5 Low Beta, Safe Haven Stocks

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 |  Includes: BAC, KO, LO, MCD, MO, PM, T
by: Convex Strategies

One way to outperform the broader market in the event of a downturn is to buy high yield, safe stocks that can easily absorb a few quarters of economic weakness. Look for companies with cheaper products, safe, high yields, and low volatility.

Here are my five favorites:

McDonald's (NYSE:MCD): You can't go wrong with a large multinational that makes money by selling cheap food. In the event of a real downturn, food prices will soften, making input costs for McDonald's cheaper. In addition, pinched consumers will look for cheap meals to cut personal expenditures. McDonald's also has a diverse, global prescence, and will be in better shape than pure domestic plays. With a dividend approaching 3% (2.8%), and a beta of .36, investors will experience much less correlation with the broader market and can be assured of at least 3% coming their way in the form of income.

Coca-Cola (NYSE:KO): With a relatively low P/E ratio of about 12 and a beta of .57, the stock should experience significantly less price depreciation than the market as a whole. With a slightly cheaper entry point, patient investors can pick up this Buffett stock with a dividend of 3% (it is currently 2.8%). Like McDonald's, Coke sells cheap beverages and snacks, and has global diversification. In addition, weakness in food and commodity prices will allow for better margins.

Altria Group (NYSE:MO): Addicted smokers won't stop buying their fix just because their wallets are a little lighter. On this day, August 2nd, Altria is one of the few stocks in the green. A notorious safe-haven to begin with, and hey, the near 6% (5.9%) dividend isn't the hardest thing to swallow. You can't do much wrong with Lorillard (NYSE:LO) or Phillip Morris (NYSE:PM) either. Take your pick.

AT&T (NYSE:T): The "T" has a fantastic 6% yield, global diversification, and an alarmingly low P/E ratio of about 8.5. Low P/E stocks in a down market tend to get hit as hard as they've already been looked at with skepticism for several quarters. A beta of .52 shows that AT&T most likely won't have a direct correlation.

Bank of America (NYSE:BAC): Ok, I cheated a little on this one. A yield of almost zero (.4%), incredibly hated, not profitable, and so forth. Don't crawl under the table in case of a downturn, and take a chance with what most will most likely say is the dumbest pick in a down market. Maybe it is. My feeling is that BofA is approaching its floor, has already been beaten to heck and back, and is actually a fantastic value play. You'll undoubtedly see some short term losses, but if you have a long term horizon, we're on the verge of an incredible entry point here.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in MO, KO over the next 72 hours.