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Crisis-resistant stocks in the US
24
May
Crisis-resistant stocks in the US

 

While their peers fall victim to market disasters these companies keep on keeping on, paying dividends and raising their stock prices.

The key criterion for a stock price’s independence from the general economic climate is called the Beta coefficient (β). It shows how much the share’s price correlates with the typical prices of other shares on the market, or with stock indices that assess the whole market, such as S&P 500 or Russell 3000.

Investors who aren’t afraid of taking risks and know how to predict the market’s behavior prefer volatile stocks with β>1. However, it is probably wiser for less-skilled investors to buy assets with β~0 rating, since it is easy to create a so-called beta-neutral portfolio with them. This would offer steady annual returns of around 10 percent during most economic crises.

In this review, we’ll look at US stocks with a small β — and not just stocks that are not too dependent on the market, but those that have shown a stable price increase for many years. We’ll look at stocks that have recorded the biggest increases over the last 10 years while meeting the following criteria.

1. The Beta coefficient (β) falls within the −0.3 to 0.3 range. In other words, the stock price is not overly reliant on the general mood of the market.

2. The company’s market cap is at least $300 million. Larger companies are more reliable on average.

3. The company’s P/E ratio is between 3 and 30. That means that the company is not overvalued, is not a bubble, and that every dollar invested brings in a significant profit. On the other hand, it also means that company is not particularly undervalued either (which could mean the company is close to bankruptcy).

4. The company’s annual dividends are at least 3 percent. Since beta-neutral portfolios usually attract long-term conservative investors, dividends matter here too.

5. The company has had a positive stock price change for the last five years. If this condition is met, it shows on the most basic level that the stock price increase is steady, as it has grown over both a 10-year period and five-year period.

Let us also note that most of the companies that we are going to review today are energy giants with market caps in the billions. All figures are listed in US dollars. ‘B’ stands for billions, while ‘M’ stands for millions.

1. B&G Foods

B&G Foods products

— Ticker: BGS 

— Stock Exchange: NYSE

— Capitalization: $2.7B

— Annual turnover: ?

— P/E: 24

— Beta: +0.03

—  Annual dividends: 4.6%

— Yearly quotes change: — 6%

— Quotes change for 5 years: +89%

— Quotes change for 10 years: +198%

— Profit change for 5 years: +16%

— Turnover change for 5 years: +13%

About the company. B&G Foods produces a wide range of foodstuffs, such as vegetables, grains, meat, spices, chips, etc. It operates in Canada, the US, and Puerto Rico. It owns a number of brands that are household names in these countries but which are not as recognisable elsewhere.

What the chart shows. Although this company’s stocks are currently beta-neutral, that was not the case just a few years ago. B&G’s stock price plummeted during the Global Financial Crisis. However, it managed to recover its pre-crisis stock price as quickly as 2010 and has continued growing since. In 2016 the company set a personal record, as its stock price grew to 3.5 times its 2007 value. B&G usually pays dividends four times a year but in 2015 it paid out five times, while in 2016 it only paid twice.

Pros for investors. The highest price increase over a 10-year period in this review, and outstanding five-year growth. Decent dividends with a long history of regular payments.

Cons for investors. A relatively high P/E ratio.

2. WEC Energy Group (Wisconsin Energy Corporation)

WEC Energy Group solar park in Walworth County, Wisconsin

— Ticker: WEC

— Stock Exchange: NYSE

— Capitalization: $19B

— Annual turnover: $7.5B

— P/E: 20

— Beta: +0.08

— Annual dividends: 3.4%

— Yearly quotes change: +2%

— Quotes change for 5 years: +66%

— Quotes change for 10 years: +146%

— Profit change for 5 years: +13%

— Turnover change for 5 years: +11%

About the company. WEC is a major power company and natural gas supplier, founded in 1896. It works primarily in Wisconsin, where the company was founded, as well as Illinois, Minnesota, and Michigan. Its total number of clients is 4.4 million. The company is directly involved in its power plants’ design and construction, invests money in various kinds of industrial infrastructure and is involved in general city development planning.

What the chart shows. This company is known for long and steady stock price growth. It almost shrugged off the GFC and has been growing since 2009 (the only exception was a dip in 2015 that the company recovered from in 2016). The company has paid dividends four times a year for a long time.

Pros for investors. Excellent and steady stock price growth over 10 years, growing profits and turnover and a long history of yearly dividend payments.

Cons for investors. No significant cons.

3. CMS Energy (Consumers Energy)

Wind park

— Ticker: CMS

— Stock Exchange: NYSE

— Capitalization: $13B

— Annual turnover: $6.4B

— P/E: 22

— Beta: +0.12

— Annual dividends: 2.9%

— Yearly quotes change: +10%

— Quotes change for 5 years: +101%

— Quotes change for 10 years: +140%

— Profit change for 5 years: +6%

— Turnover change for 5 years: 0%

About the company. CMS is a Michigan-based energy company. It owns several thermal power stations run on natural gas and biofuel. It supplies both electricity and gas to its end users. The company also has its own bank, EnerBank USA.

What the chart shows. Compared to B&G food, CMS Energy was only mildly affected by the crisis of 2008. Later on, both companies’ stock prices behaved similarly: they recovered their pre-crisis standing in 2010 and set new records in 2016. The company has been paying dividends four times a year for quite a while, only missing one payment in 2010.

