The 3 Safest Stocks to Buy in 2020

The markets continue to rally as investors cheer news that the U.S. economy will reopen in parts of the country this week.

Starbucks Corp. (NASDAQ: SBUX) announced its plans to open its doors to more than 85% of its retail locations. Fiat Chrysler Automobiles NV (NASDAQ: FCAU) announced that it will soon restart production after a $1.8 billion loss fueled by the shutdown.

Despite the optimism, a sea of uncertainty remains about the health of the economy.

The U.S. Labor Department could report on Friday that the unemployment rate surpassed 16% in April.

Consumers remain guarded about the threat of COVID-19 as they venture out. And some sectors like hospitality, airlines, and retail face steep challenges through the balance of 2020.

With that in mind, we have to be conservative in our selections of stocks in the month ahead.

Today, we’re looking at the three safest stocks to own right now. But these aren’t just stocks that will return 1% or 2% gains. These stocks all have tremendous profit potential, while still being “safe” buys…

Safest Stocks to Buy, No. 3: Alphabet Inc.

Last week, Wall Street warned that Alphabet Inc. (NASDAQ: GOOGL) and other FAANG stocks would struggle in the face of COVID-19. But companies like Alphabet have proven that they are largely immune to the pandemic.

The “stay at home” orders didn’t have the impact that many had anticipated. While the firm did report a slowdown in advertising revenue growth, its cloud revenue and YouTube revenue helped pump the stock higher and alleviated concerns about the firm’s ability to weather this storm. In fact, YouTube advertising revenue increased 33% year over year.

Looking ahead, the company has promised to cut marketing budgets, hike its buybacks, and seek new avenues of growth. But given that more companies recognize the importance of an online presence, we anticipate that the firm will benefit from the further digitalization of the American economy.

The company has an incredible economic moat that limits competition and protects its market share. In addition, the stock has a diverse blend of profit centers that will help the company remain stable during this challenging time.

Shares of Alphabet trade at roughly $1,350. However, there is good reason to anticipate that the stock will tick back toward its 52-week high of $1,530 by the end of the year. That price target represents upside of more than 13% through the balance of the year.

Safest Stocks to Buy, No. 2: PICO Holdings

Before 2015, PICO Holdings Inc. (NASDAQ: PICO) was once one of the worst-run companies on the planet. It had a failed insurance business, a failed canola business, a failed homebuilding business, and even a failed investment business. But it did have one business worth saving. And in 2015, two investment funds overthrew the company board and got rid of many different assets.

It saved its water company – Vidler Water, a firm that owns water resources and storage across Western states. The company sells water rights to Reno, Nev.; Las Vegas, Nev.; and Phoenix, Ariz. It earned about $30 million last year from the sales of water and land.

Right now, the firm has tens of thousands of acre-feet of water credits across the West, an area of the population that continues to see strong population growth. Every time the company sells land and water, it returns that capital to investors in the form of a special dividend. Looking forward, the sum of the company’s assets could very well run around $17.50 per share.

The stock currently trades at $8.22. This means that the company could see its stock surge more than 100% in the next year.

The Safest Stock You Can Buy Now Also Has Double-Digit Upside

Finally, Brookfield Infrastructure Partners LP (NYSE: BIP) is a safe stock poised for a very stable decade. Not only does it tap into solid demand for infrastructure assets, but the firm pays a hefty dividend north of 5.5%.

Brookfield owns cell phone towers, energy pipelines, power lines, transportation (roads, bridges, etc.), and data centers. Its diverse base of assets makes it an attractive long-term investment with a reliable history of paying its investors.

Recently, CEO Bruce Flatt told shareholders: “Most of our businesses are very resilient, and we therefore don’t foresee major issues. … Our focus has always been on structuring our affairs to ensure we can survive all environments, and we are confident we are in this position today.”

Shares of BIP currently trade at $39.50 per share. But we expect that the stock will bounce back toward its 52-week high if the economy recovers quickly. This means that at $50 per share, the stock has potential upside of more than 26.5%.

Action to Take: If you’re looking for safe investments that will also grow your wealth, these three stocks are the best you can buy now. Investors who want to buy these stocks can consider low-ball orders, cash-secured puts, or dollar-cost averaging in order to maximize their returns on these stocks.

— Garrett Baldwin

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Source: Money Morning