Top safe stocks for turbulent times

04, Mar - BLOG

In the last article, we talked about how to choose a reliable company for investment, as well as about three suitable companies. Today we will talk about some very strong companies.

Monster Beverage Corporation (also known as Monster Energy)

The manufacturer of the most popular energy drinks has been showing excellent results in terms of investment for several years. Moreover, experts are confident that Monster will be able to increase its sales by 10-11% this year. Earnings per share should rise even more. The reasons for our confidence in the company are simple. The volume of the energy drink market is growing rapidly and Monster Energy dominates this market. Such success is due to a competent pricing policy and a significant product portfolio. Thanks to this, Monster Energy has been showing excellent operating profit and acquiring new assets for several years.

The Monster brand has a good reputation and a large loyal customer base.

It is important to understand that the industry also has some resilience to economic fluctuations, as energy drinks are often purchased during the day to keep you energized and awake. Also important is the growth of the energy market in the coming years. An average growth rate of 8% per year is projected until the end of the 2020s.

Nvidia

Nvidia already has a leading position in several industries and makes a high profit due to this. However, another advantage is that Nvidia is directly connected to AI. Nvidia produces the electronics needed for powerful computing systems. In this regard, this is a great option for those who want to invest in AI, but are afraid to invest in young startups with unknown prospects. AI itself is a very complex and controversial thing, and investing in artificial intelligence startups is only hypothetically profitable. In fact, many startups in this area are going broke. There is a good example when tens of millions of dollars were invested in companies and it ended in nothing. Seven Dreamers Laboratories, Aria Insights, Anki and others.

According to experts ' forecasts, Nvidia's market value may overtake that of Amazon in the coming days or weeks, because Nvidia's dominance in AI will continue and no worthy competitors are expected yet. In the first month and a half alone, Nvidia added 40% to its value. At the moment, Nvidia's market capitalization is$ 1.715 trillion, while Amazon's market capitalization is $ 1.767 trillion. Of course, some of this growth is artificial and fueled by speculative market activity. Nevertheless, more and more news comes about the conclusion of long-term contracts with Nvidia.

TSMC

TSMC is the largest semiconductor manufacturer and has many large and long-term contracts, which is one of the guarantees of stability. An interesting and little-known fact is that TSMC makes chips for Nvidia.

Recent statistics for the end of 2023 show that TSMC accounts for 58.5% of the global semiconductor market. This is even more impressive compared to its closest competitor Samsung, which accounts for 15.8% of global semiconductor sales. Compared to Nvidia, TSMC pays almost three times more dividends per share as a percentage.

Nvidia, unlike TSMC, only designs chips and delegates their production to companies such as TSMC, Samsung, and so on.Thus, these two firms are more partners than competitors. TSMC's manufacturing capabilities are unique and include the full range of products available. This suggests that even if demand for one type of chip falls, TSMC can change its priorities and produce more of those chips that will be in high demand.

TSMC's prospects are also important. Here the company is also doing well. One of the most important areas for the company is contracts with Apple and the production of chips for it. So Apple plans to replace all processors in its computer lines with Arm processors, which will be produced by TSMC. It is also important that many of the developments of TSMC's competitors also use TSMC technologies. For example, Apple tested its own chip designs using TSMC's 3nm process technology. Intel did the same thing. Moreover, TSMC is investing $ 12 billion to expand production. This is a very impressive amount.

McKinsey & Company, a consulting firm, estimates the global chip market at approximately $ 600 billion in 2021. Moreover, the annual growth of the market is estimated in the range from 6% to 8%. Thus, by the end of the decade, this market can reach a volume of $ 1 trillion.

Union Pacific

Union Pacific is the largest railroad company in the United States and North America. The company provides services in both passenger transportation and delivery. From the point of view of the contracts concluded, Union Pacific is doing well. The company has many large clients from various sectors of the economy, especially in the construction sector.

The capitalization of UNP is also high. There is no overheating in the share price. Overall, the company's recent years have been successful, although the latest quarterly report was received ambiguously by the market and the expert community. In any case, we can't say that things have taken a sharp turn for the worse for UNP and the deterioration of dynamics is a long-term trend. The deterioration in results is due to inflationary pressures and reduced traffic volumes, as well as a worsening business climate in the entire transportation industry. However, at the same time, Union Pacific has achieved its earlier goals of increasing transportation efficiency. Improving these indicators will be beneficial in the future, when the business climate in the industry improves.

Interestingly, despite the excellent results, if we take a longer period of time, UNP shares are undervalued. This is evidenced by the research of analysts and the fact that recently Warren Buffett bought a large stake in this company. As you know, Buffett prefers to buy undervalued stocks, and in general, this fact is another argument in favor of buying Union Pacific.

The undervaluation of UNP shares can be explained by the trend of investing in technology companies, especially Nvidia. Also, companies from such "classic" industries are generally less in demand compared to mainstream companies, often regardless of the results of companies from classic sectors of the economy.