Build a diverse portfolio from these sector standouts.
A few years ago, it was easy to justify an approach to the stock market that relied on just a few stocks in a few hot sectors. Many investors were content to simply own the FAANGs — tech stocks including Facebook, now Meta Platforms Inc. (ticker: META), plus Amazon.com Inc. (AMZN), Apple Inc. (AAPL), Netflix Inc. (NFLX) and Google parent Alphabet Inc. (GOOGL, GOOG) — and nothing else. But with the return of a “risk off” environment and a harder row to hoe in a challenging 2022, the benefits of diversification have become clear once more. The following 11 stocks all represent some of the best picks across each of the 11 market sectors. If you’re looking to build a more diversified portfolio or if you’re simply eager to add a few names to cover your current blind spots, the leaders on this list are worth a look.
Jack Henry & Associates Inc. (JKHY)
If you’ve never heard of Jack Henry before 2022, you’re not alone. This $15 billion payments software company wasn’t on many investors’ radar over the last few years, but a more than 25% gain this year as of Aug. 10 as the rest of the tech sector has fallen apart is enough to win JKHY some attention. This is not a flashy consumer gadget company, as Jack Henry’s main business is helping retailers process in-store and online payments, and facilitating online banking and mobile deposits for smaller financial institutions such as credit unions. And though the “cashless craze” blew up amid the push for touchless payments during the pandemic, JKHY has been around since the late 1970s offering its solutions to clients. With long-term megatrends boosting its business alongside double-digit revenue growth in the near term, there’s a lot to like about this unique tech stock in an otherwise uncertain sector.
Sector: Information technology
AbbVie Inc. (ABBV)
There’s a lot to like about AbbVie in 2022, as this is one of the leading stocks in a recession-proof sector that isn’t as susceptible to the ups and downs of spending trends. ABBV stock is actually up slightly in an otherwise tough market, thanks to a robust research pipeline that will replace its existing lineup of blockbuster drugs. In fact, a recent forecast predicted ABBV would be the largest of all Big Pharma stocks as soon as 2028 thanks to its continued growth. And though AbbVie was spun out of conglomerate Abbott Laboratories (ABT) in 2013, its roots go back much longer — including an impressive 50 straight years of dividend increases when you trace through its parent company. Since its inception in 2013, it has increased its dividend by more than 250%. That shows this stock has staying power as well as short-term growth on its side.
Sector: Health care
JPMorgan Chase & Co. (JPM)
JPM is the largest commercial bank in the U.S. by assets, with a total balance sheet that is valued at about $3 trillion — yes, that’s trillion. This well-established, well-run financial stock has roots that trace back to 1799, but its more recent history shows it is only growing in dominance. During the financial crisis, JPMorgan weathered the storm better than its peers both with regard to stock price as well as dividend levels. And the recent increase in interest rates is sure to create a tremendous tail wind for this financial stock given its cash hoard. The icing on the cake is a dividend yield of 3.4% at present, twice that of the typical S&P 500 stock yet only about a third of projected earnings. That means the stage is set for even bigger dividends over time.
Sector: Financials
MercadoLibre Inc. (MELI)
Though not a domestic name, the $53 billion MercadoLibre is certainly a large consumer stock worth watching — particularly considering the challenges elsewhere in the sector. MELI is often referred to as the Amazon of Latin America, as it operates a consumer-focused internet marketplace and mobile payments platform that dominates Brazil and Argentina. Western consumer discretionary stocks are under pressure amid inflation and the threat of a spending pullback, but this emerging-markets e-tailer has projected revenue growth of nearly 50% this fiscal year with another 30% expansion expected in 2023. Shares are down slightly year to date but have nearly doubled from their lows, and MELI is showing great momentum as it charges into the second half of the year.
Sector: Consumer discretionary
AT&T Inc. (T)
AT&T is a well-known communications services firm, but it’s quite a different company these days after a recent spinoff of Warner Bros. Discovery Inc. (WBD) and related media assets. The event reduced the market value of AT&T along with its dividend potential. However, the new dividend level of just under 28 cents per share is still equal to a yield that’s roughly four times the typical S&P 500 stock at present. More importantly, the spinoff refocuses the core business of AT&T to ensure it has a bright future without distractions going forward. In fact, T stock has lost only a percentage point since its April 11 spinoff, while the S&P 500 lost about 5% from that date through Aug. 10.
Sector: Telecommunications
Northrop Grumman Corp. (NOC)
Northrop Grumman is one of the world’s largest defense contractors, though only the fourth-largest in the U.S. Still, it raked in $30 billion in revenue from the Department of Defense in 2020 — and that was before the Russian invasion of Ukraine sparked a renewed interest in this industry. What was once a pretty boring dividend stock during peacetime has become a top performer in 2022 as a result, with about a 20% gain as the S&P 500 has fallen by 12% this year as of Aug. 10. That’s in large part because NOC is a key player in replacing older Minuteman III intercontinental ballistic missiles with next-generation ICBMs. With the Russia-Ukraine war still raging and increasing uncertainty between China and Taiwan, the harsh reality is that the U.S. will have to rethink its nuclear deterrence — and that means a tail wind for NOC stock.
