The Bear Market Is Indeed Here: Time to Switch to Safer Assets

Print Email

Typically when things turn negative, the always bullish sell-side analysts become a little less positive and start lowering their price targets. It often seems they never lower targets until the moves have already been made. Then like clockwork, the prognosticators and pundits start to tout the bear-market scenario.

On Monday, Jeffrey Gundlach from DoubleLine, now known as the new “Bond King,” having assumed the title once held by Bill Gross, said the bear market is here and we could go much lower. He also said the yield on the 10-year Treasury could go to 6% by 2021. With the current yield on the 10-year Treasury at 2.87%, that would be a huge move higher in rates.

As always, it’s just not as simple as selling everything and going to cash. What does make sense is to move to safer assets and wait out the bear market, while trying to raise cash to buy at what is the desperation or panic low.

We screened the Merrill Lynch research database looking for good ideas for worried investors, with a focus on stocks that should perform even if the economy slides into recession. We also looked for companies that paid a solid and dependable dividend.

American Electric Power

This industry-leading utility is also a solid dividend-paying company. American Electric Power Co. Inc. (NYSE: AEP) is one of the largest electric utilities in the United States, delivering electricity to more than 5.4 million customers in 11 states.

The company ranks among the nation’s largest generators of electricity, owning nearly 38,000 megawatts of generating capacity in the United States. It also owns the nation’s largest electricity transmission system, a more than 40,000-mile network that includes more 765-kilovolt extra-high voltage transmission lines than all other U.S. transmission systems combined.

Many on Wall Street feel that the stock trades at a discount to its utility peers, and they feel it deserves a premium. Top analysts also think the company may sell generating assets and buy back shares with the proceeds, which would be also accretive.

American Electric Power shareholders are paid a solid 3.35% dividend. The Merrill Lynch price target for the shares is $84, while the Wall Street consensus target price is $78.61. The stock closed on Monday at $77.33 a share, down almost 3.4% on the day.

Coca-Cola

This top Warren Buffet holding not only offers safety but an incredibly strong worldwide brand with 40% overseas sales. Coca-Cola Co. (NYSE: KO) is the world’s largest beverage company, refreshing consumers with more than 500 sparkling and still brands.

Led by Coca-Cola, one of the world’s most valuable and recognizable brands, the company’s portfolio features 20 billion-dollar brands including Diet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater, Powerade, Minute Maid, Simply, Georgia and Del Valle. Globally, it is the number one provider of sparkling beverages, ready-to-drink coffees and juices and juice drinks.

Through the world’s largest beverage distribution system, consumers in more than 200 countries enjoy Coca-Cola beverages at a rate of more than 1.9 billion servings a day. With coolers getting packed for picnics, parades and vacations you can bet that they will be stuffed with products from this iconic American company. Also remember that the company also owns 16.7% of Monster Beverage, which continues to deliver big numbers.

Coca-Cola investors are paid an outstanding 3.16% dividend. Merrill Lynch has a price target of $55 for the stock, while the posted consensus target was last seen at $51.76. The stock closed Monday’s trading at $48.33 apiece.