Safest shares to buy

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There aren't many things investors agree on, but today we've found three companies that all share one thing in common: They produce a lot of free cash flow, or money left over after paying the bills, that can be used to either return value to shareholders or invest further in the business. It's not "cash" in the usual sense, but it does still possess a storehouse of value. When the market undervalues such companies, it represents opportunity, so let's see why these top Motley Fool contributors think Ford NYSE: F , CVS Health NYSE: CVS , and American Outdoor Brands NASDAQ: I may use a different definition of "safe" than other investors.

To me, a "safe" stock is one that quickly earns cash to repay my investment.

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And the safest stocks are the ones that earn cash the quickest. In other words, I like free cash flow. When searching for a stock that qualifies as safe, my first question is: Is the stock generating enough cash profits to replace its entire current market capitalization with cold, hard cash, in about 10 years' time, with no need to increase the rate at which it produces cash? In other words, does it sell for less than 10 times free cash flow?

If so, then I figure 10 years' time isn't too long to wait to be able to play with the "house's money. Or maybe the cash comes in, and the stock price rises in tandem -- even better. That's a low, low price-to-free cash flow ratio of 3. Personally, I think that's a bit optimistic, but even if I'm right and the analysts are wrong, at 3.

In my view, there are several criteria for picking a relatively safe stock. You definitely want the company to have a sustainable competitive advantage what Warren Buffett likes to call a "moat. The stock shouldn't be overpriced. And Rich's idea above about having strong cash flow is also a good trait to include. CVS Health meets all of these criteria. The company's two biggest lines of business are retail pharmacy and pharmacy benefits management PBM.

CVS Health is ranked in the top two in the U. Size is key in both businesses because it provides both economies of scale and leverage in negotiating prices. Aging demographic trends in the U.

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As people grow older, they tend to need more prescription drugs. That should benefit CVS' retail pharmacies. The company also owns the largest pharmacy for long-term and post-acute care. Because payers will want to keep those prescription costs down as much as possible, this trend also helps CVS Health's PBM business. With its shares currently trading at only 12 times expected earnings, CVS Health stock isn't overpriced by any stretch of the imagination.

This relatively low valuation should serve as a cushion in times of a market pullback. That's not quite at Rich's target level -- but it's close. No stock is completely safe.

However, when all factors are considered, I think CVS Health looks to be one of the safer picks for investors. Rich Duprey American Outdoor Brands: I agree with my colleagues that a good way to find a "safe" investment is to have a long-term horizon for owning a stock that's producing copious amounts of cash, but which the market is completely ignoring or discounting.

The company isn't about to go out of business with all those greenbacks, and it will be able to motor-on until the market catches up with this otherwise hidden gem.

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American Outdoor Brands may not be priced at the ridiculously bargain-basement level that Ford is, but at less than eight times free cash flow, the gunmaker-turned-rugged outdoorsman's enterprise value is giving investors a pretty sweet deal. A company that is producing less-and-less free cash flow becomes a risky proposition over time, but that's not the case here. Of course, that occurred during a major boom in gun sales, and analysts have suggested that with the election of Donald Trump as president, the good times are at an end because the need to buy a gun now is greatly diminished.

But that doesn't seem to be holding up on closer scrutiny. Couple this with American Outdoor Brands' move into the great outdoors -- a market opportunity that is several orders of magnitude larger than the firearms business -- and its stock price is amazingly low and simply waiting for the market to catch up. I'd argue this company a safe bet to outperform the market over the long haul.

Rich Duprey has no position in any stocks mentioned.

The Motley Fool owns shares of and recommends Ford. The Motley Fool recommends CVS Health. The Motley Fool has a disclosure policy. Rich has been a Fool since and writing for the site since After 20 years of patrolling the mean streets of suburbia, he hung up his badge and gun to take up a pen full time. Having made the streets safe for Truth, Justice and Krispy Kreme donuts, he now patrols the markets looking for companies he can lock up as long-term holdings in a portfolio.

So follow me on Facebook and Twitter for the most important industry news in retail and consumer products and other great stories.

3 of the Safest Stocks You Can Buy Right Now -- The Motley Fool

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Rich Duprey, Rich Smith, and Keith Speights.

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