Buy these safe stocks to protect you from the coming storm


As an investor, you no doubt hear a lot of opinions about the relative health of the market. Pundits throw the term "valuations" around a lot, almost always using it to mean P/E Ratio, the most widely used measurement of theoretical value. Here are a few facts which may surprise you. The average P/E Ratio of stocks in June 2014 is 18.3. That is slightly higher than average, but as this chart shows very clearly, it is still low compared to any of the market's previous "top-out" points. As for the excessively high valuations hit at various times in the last fifteen years, we are, as you can see, nowhere near them.

Chart courtesy

So what is this about a correction? Well, the market always moves jaggedly, as investors often respond to each other's moves emotionally. This creates periods of unsustainable growth, punctuated by brief temper tantrums in which the market tests our nerve. These bull market corrections have been coming every two to four months for the last two year. It has been about three and a half months since we last did this dance, and while I have no crystal ball, I believe beyond the shadow of any doubt that the market is going to give traders at least one big scare before the summer is out.

The problem is that not all stocks bounce back after corrections, and sometimes companies that look very conservative get beaten up as badly or worse than the rest of the market. I've been burned by that one often myself, and that is one reason my "safe" stocks are going to look different than most. I'm talking about solid growth or growth and income stocks with rising revenue and rising earnings in industries that continue to do well even when everything else looks rough.

Here then, are my favorite stocks for the coming bull-market correction.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , insurance , Technology

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