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The election of Donald Trump to the White House delivered a mini-boom for stocks. Investors have been encouraged by Trump’s plans to spur economic stimulus and job growth.
Yet, some think the market has gotten ahead of itself recently, with the Dow Jones hitting an all-time high. Now that the Dow has topped 20,000, the Trump euphoria is wearing off and some investors may be uneasy about going all-in in 2017.
Trump’s policies could affect the stock market in a number of ways. For one thing, Trump plans to get more aggressive with foreign trade partners. This, along with Trump’s plan to bring more jobs back to the U.S., could put a strain on companies doing business overseas.
That means investing in domestically focused stocks can help insulate investors from Trump’s foreign policy issues and international trade issues.
What’s more, the U.S. economy and gross domestic product is still expanding nicely. That means the U.S.-focused stocks we’ve found will also offer lower volatility, solid dividends and none of the downside from overseas concerns. With those elements and safety in mind, here are three top low-risk stocks for the coming year under the Trump administration:
Low-Risk Stocks: Clorox (NYSE: CLX)
What better way to play it safe than with consumer staples? One of the best, yet underrated, opportunities in this market is Clorox. The consumer staples maker offers a 2.6% dividend yield and has managed to increase its annual dividend for 39 consecutive years.
Clorox is not an “exciting” company, but slow-and-steady can win the proverbial race here. It’s a leader in the solid-growth consumer staples industry and has a wide portfolio of products in lifestyle and household categories, including brands Clorox, Fresh Step and Pine-Sol.
Clorox is also U.S.-centric, generating 80% of its revenues from domestic markets. This makes it one of the best consumer staples opportunities around, In contrast, major competitors like Procter & Gamble (NYSE: PG) and Unilever (NYSE: UL) are heavily exposed to international markets.
Low-Risk Stocks: D.R. Horton (NYSE: DHI)
The other major industry that generates most of its revenues from the U.S. is homebuilding. Homebuilders will do well if the U.S. economy continues to expand. The best play in the industry happens to be the biggest, D.R. Horton.
This $11 billion market-cap homebuilder also offers one of the best dividends, yielding 1.4%. It’s paying out just 15% of its earnings via dividends and has managed to increase that annual dividend for five straight years.
D.R. Horton is also attractive from a valuation perspective, trading at less than 10 times next year’s earnings estimates. While rising interest rates is a worry, the expanding U.S. economy should more than offset that. That, plus a better bank-lending environment, could enhance one of D.R. Horton’s key competitive advantages: selling homes to first-time buyers,
Low-Risk Stocks: Regions Financial (NYSE :RF)
Regions Financial remains one of the cheapest regional banks that investors will find. Shares trade at just 1.1 times book value and it pays a 1.8% dividend yield. Since the financial crisis, the company has managed to strengthen its balance sheet and overhaul its leadership team. Rising interest rates will help regional banks like Regions Financial that have a solid deposit base.
Regions plans to aggressively cut more than 10% of its core expenses. And beyond the benefits of rising rates, Regions is benefiting from strong (in many cases, double-digit) growth for its investment services, capital markets and insurance businesses.
In the end, the Trump euphoria appears to be wearing off. With the market hitting all-time highs and uncertainty over Trump’s foreign policies, U.S.-focused companies might be the best path for investors in 2017. The three stocks above derive most of their revenues from the U.S., offer solid dividends and should be less volatile than many other choices in the market.