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2 All-Weather Stocks to Prepare for the Unexpected

Volatility has resurfaced in the market, which means it’s time to protect your portfolio. These two all-weather stocks should do the trick.

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Volatility has resurfaced in the market, which means it’s time to protect your portfolio. These two all-weather stocks should do the trick.

Last year illustrated the unpredictability of the future. Nobody saw a global pandemic coming. How could they? After that, few predicted a market boom for the ages beginning last March.

For investors, 2020 should serve as a stark and valuable reminder to expect the unexpected, at least with part of your portfolio. You never really know what lurks around the corner. Which is why you need a few all-weather stocks in there for protection. More on those in a minute.

Deciphering the unexpected requires answering an important question: What does the market currently “expect”? The market anticipates wonderful things for 2021. Investors tend to look ahead, and the nearly 20% market spike since early November is irrefutable evidence of a very positive outlook.

The vaccines promise to end the pandemic. The removal of lockdowns and restrictions will unshackle the economy into a full recovery. A booming economy will combine with rock bottom interest rates and trillions in stimulus to create an ideal environment for stocks. At least, that’s what is expected.


I don’t want to throw cold water on the optimism. I believe in the economy. It has consistently proven to be far more resilient than expected through the pandemic. I think the economy will boom when things truly open up. It’s the “open-up” part that invites more skepticism. You never know.

Investors need to prepare for the possibility that the New Year won’t unfold as currently expected. Even if it does, the market may have gotten ahead of itself in the near term. The S&P 500 has soared more than 70% since last March. Stocks never go straight up for long, even in the strongest bull markets. A pullback is overdue.

Under the circumstances, it is worth considering a position in stocks that can thrive in virtually any scenario. Certain stocks tend to move independently of the market. And a select few of such all-weather stocks also have powerful catalysts to deliver a strong return even if current expectations don’t come to fruition.

Here are two good ones.

2 All-Weather Stocks to Protect your Portfolio

All-Weather Stock #1: Xcel Energy Inc. (XEL)

Utility stocks fill a great niche in any investment portfolio, especially when stock prices get a little frothy. The sector is the most defensive on the market as earnings are virtually immune to economic cycles. Stocks also pay high dividends and typically hold up very well in down markets.

Xcel Energy provides all those advantages plus exposure to the fast-growing and highly sought-after alternative energy market.

Xcel is a regulated electric and natural gas utility serving 3.7 million electric customers and 2.1 million natural gas customers in eight states, primarily in the northern and southwestern U.S. It is also one of the largest renewable energy providers in the U.S. with 28% of electricity sales generated from alternative energy sources in 2019.

Alternative energy is what separates XEL from the utility pack and makes it a much better investment. It enables investors to play defense and offense at the same time. You get low volatility with defensive and reliable earnings plus exposure to one of the most exciting and fast-growing areas of the market.

It is already one of the largest clean energy providers in the country. And it’s rapidly growing its alternative energy business with a goal of being 80% carbon free by 2030 and 100% by 2050.

XEL is a great way for conservative investors to play clean energy while earning a 2.7% yield. It is at the low point of the recent range on a longer-term uptrend. It also sports a beta of just 0.23, meaning it is less than one quarter as volatile as the overall market.

All-Weather Stock #2: Digital Realty Trust (DLR)

Digital Realty is a Real Estate Investment Trust (REIT) that specializes in technology related real estate. Specifically, it owns and operates over 270 data centers in 44 metropolitan areas across the world. It is the fifth-largest REIT on the U.S. market with $3.4 in annual revenues. Its largest customers include dominant industry players such as Facebook, Verizon and Oracle.

A data center is a facility used to house computer systems and related components. We now live in an age when large (and small) institutions operate massive technology systems that require specialized infrastructure. Companies like Facebook and AT&T can’t house the core of their operations just any place.

They need a top-notch facility with the proper temperature systems for the equipment, a dependable power supply with adequate backup systems, fire suppression and various security devices. Large data centers often require as much electricity as a small town. The operational integrity of some of today’s most prominent companies depends on such facilities.

Digital Realty is one of the largest players in this new and growing type of crucial property. And these properties provide crucial services to companies involved in cloud and information technology services, communications and social networking, financial services, manufacturing, energy and healthcare.

And infrastructure requirements are likely to increase in the future as new technologies in artificial intelligence, self-driving cars and virtual reality inevitably gain traction.

The track record is stupendous. DLR has returned 2,200% over the last 10 years. The stock also is at a low point on a longer-term uptrend. It sports a 3% yield and has a microscopic beta of just 0.11. DLR tends to move to its own drummer regardless of what the overall market does – a true all-weather stock.


Tom Hutchinson is the Chief Analyst of Cabot Dividend Investor, Cabot Income Advisor and Cabot Retirement Club. He is a Wall Street veteran with extensive experience in multiple areas of investing and finance.