7 Boring Stocks to Buy as Inflation Crimps Sentiment
The case for boring stocks to buy stems from good news that could actually be bad news. Yes, we’re playing that silly game again.
As InvestorPlace’s Shrey Dua mentioned, Wall Street is divided over the March jobs report. On one hand, the latest print – 303,000 nonfarm payrolls added – demonstrates continued strength in the economy. That was more than 100,000 jobs above analysts’ expectations. But on the other hand, the robust figures also mean that the Federal Reserve might not lower interest rates.
Yes, the central bank claimed earlier that inflation was tracking along encouragingly. However, with gold and oil prices rising, that might not be the case any longer. For those who are feeling jittery about the potential paradigm shift, these are the boring stocks to buy.
Grocery Outlet (GO)
Fundamentally, Grocery Outlet (NASDAQ:GO) aligns with a irrefutable logic: we all have to eat. Not only that, GO stock aligns with a financial logic. Many of us have to eat as cheaply as possible. Given that the company offers consumable and fresh products through an independent operated store system along with discounted prices, the business model is exceptionally compelling.
I understand that the analysts don’t particularly care for it. Right now, they rate shares as a consensus hold. I’m not entirely sure why that is. On the financial performance front, it’s doing quite well. For one thing, the company beat all its quarterly bottom-line targets for fiscal 2023. Further, the average positive earnings surprise landed at nearly 17%.
For the current fiscal year, experts believe that earnings per share will come in at $1.17. That’s an improvement over last year’s result of $1.07. Further, they’re looking at a sales target of $4.34 billion, up 9.2% from 2023’s haul of $3.97 billion. With the relevant business, GO is one of the boring stocks to buy.
Ross Stores (ROST)
A discount retailer, Ross Stores (NASDAQ:ROST) definitely belongs on your list of boring stocks to buy. Primarily, it rises to the forefront because of its business model. The company takes overstock brand-name products and sells them to customers at discounted prices. It’s a symbiotic relationship, with the brand names happy to move not-moving inventory while customers get quality products for less.
I like to think that everyone wins and that may especially be the case if inflation continues to rise higher. That’s because with higher costs, companies will be looking to cut overhead. We’ve already seen major technology enterprises issue pink slips despite the innovation ecosystem benefiting from major equity booms. Bottom line, people will be out looking for new jobs. So, they’re going to need to dress up their office attire – and cheaply.
For me, Ross Stores is practically a no-brainer investment. Last fiscal year, the company’s average positive earnings surprise came out to nearly 9%. This year, experts are looking for EPS of $5.94, an improvement over last year’s $5.56. Also, revenue should hit $21.25 billion, up 4.3% year-over-year.
Costco (COST)
In my opinion, membership-only big-box retailer Costco (NASDAQ:COST) practically sells itself as one of the boring stocks to buy. If you visit any Costco, it absolutely is boring. It’s a suburban utopia or perdition, depending on your perspective. Still, what I love about COST stock is that the underlying enterprise commands a high-income membership base.
If inflation gets out of control, Costco shoppers will likely be the last to be impacted severely. These are not paycheck-to-paycheck type of folks. Rather, they’re rebalancing their 401K people. It’s a more sophisticated consumer base, to put it diplomatically. And that often equates to higher educational attainment along with bigger salaries.
Now, Costco did incur a bum note for the quarter ended May 30, 2023. However, in the three quarters since then, the average positive earnings surprise came out to 4.83%. Looking to the current fiscal year, experts project EPS of $16.16, above last year’s $14.16.
Also, revenue should hit $254.17 billion, up 4.9% YOY. And fiscal 2025’s revenue could be $272.34 billion. It’s a compelling example of boring stocks to buy.
Ollie’s Bargain Outlet (OLLI)
Of course, not everyone has the luxury of shopping at Costco or wants to. And as we’ve seen with the tech layoffs, even lifelong Costco shoppers might not be so safe. For these and myriad other reasons, we have Ollie’s Bargain Outlet (NASDAQ:OLLI). If you’re worried about the impact that inflation might have on your portfolio, OLLI stock should be watched closely.
