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Three crash-proof blue-chip stocks

Stash your winnings here if you're feeling defensive.

  • By Jeff Reeves,
  • MarketWatch
  • – 08/13/2013
  • Investing Strategies
  • Investing in Stocks
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The S&P 500 (.SPX) seems like it can only go up this year, starting this week at around 1,700 after a 19% gain so far in 2013.

But many traders feel like it's time for the market to take a breather and are getting defensive.

Corporate earnings remain troublesome, characterized by weak revenue, and GDP estimates worldwide continue to disappoint.

Also, it's worth noting that we've seen selloffs in the market every two months or so -- a mild dip at the end of February, and more modest corrections in mid-April and the end of June -- and it might be time for our regularly scheduled dip.

And bigger picture, of course, there are those who warn about a much more serious downturn as the Federal Reserve toys with tapering its stimulus program and as the U.S. labor market remains painfully stuck in neutral.

If you've seen some big gains in 2013, it may be prudent to consider trimming back your winners... but where do you put that cash if you do?

Here are three blue chips that will remain stable even in a choppy market: Exxon Mobil Corp. (XOM), Amgen Inc. (AMGN) and Apple (AAPL) ... yes, Apple.

Exxon Mobil

Exxon Mobil is the quintessential megacap with a wide moat and stable operations. Check out this rundown of figures:

  • Market capitalization of over $408 billion -- the biggest in the U.S. currently
  • Annual operating cash flow north of $56 billion
  • Roughly $42 billion in cash and investments
  • Revenue per employee of almost $5.4 million... now that's efficient!

Beyond just the broad market metrics, Exxon boasted proved reserves of 25.2 billion oil-equivalent barrels at the end of 2012. That's a staggering figure, worth about $2.5 trillion at current rates of $100 per barrel of crude oil.

Sure, Exxon has underperformed in 2013 with just 6% gains vs. the broader market. And the 2.8% dividend is nice, but hardly big enough to satisfy by itself -- especially if inflation ticks higher.

But if you're looking for long-term stability, it's hard to argue with Exxon.

Amgen

Biotechnology stock Amgen is one of many health care stocks that I like, largely because of the aging baby boomers providing a near guarantee of growth for the sector. Since Amgen focuses on cancer, kidney disease and arthritis it will have no shortage of sales in the coming years regardless of the macro picture.

But it's not just the recession-proof appeal that makes Amgen crash-proof. Many folks think that tech stocks are always the big cash hoarders, but at the end of June, Amgen reported an amazing $22 billion in cash and short-term investments. That's more than enough to fund research to keep its drug pipeline going, snap up smaller biotech firms and keep humming along.

There's also hope for continued dividend increases. Though the yield in Amgen is just 1.7%, the payout of $1.88 annually is just 22% of fiscal 2014 earnings -- not just sustainable, but ripe for a bump higher. Amgen boosted its payout 30% in 2013 over 2012's rate, and investors can bank on that trend continuing going forward.

With stable positioning as a health care stock serving older Americans and with upside potential to dividends, Amgen is a very safe bet. The fact that the stock is up 28% YTD in 2013 to outperform the S&P is the icing on the cake.

Apple

I know, putting Apple on this list may seem controversial. But I remain convinced that despite volatility in Apple shares on sentiment, it remains a very stable long-term bet... even if the mammoth growth days are clearly over.

The numbers for Apple are just as powerful as Exxon:

  • $146.6 billion in cash and long-term investments
  • Based on earnings estimates of $42.35 for FY2014, the forward P/E is less than 11
  • Back out the cash ($161.37 per share based on 908.44 million shares) and the forward P/E is about 7.1
  • Annual operating cash flow of over $50 billion
  • Revenue per employee of $2.2 million
  • $100 billion earmarked for dividends and buybacks through 2015

Sure, there are risks for Apple stock. But when you look at the actual numbers, it is very difficult to argue that Apple is a risky investment. Shares may gyrate around based on some theoretical notions of innovation, disruption or investor sentiment... but at the end of the day, the numbers give Apple a firm foundation in any market.

That's no guarantee it will deliver market-beating returns, of course. But it's certainly assurance that Apple isn't likely to crash and burn.

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Copyright © 2013 Dow Jones & Company, Inc. All Rights Reserved.
Content for this page, unless otherwise indicated with a Fidelity pyramid logo, is published or selected by Fidelity Interactive Content Services LLC ("FICS"), a Fidelity company with main offices in New York, New York. All Web pages that are published by FICS will contain this legend. FICS was established to present users with objective news, information, data and guidance on personal finance topics drawn from a diverse collection of sources including affiliated and non-affiliated financial services publications and FICS-created content. Content selected and published by FICS drawn from affiliated Fidelity companies is labeled as such. FICS selected content is not intended to provide tax, legal, insurance or investment advice and should not be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any security by any Fidelity entity or any third-party. Quotes are delayed unless otherwise noted. FICS is owned by FMR LLC and is an affiliate of Fidelity Brokerage Services LLC. Terms of use for Third-Party Content and Research.
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