewhere and using its formidable cash position to expand in faster-growing emerging markets and to finance dividends, share buybacks and acquisitions -- most recently a Brazilian food maker that is expected to more than double the company’s annual sales in Latin America, to nearly $1 billion.

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International Business Machines (IBM)

Year company was founded: 1911 (as Computing-Tabulating Recording Company)

Big Blue has been around for a century and knows how to weather economic storms. The company offers a wide range of computer hardware, software and services, making it a one-stop shop for many corporate information-technology departments. Cloud computing could challenge IBM’s high-end hardware business. But the company continues to innovate. It spent $6.3 billion on research last year and won more U.S. patents (6,180) than any other company.

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Johnson & Johnson (JNJ)

Year company was founded: 1886

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Automatic Data Processing (ADP)

Year company was founded: 1949

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Coca-Cola Co. (KO)

Year company was founded: 1886

You can order a Coke almost anywhere. Coca-Cola Co. delivers its soft drinks, which also include Sprite, Fanta, Tab and Fresca, to thirsty consumers in some 200 countries. (Other brands include Minute Maid orange juice, Powerade energy drink and Dasani bottled water.) And the company is investing billions of dollars more in overseas markets (which account for 70% of sales), especially in China, Russia, Brazil and other big emerging markets.

Coke battled higher commodity prices last year but recently announced a plan to shave annual costs by $550 million to $650 million by the end of 2015. Analysts, on average, expect Coke to generate annualized earnings growth of nearly 8% over the next three to five years. Some, such as analyst Caroline Levy, at Credit Agricole Securities, think Coke can achieve a double-digit earnings growth rate over the long haul. The stock, at 18 times estimated earnings, isn’t cheap. But the bulls say that because of Coke’s steadiness, it deserves an even higher price-earnings ratio.

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McDonald's (MCD)

Year company was founded: 1940

The golden arches continue to rise in emerging markets. But McDonald’s continues to gain market share even in the developed world, where restaurant demand is muted. The world’s number-one chain in total sales, McDonald’s enjoys huge economies of scale and wields significant bargaining clout with suppliers. According to Morningstar, McDonald’s restaurants, on average, generate about $2.7 million per year, easily trumping the fast-food industry average of just over $1 million per location. Nobody does fast food better.

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Philip Morris International (PM)

Year company was founded: 1847 (went public in 1881)

You’ll find the shares of Philip Morris International tempting if you have no concerns about investing in tobacco. Consider this telling prediction, from Morningstar: By 2020, there will be 1.4 billion smokers globally, up from 1.3 billion today, even if the percentage of the population that smokes declines 1% annually. Not counting China and the U.S., the market share of Marlboro, PMI’s best-selling brand, rose to 9% last year. And Parliament, a luxury brand with a high profit margin, saw sales volume increase 12%. Midprice L&M has been gaining market share in the European Union since 2009 and is the second-largest brand there.

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Procter & Gamble (PG)

Year company was founded: 1837

P&G hasn’t been immune to consumer belt-tightening in the U.S. and Europe and slower growth in emerging markets. As with many multinationals, currency swings have cut into revenues. The company recently warned that sales and profits for the fiscal year that ends in June 2013 would be less than previously expected. But P&G has responded with some belt-tightening of its own. The company is engineering a $10 billion, five-year cost-savings program aimed at plumping profit margins. And executives have vowed to focus on core markets and businesses, as well as on dreaming up the next game-changing product you don’t yet know you need.

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Wal-Mart Stores (WMT)

Year company was founded: 1962

Behold the largest retailer in the world, posting annual sales of more than $400 billion. Every week, more than 100 million people walk into a Wal-Mart store. Its stock seems to have shaken off worries about any long-term effects of an investigation into the company’s Mexico operations. Look for Wal-Mart Express stores to penetrate urban and smaller rural markets, while the company’s Internet division readies itself to take on Amazon.

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Anne Kates Smith brings Wall Street to Main Street, with decades of experience covering investments and personal finance for real people trying to navigate fast-changing markets, preserve financial security or plan for the future. She oversees the magazine's investing coverage, authors Kiplinger’s biannual stock-market outlooks and writes the "Your Mind and Your Money" column, a take on behavioral finance and how investors can get out of their own way. Smith began her journalism career as a writer and columnist for USA Today. Prior to joining Kiplinger, she was a senior editor at U.S. News & World Report and a contributing columnist for TheStreet. Smith is a graduate of St. John's College in Annapolis, Md., the third-oldest college in America.