There is currently a tug of war between fear and actual fundamentals. Most major corporations are delivering close to record results. But Wall Street investors are mostly hesitant because of the fears of what’s to come. Current metrics are still solid, but the central banks are flipping into a hawkish stance. This is creating opportunities where smart money is looking for safe stocks to buy and hold forever.
The U.S. Federal Reserve is the worst of the central banks, Which explains the strength of the U.S. dollar. The Fed seemingly is out to destroy “demand” almost at all costs. Chairman Jerome Powell has spewed rhetoric that is scaring companies into tightening their purses. Almost all major U.S. corporations announced hiring reductions and other spending cuts. Some have even started cutting jobs.
This is not because of drops in the business, but rather a preemptive measure against the Fed. Powell is out to undue the good his team did last year. Their quest to undo the inflation they created is crushing us now. Therefore, it is prudent to watch for what they say after their meeting on Wednesday.
But in the end I bet they will not be able to accomplish their goal. Government agents cannot have a goal of destroying its own people, so they will stop short. My thesis is that this combative stance from the Fed will taper off and is transitory. Businesses will revert to chasing growth, not cowering in fear of one agency.
This week we will watch a large basket of giant companies report their earnings. They will contain clues as to how business is progressing in the U.S. They are likely to deliver strong results, but they may tone down the expectations going forward. Any dips from the emotional reactions to those messages will be buying opportunities. I bet that there will be plenty of safe stocks to buy for those who are patient.
|SPY||SPDR S&P 500 ETF||$395.87|
If we are investing in stocks to buy and hold forever, then we must include the best company. Apple (NASDAQ:AAPL) has been the premier company for a long while, so it earned its spot on this list. Even though I don’t particularly like the leadership, the business is on rails. It will be hard to mess up such potential, so the stock should deliver profits over time.
If the stock market is higher in the future then AAPL is leading it. Timing could be tricky this week for two reasons. The first being that they will deliver their earnings results. The reaction to those is binary in the short term. Of the last seven reports, only one was positive. Therefore, the quality of the report did not help it the next morning.
Secondly, the chart suggests that there should be resistance in this zone. On Friday, AAPL stock closed at the 50% retracement level from the harsh 28% correction it just suffered. These are usually places where the bulls tend to pause a bit. It’s not a short idea, but a place where it can stall to gather momentum.
Now that the Fed has ended its QE, it is important to diversify the portfolios. In this case, Verizon (NYSE:VZ) offers a blend of solid financial performance, and excellent dividend income. Investors in the VZ stock received an excellent reward for holding it. The current dividend yield of 5.8% thanks to an extremely harsh drop on earnings.
The reactions to those headline often are more about emotions than facts. VZ’s business is not struggling, so I would consider this dip a buying opportunity. Investors panicked last week because the company lowered its forward guidance. This is management’s way to under-promise and relieve pressure from next quarter.
Even though the revenue line is not that exciting, VZ has grown its bottom line. Net income is now 40% higher than 2018. Clearly they are becoming more efficient with their operations. Technically, it is now at the pandemic lows, and at a strong support 2017 level.
Alphabet (NASDAQ:GOOGL) is a monster that bullies its way onto a list of stocks to buy for the long term. They dominate the search business and they are a gigantic force in social media. With 2.5 billion android users, they command attention just from one platform. They have eyeballs watching its screens for 1 billion hours of YouTube content per day.
Short term GOOGL needs to hold $102 else it can trigger more selling. This also has an earnings headline coming, so it will be a bit wild this week. But now that the stock has split, it will be attainable to trade for all investors. That attention should bring more willing buyers on dips. Being long for the long term is fine here, but I would leave some dry powder. Buying dips in this premier company is most definitely not a financial mistake.
Zoom Video (ZM)
When your company name becomes a verb, then you belong on my list of safe stocks to buy. Zoom Video (NASDAQ:ZM) stock could be the poster child for the companies who benefited from the pandemic. When we locked ourselves in, we needed to use their streaming services to stay in touch. Demand exploded from the business and personal sides. It handled the boom in services like champs and without many complaints.
Management did not squander the opportunity, and they ran with the momentum for great results. I was a critic on the way up, when the stock reached $588 per share. The price-to-sales back then was over 125, which was exorbitant. Now the financial metrics are excellent, and I would even call them cheap. The current price-to-sales is barely 8 and the growth is still impressive.
Management has earned my respect because how they handled the explosive growth with minimal visible growing pains. ZM stock is still at the lows of the pandemic, so it is still a good place to nibble. I would not go all in simply because of all the other problems mucking up the macro.
I would not have a list of stocks to buy and hold and not include my favorite Amazon (NASDAQ:AMZN). This is the only company that has never stopped being a start up. They reinvent themselves often and find new income streams. Usually when they enter a vertical, it is to dominate it. And if they don’t, they know to cut the cord quickly and move on.
The annual growth has been steady and steep for over a decade. Management earned the respect even of its earlier critics. Hardly any of them now still complain of thin margins. As for buying the AMZN shares, investors need to use common sense. When fear is high about its prospects, that’s when the opportunities emerge.
Recently it fell almost 50% from the highs, and into support from 2018. These are usually pivotal zone worth noting. This week, they report earnings so there is short-term risk from that. But in general, they have already shed the ridiculous froth from the 2021 rally. The financial metrics are impressive, and my favorite is its price-to-sales under 3. That’s 60% cheaper than AAPL to name only one. This is proof that owners of the AMZN stock at these levels have realistic expectations. Therefore they will be hard to disappoint in size
If investors are looking for quality companies that are growing fast then Block (NYSE:SQ) is a prime candidate. It is not only on a tear, but inside a sector that is also accelerating fast. As the world continues its quest for digitizing our finances, demand for fintech is exploding. We are in the relentless pursuit of everything digital.
Venmo and PayPal have become household terms. Square is more prevalent among merchants. It is quietly leading the pack with innovation. And its financial reports are testaments to that. Its revenues now are 12.8 times those of 2015. The net income is still slightly red, but the company generates $900 million in cash from operations. These are statistics of a thriving business that has no intention of slowing down.
SPDR S&P 500 ETF (SPY)
For my last pick of stocks to buy and hold forever, I chose one that encompasses all. The SPDR S&P 500 ETF (NYSEARCA:SPY) stock represents the top companies in the U.S. markets. This includes all of picks today and more that we have omitted. If investing works, then the results will be visible here. Over time, the value for the SPY has increased exponentially. There are draw-down periods, but in the end the dips were opportunities to buy. So, the idea is to accumulate SPY over time so to cast a wide net.
Investors are eager to rally, as we’ve seen them do so often. But they sell in panic at the drop of a hat. This week will not be an exception, as I am sure that the Fed’s Powell will spook them on Wednesday.
If we drop, I will be looking to buy that dip for a tactical trade up. But this at some point this year will carry for a few weeks and surprise the bears.
On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.