Pros for investors. A long history of yearly dividend payment. The highest price increase over the five-year period in this review and outstanding 10-year growth.

Cons for investors. The lowest dividends among all companies reviewed here.

4. DTE Energy

DTE Energy headquarters in Detroit, Michigan

— Ticker: DTE

— Stock Exchange: NYSE

— Capitalization: $18B

— Annual turnover: $11B

— P/E: 18

— Beta: +0.21

— Annual dividends: 3.2%

— Yearly quotes change: +16%

— Quotes change for 5 years: +88%

— Quotes change for 10 years: +104%

— Profit change for 5 years: +4%

— Turnover change for 5 years: +4%

About the company. A major energy company based in Detroit, Michigan. DTE is an electricity and gas provider that generates around 13 gigawatts of electricity. Most of DTE’s power plants run on traditional heat energy sources, but around nine percent of its power is nuclear generated. The company has recently begun to pay greater attention to alternative energy sources. DTE is currently building one of the largest solar plants in the US, on the Mississippi.

What the chart shows. DTE’s stock price dropped significantly in 2008 but the company managed to recover its pre-crisis position in 2011. In 2016, the company’s stock price was twice its 2011 value, setting a new record. DTE has been paying dividends four times a year for a long time.

Pros for investors. Excellent price growth over the 10-year and five-year periods, a long history of yearly dividend payments. The lowest P/E rate in the review.

Cons for investors. No significant cons.

5. Xcel Energy

Xcel Energy employee at work

— Ticker: XEL

— Stock Exchange: NYSE

— Capitalization: $23B

— Annual turnover: $11B

— P/E: 20 

—  Beta: +0.13

— Annual dividends: 3.2%

— Yearly quotes change: +11%

— Quotes change for 5 years: +66%

— Quotes change for 10 years: +86%

— Profit change for 5 years: +6%

— Turnover change for 5 years: +1%

About the company. A major electricity company. Xcel owns 13 thermal power stations with a total output of 7.7 gigawatts, 27 small hydroelectric plants with a total power output of 500 megawatts, and a number of alternative energy complexes. Alternative energy sources only account for a small part of the Xcel’s power output but the company has invested in their development — particularly wind turbines.

What the chart shows. Xcel’s stock suffered a relatively small dip during the GFC and has been growing steadily since. The general picture of the company’s growth resembles that of DTE and WEC but the pace of growth has been more modest. Xcel has consistently paid dividends four times a year but missed a payment in 2016.

Pros for investors. Compared to the other companies reviewed it has no significant advantages.

Cons for investors. Relatively modest stock price growth over a 10-year period.

6. Unitil Corporation

Unitil Corporation operator

— Ticker: UTL

— Stock Exchange: NYSE

—  Capitalization: $655M

— Annual turnover: $383M

— P/E: 23

— Beta: +0.18

— Annual dividends: 3.0%

— Yearly quotes change: +19%

— Quotes change for 5 years: +79%

— Quotes change for 10 years: +77%

— Profit change for 5 years: +11%

— Turnover change for 5 years: +2%

About the company. An electricity and gas distributor in New Hampshire, Maine, and Massachusetts. It has three subsidiaries: Unitil Energy Systems (provides electricity in New Hampshire’s capital of Concord and its southeastern coast), Fitchburg Gas and Electric Light Company (electricity and gas in northern and central Massachusetts), and Northern Utilities (gas in southern and central Maine and southeastern New Hampshire).

What the chart shows. Unitil was only mildly impacted by the 2008 crisis but recovered very slowly in the subsequent years. Its pre-crisis stock price record was only broken in 2013 and the current record of 2017 is only around one-and-a-half times that amount. The company has been paying dividends four times a year for a while.

Pros for investors. Good price growth over a five-year period, growing profits, a relatively long history of yearly dividend payment.

Cons for investors. Relatively modest 10-year stock price growth (compared to that of most of the other companies reviewed).

7. Dominion Resources

Cove Point regasification terminal by Dominion Resources

— Ticker: D

— Stock Exchange: NYSE

— Capitalization: $48B

— Annual turnover: $12B

— P/E: 22

— Beta: +0.26

— Annual dividends: 3.9%

— Yearly quotes change: +9%

— Quotes change for 5 years: +50%

— Quotes change for 10 years: +71%

— Profit change for 5 years: +8%

— Turnover change for 5 years: — 3%

About the company. A major electricity and gas supplier in Virginia, North Carolina and a number of other states. The total output of Dominion’s power plants is 27 gigawatts, with nuclear power plants accounting for 41 percent. The company also owns gas holders holding a total volume of 34 cubic kilometers, including the country’s largest gas holder with a volume of 27 cubic kilometers. Dominion also owns around 10,000km of power lines and 23,000km of piping.

What the chart shows. Dominion’s stock price was only moderately affected by the GFC. The company recovered its pre-crisis standing in 2011 and kept growing. The latest record was set in 2015 but that’s when the growth stopped. Dominion has consistently paid dividends four times a year.

Pros for investors. High dividends with a long history of consistent payment.

Cons for investors. The smallest price growth over the 10-year and five-year periods of all the companies reviewed with no price growth since 2015.

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