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Beat the Market Vagaries With 4 Top-Ranked Defensive Bets

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The U.S. equity market has been witnessing a downturn since the past few trading sessions, inducing investors’ bearish sentiment. The S&P 500, the DOW and the Nasdaq have been down 19.3%, 15.8%, and 9.6%, respectively, in the year-to-date period.

The prolonged supply-chain challenges triggered by the pandemic, the rising COVID-19 cases in China and the resultant stringent measures continue to affect the market. Also, growing geopolitical tensions including Russia’s invasion of Ukraine and the China-Taiwan conflict are escalating global sanctions and energy crisis.

In addition, fiscal stimulus and lower interest rates to boost the economy during the pandemic-led lockdowns created an inflationary bubble which is a major headwind.

To counter the swelling inflation, the Federal Reserve has implemented four interest rate hikes so far this year to achieve its 2% inflation rate target. This, in turn, pushed all the major indices into the negative territory.

Moreover, soaring interest rates will continue to increase the cost of borrowing, which in turn, will bear a negative impact on consumer spending, thus slowing down economic growth.

The United States recorded two successive quarters of downslide.

Weighing the current situation, it would be prudent for investors to park their money in the defensive sectors like consumer staples, utilities and health care. These sectors comprise companies that provide necessary products and services, which consumers will continue to avail even in the worst economic times.

Therefore, stocks catering to the defensive sectors are less likely to get affected by the economic turmoil and will thus remain a suitable choice for risk-averse investors.

In addition, defensive stocks tend to offer high dividend yields and cater to capital preservation and income generation, thereby emerging as solid picks for any investment plan.

Stocks to Buy

We recommend 4 defensive stocks as these are less sensitive to take a hit from economic downfall. Apart from strong fundamentals, these stocks have a Zacks Rank #2 (Buy) and a Growth Score of A or B. Moreover, these companies are regular dividend payers. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The following chart shows the price performance of our four picks in the year-to-date period.

Zacks Investment Research
Image Source: Zacks Investment Research

Corteva (CTVA - Free Report) supplies products to the agricultural input industry, which protects from weeds, insects and other pests, and diseases, thereby enhancing crop health. CTVA’s recent partnership with BASF Agricultural Solutions to develop future herbicide-tolerant soybeans for farmers in North America and beyond remains a positive.

CTVA has an expected earnings growth rate of 20.5% for the current year. Corteva’s board of directors paid out a quarterly dividend of 15 cents per share on Sep 15, 2022, reflecting an annualized spike of 7.4% from its previous quarterly dividend.

At present, Corteva has a Growth Score of A. The long-term earnings growth rate for the stock is currently projected at 15.3%. CTVA has returned 29.8% in the year-to-date period.

Hershey (HSY - Free Report) is a global leader in chocolate and non-chocolate confectionery. HSY has been gaining momentum in the confectionary space with consistent acquisitions. Its buyouts continue to augment portfolio strength and boost revenues. This was seen in the second quarter of 2022, wherein buyouts of Pretzels, Dot’s and Lily’s boosted net sales by 5.3 points.

Hershey has an expected earnings growth rate of 14.3% for the current year. HSY paid out a quarterly dividend of $1.036 per share for its common stock and 94.2 cents for Class B common stock on Sep 15, 2022, reflecting a 15% hike. HSY has a current dividend yield of 1.9%.

Hershey flaunts a Growth Score of B. The long-term earnings growth rate for the stock is currently projected at 7.7%. HSY has returned 13.7% on a year-to-date basis.

National Fuel Gas Company (NFG - Free Report) is an integrated energy company with a presence across the natural gas value chain through Upstream, Midstream and Downstream activities. NFG’s systematic investment will help strengthen its natural gas and oil operations and reduce greenhouse gas emissions. It further aims to expand its pipeline transportation and distribution business by investing more than $500 million over the next five years.

NFG has an expected earnings growth rate of 38.9% for the current year. Its board members declared a quarterly dividend of 47.5 cents per share for its shareholders of record as of Sep 30, 2022, payable Oct 14, 2022. National Fuel Gas has a current dividend yield of 2.8%.

NFG also carries a Growth Score of B at present. The long-term earnings growth rate for the stock is currently projected at 13.7%. National Fuel Gas has gained 7.7% on a year-to-date basis.

McKesson Corporation (MCK - Free Report) is a healthcare services and information technology company. Its strong position in the pharmaceutical and medical supplies distribution market is noteworthy. MCK played a crucial role in COVID-response efforts in the United States and abroad via the distribution of vaccines, ancillary supply kits and COVID-19 tests.

McKesson has an expected earnings growth rate of 2.4% for the current year. Its board approved a quarterly dividend of 54 cents per share of common stock, of record as of Sep 1, 2022, payable Oct 3, 2022. The declared dividend is a 15% hike from the prior quarter’s figure.

Currently, MCK has a Growth Score of B. The long-term earnings growth rate for the stock is presently projected at 10.1%. Shares of McKesson have returned 39.3% in the year-to-date period.

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