Breathe in and Profit: This Sector Can Be Your Safe Haven

by Andrew Zatlin September 23, 2022 12:10 pm ET

The Fed’s move this week sent the market into a scary new tailspin.

Everyone’s asking how low the market will go. But here’s the better question to ask:

“Where can you put your money to work when the market is in free-fall?”

And that’s what I’ll answer today.

For a transcript of this video, see below. This transcript has been lightly edited for length and clarity.

Breathe in and Profit: This Sector Can Be Your Safe Haven

When the market is in free-fall, you have three choices:

Sit there like a deer in the headlights and watch your portfolio shrink.
Make trades that go up when the market goes down. (My Moneyball Crash Alert customers have been crushing it using this strategy.)
Or, finally, you can seek out what I call safe havens.

Today, I’ll focus on option 3. In fact, I’ll reveal a sector that’s the ultimate safe haven.

How Far Will it Fall?

The S&P 500 is down twenty percent for the year. But I’m convinced it’ll fall more. Why?

Because the twenty-percent drop is only related to the Fed’s interest-rate hikes. The market hasn’t yet priced-in the recession that’s on its way.

How far will it fall when the recession gets baked-in?

Let’s see what’s happened in the past:

This chart shows how far the S&P 500 fell during the last four recessions. As you can see in the far-right column, the smallest drop was twenty percent. But in 2008, it was 56%.

Is a drop like that possible now? It is. Here’s why…

Bad News Ahead

We’re two weeks away from earnings season.

And companies have started to acknowledge there are problems.

Apple, for example, is getting crushed by the rise of the U.S. dollar. With two-thirds of its revenues coming from overseas, its earnings are going to take a major hit.

And it’s hardly alone.

Bottom line: with a recession coming, company earnings are headed lower. And that means lower stock prices.

So what can investors like us do?

Find a Safe Haven

The trick is finding a sector that’s protected from all the carnage.

In other words, find a safe haven.

In my opinion, when the rain sets in, investors should focus on utilities. Here’s why:

Stable Demand — First, utilities are always in demand. People need water, communications, and electricity, no matter what’s happening in their lives.

No Competition — Other sectors have to worry about international competition. But not utility companies.

Dividends — Finally, many utility companies pay dividends. It’s always nice to get some money back from our investments in cash, not just from a rising stock price.

Let me tell you about a few you might want to explore…

My Top Utilities Picks

To start, consider American Water Works (NYSE: AWK). This stock has kept rising steadily, and it offers a nice dividend.

Southern (NYSE: SO), a gas and electric company, pays out a three-and-a-half percent dividend, and Duke Energy (NYSE: DUK) pays out a four-percent dividend.

In telecommunications, check out TELUS Corporation (NYSE: TU), which offers a five-percent dividend. Or BCE (NYSE: BCE), which pays out a six-percent dividend. I love it!

These dividends can help offset the impact of inflation. But there’s also another reason I’m so bullish on the utilities sector right now…

An Almost-Certain Boost to Stock Prices

Coal and natural gas prices have been easing recently. Here’s coal prices, for example:

At the start of this year, prices doubled. But they’ve been flat for a few months now. And it’s the same story with natural gas.

When prices fall, companies in this sector see their margins expand. And that can lead to earnings increases that will almost certainly boost their stock prices.

By the way, for my “Pro” subscribers today, I’m sharing my single-favorite play in the utility sector. Definitely check it out!

In the meantime, we’re in it to win it. Zatlin out.