8 Safe Stocks to Buy Now

General Dynamics (symbol GD)

The economic slowdown has yet to be reflected in the performance of General Dynamics, which gets about two-thirds of its revenues from the U.S. government. The world's sixth-largest defense contractor, which makes everything from tanks and submarines to electronics for the military and intelligence services, continues to see its backlog of business grow. For the quarter that ended September 30, the backlog was $60.5 billion, up from $55 billion the previous quarter. Better yet, profit margins rose in each of GD's four business segments.

General Dynamics also owns Gulfstream, a maker of high-end business jets, which accounts for about 18% of its revenues. This business could dip in the short term as corporate budgets tighten, but demand remains strong from oil-rich Persian Gulf states. The defense-contracting portion of the business will probably level off after several years of robust growth. But that already seems to be reflected in the shares, which trade at just nine times expected 2009 profits of $6.71 per share. With GD paying an annual dividend of $1.40 a share, the stock yields 2.4%.

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Google (GOOG)

Once everybody's favorite glamour stock, Google is now available at half-price. That looks like a pretty good deal. Down from $742 in late 2007, you can buy shares of the leading Internet-search and advertising firm for just 14 times expected 2009 earnings of $22.64 per share.

Granted, advertising budgets will likely shrink in a tough economic climate. But targeted Internet advertising, for which effectiveness is easy to measure, may not suffer as much as the more scattershot types of advertising, such as TV commercials. In addition, Google's management has shown increasing willingness lately to rein in employee expenses and capital expenditures to boost profitability.

Google's days of off-the-charts performance (revenues have risen at an annualized rate of 140% since 2001) may be over, but the company's competitive advantages remain in place. It has a 69% share of the global Internet-search market-a far larger share than its nearest competitor. It has $14 billion in cash, no debt and healthy free cash flow. Analysts expect better than 20% annual profit growth over the next three to five years. What's not to like?

Johnson & Johnson (JNJ)

Consumer-products firms are a natural refuge in turbulent times. That's why Johnson & Johnson is the right pick now. No matter how bad things get, people will still buy household essentials, such as Band-Aids, Listerine and Rolaids, and that means a steady stream of profits for the company, based in New Brunswick, N.J.

The shares, trading at 13 times estimated 2009 earnings of $4.68 per share, are cheaper than they might otherwise be because of concerns about J&J's larger divisions: pharmaceuticals (40% of revenues) and medical devices (33%). Several drugs are about to lose patent protection. J&J also faces fierce competition in the market for drug-coated stents, which are used to prop open diseased arteries.

But these are short-term problems. The firm's pipeline of new drugs and devices is robust and contains several potential blockbusters. Meanwhile, J&J is using its financial might-it generates 20 cents in free cash flow for every dollar of sales-to reward shareholders. It is buying back $10 billion worth of stock and paying a $1.84 annual dividend. The stock yields 3.06%.

American Tower (AMT)

Fierce competition means that wireless-phone carriers will continue building their communications networks in any economic environment, and that's good news for American Tower. The Boston company owns or operates more than 23,000 wireless-phone and broadcast-communications towers. Major carriers, such as AT&T and Verizon, are willing to sign long-term contracts with built-in annual price increases to lease space on these towers so that they can provide voice and data services for their customers. Morningstar analyst Imari Love estimates that American Tower has more than six years' worth of revenue already locked into these noncancellable contracts.

The shares are off their highs of last spring by 35%, although they're not cheap by most other measures. Still, American Tower's locked-in revenues, solid balance sheet and expansion opportunities in Mexico, Brazil and India make it a relatively safe growth stock to own.

Oracle (ORCL)

The company is the leading provider of database software, an essential underpinning for virtually every type of corporate software application. Oracle's 43% market share is more than double that of IBM, its nearest competitor. Working from that stronghold, the Silicon Valley-based firm has spent $28 billion over the past four years successfully extending its reach into enterprise software, programs that support or streamline business operations.

Offering all-in-one bundles of software tailored to a particular company or industry has proved to be an effective and profitable strategy. That's because switching to a different software provider is prohibitively high. For every dollar of sales, Oracle generates 32 cents of free cash flow (profits plus noncash expenses, minus capital expenditures).

Global economic headwinds could drastically reduce corporate appetites for new software projects. But Oracle gets nearly half its revenues from highly profitable maintenance contracts, which continue paying off regardless of the economic climate. The company recently announced an $8-billion share-buyback program, which should provide additional support for earnings and the stock price. The stock trades for a reasonable 10 times projected earnings of $1.68 per share for the fiscal year that ends May 2010.

Accenture (ACN)

Although Accenture is not immune to a global economic downturn, it should survive relatively unscathed. The company, which is headquartered in Bermuda, provides management- and technology-consulting services to businesses and governments around the world. Plus, it provides services, such as computer-network management, customer help desks and back-office services, that businesses prefer to farm out.

New bookings, a measure of future business, hit an all-time high for the quarter and the fiscal year that ended last August. Although pinched companies and governments could cut back on consulting, which accounts for 60% of Accenture's revenues, a majority of the firm's new bookings for the quarter were for the growing outsourcing business, which should prove more resilient in a downturn.

Accenture's strong balance sheet -- it has $3.6 billion in cash and generates nearly $3 billion in free cash flow annually-diversified customer base and relatively predictable business should appeal to risk-averse investors. The shares are off 28% from their September peak and trade for an unusually low 10 times expected profits of $2.87 a share for the August 2009 fiscal year. The stock yields 1.7%.

Thermo Fisher Scientific (TMO)

This is a one-stop shop that equips research laboratories with everything from high-end analytical instruments to everyday supplies, such as chemicals and microscope slides. Based in Waltham, Mass., the company derives about half of its annual revenues from lab supplies that need to be restocked -- a steady business that's not particularly economically sensitive. That should cushion any drop-off from sales of costlier scientific instruments (31% of revenues). Customers range from pharmaceutical firms and hospitals to research labs and government agencies. (Other revenues come from sales of software and services.)

Thermo Fisher, the product of a 2006 merger between instrument maker Thermo Electron and lab-equipment supplier Fisher Scientific, can throw a lot of weight around in a fragmented industry. It has a leading market share in each of its product categories and enough financial strength to bolster results by acquiring rival firms.

Analysts foresee 10% or better earnings growth in 2009 and beyond. Even if that's overly optimistic in the short term, there's little doubt that expansion into Asia will fuel long-term growth. The stock is 41% off its August peak and trades for 11 times expected 2009 profits of $3.51 per share.

Automatic Date Processing (ADP)

Even though the near-term U.S. employment picture looks shaky, the business of processing corporate payrolls remains a good one. ADP boasts long-term contracts and high repeat business, and it gets to keep the interest it earns on billions of dollars in taxes deducted from workers' paychecks that are later turned over to the government. This profitable business model means that the Roseland, N.J., company generates a lot of cash. During the fiscal year that ended last June, ADP rewarded shareholders with dividends and buybacks worth $2 billion.

Analysts are forecasting below-average growth for ADP in 2009 as companies cut back on hiring. Lower interest rates also mean less float on the money ADP holds for clients. But these short-term issues mean investors can buy into a top-flight business at a price just above its five-year low. The stock trades for 15 times expected earnings of $2.39 a share for the year that ends this June. The $1.16 annual dividend translates into a 3.3% yield.