Top safe stocks for turbulent times

01, Mar - BLOG

The year 2024, like the previous 3 years, is a year of uncertainty. Forecasts diverge greatly. Some predict a recession in many key economies, more rarely they talk about a global recession. In conditions of such high uncertainty, when no one can give a confident answer, it is necessary to choose the strongest companies, in which you will not have to doubt even in the moments of raging crises. In this top, we will offer you options, but first we want to briefly explain the selection methodology. We selected companies for this rating based on four main criteria:

1. Market capitalization;
2. Financial stability and low debt burden;
3. A large number of loyal customers;
4. Good growth potential.

Why, from our point of view, high capitalization is good? High capitalization means the company's ability to quickly obtain cheap loans, and invest in expanding production, advertising, or anything else that contributes to the growth of stock prices and profits.

With financial stability and debt burden, everything is clear. Low debt burden means the ability to pay dividends even in the absence of profit, or invest in growth, as well as take beneficial loans. Financial stability also means the attractiveness of the company in the eyes of investors. This positively affects the price of the company's shares.

A large number of loyal customers means that even in times of economic crisis and decrease in purchasing power, loyal customers will still buy the products or services of their favorite company. Having a large number of loyal customers, a company can increase the price of products or services for various purposes and count on the fact that due to loyal customers, the company's profit increases, not decreases.

Growth potential is often a relative value that cannot be expressed in numbers. Agree, such a thing as corporate culture and its quality in a particular company cannot be expressed using mathematical models. Naturally, this does not apply to the size of the market and the company's share. It is about the company's innovativeness, market growth rates, the possibility of expanding the product line, prospects in new markets, especially foreign ones, etc.

VISA

Visa's business model is very resilient. As you know, Visa's main competitor is MasterCard. It may seem that their shares in the world market are equal, but this is not the case. Global cash turnover through Visa cards amounts to 2.4 trillion dollars, while MasterCard has only 1.1 trillion dollars.

The P/E ratio, which is used to understand whether the company's shares are overheated and if so, by how much. An indicator of 25 is considered ideal and means that the company's shares are neither overheated nor undervalued. At the end of December 2023, VISA`s P/E ratio is 31.17. This is almost an ideal indicator.

As for VISA`s debt burden, everything is good here. The debt-to-equity ratio is 54.98%. For example, the same indicator for MasterCard is 243.9%.

The size of the company's dividends has been growing every year since 1995. Here is what the statistics look like for the last 6 years.

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Another argument in favor of investing in VISA is that VISA shares are in the portfolio of Berkshire Hathaway, led by Warren Buffet, possibly the most successful investor in history. It's no secret that Buffett`s success, in his own words, lies in finding undervalued companies with the potential for long-term growth. The presence of Visa in his portfolio speaks of the reliability of the company.

What else makes Visa a strong company?

The company's main income is commissions from transactions and card service, so the dynamics of customer growth in retrospect over a long distance is important and fortunately for the company, the growth in the number of VISA cards is a stable trend. Here are the statistics on the number of VISA cards from 2008 to the 4th quarter of 2023.

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Please note that neither the financial crisis of 2008, nor the corona crisis, and high inflation, nor the start of the Russian-Ukrainian war and the subsequent blocking of VISA in Russia had a negative impact on this aspect. All because Visa's business model is designed to protect the company from potential high inflation. It's simple. If prices rise, so do the sizes of processed transactions. Experience shows that in times of high inflation, Visa's revenue does not fall.

Visa's competitors are not doing well and this is very good for Visa itself, because customers are switching to Visa. Investors who prefer to invest in the financial services sector will also redirect their investments in favor of Visa.

Meta Platforms

Meta showed good results this year. The stock price increased by 200% just in 2023. The main reason for such success is the return of mass online ad sales. Also, in 2023, a significant increase in the number of users was recorded. Many large funds expect significant growth in Meta`s stock price and operating profit. Meta`s business model is as resilient as Visa's. Meta makes a profit from users every day. The company does not make a profit from the fact that customers buy their products with some frequency and may buy, or may buy elsewhere.

Meta is one of the most innovative companies among American big tech. The company constantly improves its products. Another advantage of Meta is the presence of gigantic volumes of data about clients, which causes disputes and suspicions from politicians and human rights activists, but so far this has not led to significant consequences.

Statistics of the number of Meta users for 6 years shows that the company knows how to attract new users. In the second quarter of 2018, the number of Meta users was 2.5 billion people, and in the third quarter of 2023, the number of users reached 3.9 billion people. This is a 56% increase. This is surprising, because 2.5 billion is a very large amount, and 3.9 is even more so.

McDonald`s

Investing in the well-known fast-food restaurant chain has the following advantages:

• A large base of loyal customers;
• Presence in all corners of the planet;
• Good operating profit;
• Good financial indicators.

Despite the fact that McDonald`s has already achieved the maximum results it could, McDonald`s has its own growth strategy and it is being implemented. At the moment, about 36 thousand McDonald`s restaurants are open around the world. Despite such an impressive indicator, the company's management has set an ambitious goal to open another 8800 establishments by 2027.

In addition to this, McDonald`s has started opening cafes with a new concept similar to Starbucks. So far, this project is just beginning to be implemented. Other important aspects of McDonald's strategy are the attraction of artificial intelligence to improve service and the expansion of the loyalty program, which will collect and process data.

Speaking about McDonald's financial indicators, everything is good here. Operating profit for 2023 increased by 16%, net profit by 11%. McDonald's market capitalization at the end of 2023 is 502 billion dollars. McDonald's has low debt.