Sector: Industrials
Altria Group Inc. (MO)
Altria is one of the biggest names in tobacco, and is the company behind brands including Marlboro cigarettes, Black & Mild cigars and Copenhagen and Skoal smokeless tobacco products. You may not think of cigarettes as a “staple” for most people, as the health risks of tobacco and the addictive properties of nicotine are well documented. But that doesn’t stop millions of customers from buying Altria products anyway. As the North American arm of what was once Philip Morris, Altria has a very stable customer base and reliable performance that includes an amazing 52 consecutive years of dividend increases. And with those dividends still only about two-thirds of total profits, there’s ample room for additional increases in the years ahead, too.
Sector: Consumer staples
Enviva Inc. (EVA)
Admittedly, mid-cap energy stock Enviva is an oddball company. Valued at about $5 billion, and focused on the unusual business of producing and selling utility-grade wood pellets, it’s a bit of a head-scratcher when compared with straightforward oil and gas plays. However, now that oil prices are in retreat and down more than 30% from their 2022 highs, it’s hard to trust a lot of the previous winners in the sector. EVA, on the other hand, offers a unique bridge between legacy power and the better-known renewables like wind and solar. After all, you can always grow more wood — unlike coal or oil. It has lucrative, long-term contracts with “biomass” power generation facilities in the U.K., Europe and Japan that are using wood pellets as a renewable energy source. Shares are up about 40% from their 52-week low earlier this year, and EVA could continue to run even as other energy stocks stumble.
Sector: Energy
Consolidated Edison Inc. (ED)
ConEd isn’t the largest of the utility stocks out there, but it has a very impressive history as well as a bright outlook. First, this company distributes power in the key metro market of New York City, boasting 3.5 million electricity customers and 1.1 million natural gas clients. This is a stable and reliable customer base, given the strong local economy of the Big Apple. Second, ConEd is one of the oldest publicly traded utilities in America and has a 48-year track record of offering at least one dividend increase per year to shareholders. It currently yields 3.2%, nearly double the average payout of the S&P 500. There may be other stocks in the sector with better yields or bigger market caps, but ConEd has put up a 16% gain in 2022 through Aug. 10 even as other stocks have melted down. That proves it’s worth a look as one of the best stocks in the utility sector.
Sector: Utilities
Simon Property Group Inc. (SPG)
Simon is a real estate investment trust, or REIT. This special class of company gets preferential tax treatment on its properties in exchange for a mandate that it must deliver 90% of taxable income back to shareholders. As evidenced by Simon’s tremendous yield, that adds up to a guarantee for big dividends. Simon’s real estate empire is focused on premier shopping, dining and entertainment properties across North America, Europe and Asia. While consumer spending has been a bit iffy lately given the pressures of inflation and shares have slumped in 2022, SPG is actually up nearly 20% from its summer lows as a sign that brighter days could be ahead. And with a dividend yield of 6.5% right now, there’s ample reason to hang on and see what happens with SPG.
Sector: Real estate
Sociedad Química y Minera de Chile SA (SQM)
Also known as Soquimich, Sociedad Química y Minera de Chile SA translates to the Chemical and Mining Society of Chile. So as you can guess, this is a Chilean mining stock that lives and dies by the prices of the materials it products. What makes Soquimich particularly interesting right now, however, is the fact that it is one of the largest lithium miners in the world. Battery metals like lithium are crucial components in smartphones, electric vehicles and a host of other 21st-century products, so that all ensures strong demand for the company’s materials going forward. And judging by the fact that the stock has doubled this year through Aug. 10 even as the rest of Wall Street has gotten hammered, there’s clearly a lot of investor interest in this foreign enterprise right now.
Sector: Materials
11 stocks to buy for a taste of all 11 sectors:
— Jack Henry & Associates Inc. (JKHY), Sector: Information technology
— AbbVie Inc. (ABBV), Sector: Health care
— JPMorgan Chase & Co. (JPM), Sector: Financials
— MercadoLibre Inc. (MELI), Sector: Consumer discretionary
— AT&T Inc. (T), Sector: Telecommunications
— Northrop Grumman Corp. (NOC), Sector: Industrials
— Altria Group Inc. (MO), Sector: Consumer staples
— Enviva Inc. (EVA), Sector: Energy
— Consolidated Edison Inc. (ED), Sector: Utilities
— Simon Property Group Inc. (SPG), Sector: Real estate
— Soquimich (SQM), Sector: Materials
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Top Stocks to Buy in All 11 Stock Market Sectors originally appeared on usnews.com
Update 08/11/22: This story was published at an earlier date and has been updated with new information.