Yes, there are competing discount dollar stores. Arguably, most of them stink when stacked against Ollie’s. In part, that’s because the company features higher margins compared to pure-play discount dollar stores. Stated differently, the discount specialists may be discounting too much, thus ironically hurting the business. Also, Ollie’s has the advantage of offering name-brand products but at a cheaper price.
Predictably, the financial performance is strong. In fiscal 2023, Ollie’s posted an average earnings surprise of 8.6% above analysts’ expectations. For the current fiscal year, experts believe that EPS will reach $3.18, above last year’s result of $2.91.
Lastly, revenue could hit $2.27 billion, 7.7% above last year’s $2.1 billion in sales. It’s one of the boring stocks to buy.
Microsoft (MSFT)
There are many reasons to acquire shares of Microsoft (NASDAQ:MSFT). Not only that, some might object to calling MSFT one of the boring stocks to buy because of its investments. Microsoft has poured in billions in artificial intelligence and that has clearly paid dividends (in a metaphorical sense – no one’s celebrating its measly 0.7% forward yield).
However, the reason that I do like MSFT under the context of this article is very much boring. Yes, AI, schmay-I…what I’m looking at is its Software as a Service (SaaS). Specifically, its Microsoft Office 365 may see increased demand due to the expansion of the gig economy. You see, with many people being laid off, some might not be so eager to climb the corporate ladder again.
Indeed, I bet that many folks will instead look to forging their own path as independent contractors. It’s one of the many reasons why the gig economy could expand at a compound annual growth rate of 16.18% to hit a valuation of $1.86 trillion by 2031.
Analysts are looking for Microsoft to produce EPS of $11.65 on revenue of $244.22 billion. These numbers may be foregone conclusions.
Sempra (SRE)
One of the easy names to consider when it comes to boring stocks to buy, Sempra (NYSE:SRE) is a utility giant. It focuses on key markets in Southern California, particularly San Diego. Fundamentally, Sempra benefits from two bullish catalysts. Number one, it enjoys a natural monopoly. The business is entrenched and would-be competitors face a mountain of barriers such as regulatory considerations.
Number two, Sempra benefits from favorable population dynamics. Yes, the Southern California real estate market is red hot, arguably overpriced. Yet San Diego in particular continues to see rising population growth and this expansion might not abate until 2042. You know what that means? A darn long upside pathway.
So, when analysts project current fiscal year EPS to hit $4.80 (an improvement over last year’s $4.61), I believe it. When they state, though, that revenue will decline 1% year-over-year to $16.55 billion, I don’t believe it. The fundamental stats suggest otherwise.
Even if you don’t assume growth, Sempra’s forward yield of 3.53% adds to the overall bullish case. It’s one of the boring stocks to buy.
Philip Morris (PM)
Ah yes, the controversial Philip Morris (NYSE:PM). As a tobacco giant, Philip Morris may be one of the boring stocks to buy. However, it generates excitement in the political realm (though not of the good kind). With anti-tobacco advocacy groups performing an excellent job of awareness of the underlying commodity’s health risks, PM stock seems an unusually silly investment.
Yes, traditional cigarette-smoking stats don’t necessarily augur well for the tobacco ecosystem. However, the fading prevalence doesn’t mean that there are no tobacco users whatsoever. Further, as the world becomes more diverse, prevalence rates may change due to shifting cultural standards. Also, Philip Morris stands to benefit from the enormous popularity of vaping. Like it or not, that’s a big catalyst for PM.
Subsequently, analysts are calling for EPS of $6.40 on sales of $37.24 billion for the current fiscal year. Last year, the stats were $6.01 EPS on revenue of $35.25 billion. That’s a decent improvement and believable based on elements such as vaping.
Plus, the company pays a nice forward dividend of 5.64%.
On the date of publication, Josh Enomoto 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.
