According to Warren Buffett, the first rule of investing is ‘don’t lose money’. When I look for stocks to buy, I try to keep Buffett’s advice firmly in mind.
With the stock market falling at the moment, a lot of investors are looking for safe investments. While no stock investment is ever 100% safe, some are riskier than others.
With that in mind, here are three stocks that I think qualify as relatively safe investments. All three are on my list of stocks to buy now.
I’m not saying that these stocks won’t go down in the future. They might. But I think that the underlying businesses have enough cash to keep themselves safe.
Top of my list of safe stocks to buy for my portfolio is Berkshire Hathaway (NYSE:BRK.B). As I said, Buffett’s first rule of investing is not to lose money and the Berkshire CEO lives by his own advice.
The risk with Berkshire shares is that the company might not grow as quickly as smaller businesses. Both Buffett and Charlie Munger have suggested that this might be the case.
As an example of a business that’s unlikely to lose money though, I think it’s terrific. At its last earnings report, the company had around $70bn in excess cash — far more than any of its peers.
I think that this gives Berkshire Hathaway a lot of protection against any unforeseen difficulties. That’s part of the reason that the stock is already the largest investment in my portfolio.
Suggesting that a bank might be one of the safest stocks today might seem like madness. And while Citigroup (NYSE:C) doesn’t exactly have a history of being a steady stock, it makes my list here.
I think the stock is much safer than it was before, though. The main reason for this is that it has significant amounts of cash (just over $18bn) set aside to cover the possibility of loan losses.
The company is currently restructuring and this brings with it a significant risk. But I think that a good amount of that risk is being factored into the Citigroup share price.
Citigroup shares currently trade at around 57% of their tangible book value. To me that indicates that I’m unlikely to suffer significant capital loss as an investor.
That ratio also compares favourably with Citigroup’s peers. JPMorgan Chase (1.49), Bank of America (1.21), and Wells Fargo (1.1) all trade at significantly higher multiples.
Lastly, I think that Rightmove (LSE:DPLM) is one of the safest UK stocks on the market right now. This might also seem strange, but I think that the company’s balance sheet justifies its inclusion here.
The main reason I see Rightmove as a safe stock at the moment is its balance sheet. The company has just under £48m in cash and around £11m in total debt.
As Peter Lynch says, it’s difficult for a company to get into serious trouble with more cash than debt. And Rightmove’s cash-to-debt ratio is better than bigger technology companies, such as Microsoft, Adobe, and Salesforce.
A slowing property market in the UK might indeed create a headwind for Rightmove’s earnings in the near future. But I think it’s a good candidate for me as a safe stock to buy now for my portfolio.
JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Citigroup is an advertising partner of The Ascent, a Motley Fool company. Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Bank of America is an advertising partner of The Ascent, a Motley Fool company. Stephen Wright has positions in Berkshire Hathaway (B shares), Citigroup, and Rightmove. The Motley Fool UK has recommended Microsoft, Rightmove, and Salesforce, Inc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2022