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Grab These Top 4 Defensive Stocks to Beat the Market Doldrums
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The prolonged downslide of the U.S. equity market since the beginning of 2022 is pushing investors’ sentiment into the negative territory.
In the year-to-date period, the Nasdaq composite, the S&P 500 and the Dow Jones Industrial Average have been down 31.8%, 22.8% and 16.9%, respectively.
Key Pointers Behind Pessimism
The prevailing market downfall is an impact of the constant plummeting of tech stocks due to the coronavirus pandemic-triggered supply-chain challenges.
The U.S. government’s recent announcement of new export rules to cripple China’s technology sector is further pushing the already battered tech stocks in the bear market.
The ongoing geopolitical tensions, including Russia’s continuous attacks on Ukraine and the China-Taiwan conflict, resulting in global sanctions and energy crisis in the European Union continue to remain a headwind.
These factors are constantly triggering the inflation rate. The annual inflation rate is 8.3% for the 12 months ended August 2022,according to the U.S. Labor Department data published on Sep 13, 2022.
To counter the swelling inflation, the Federal Reserve has implemented five interest rate hikes so far this year to achieve a 2% inflation rate target. The Fed expects interest rates to reach 4.4% by this year-end, up from the current range of 3-3.25%.
Rising interest rates will continue to increase the cost of borrowing, which in turn, will affect consumer spending. It will also cause a higher unemployment rate, thus slowing down economic growth. Notably, the United States recorded two successive quarters of downturn.
Defensive Stocks: A Safe Haven Amid Economic Turmoil
Given the current market situation and the growing fears of an upcoming recession, investors are panicking to continue investing in the market. Does it mean that there are no sectors to invest in amid this market volatility?
To stay safe and avail returns in this unpredictable market condition, investors can pump their resources into the defensive sectors like consumer staples, utilities and health care.
These sectors comprise companies providing necessary products and services, which consumers will continue to access even during an unprecedented economic turmoil.
Stocks catering to the defensive sectors are less likely to get affected by the economic turbulence and will thus remain a suitable choice for stable earnings.
Defensive stocks also tend to offer high-dividend yields, and cater to capital preservation and income generation, thereby emerging as solid picks for investors to diversify their portfolio.
Our Top Stock Suggestions
We recommend four defensive stocks as these are less sensitive to take a hit from an economic downturn. Apart from strong fundamentals, these stocks have a Zacks Rank #1 (Strong Buy) or 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 stocks here.
The following chart shows the price performance of four picks in the year-to-date period.
Image Source: Zacks Investment Research
Lamb Weston (LW - Free Report) is a U.S.-based food processing company, which globally produces and distributes value-added frozen potato products, particularly French fries, and a range of appetizers. LW’s consistent efforts to boost offerings and expand capacity enable LW to effectively meet the rising demand conditions for snacks and fries.
Lamb Weston has an expected earnings growth rate of 42.3% for the current year. The long-term earnings growth rate for the stock is currently projected at 26.89%. The company’s board members recently approved a quarterly dividend of 24.5 cents per share, payable Dec 2, 2022. LW has a current dividend yield of 1.17%.
At present, Lamb Weston has a Zacks Rank of 1 and a Growth Score of A. LW has gained 33.4% in the year-to-date period.
Consolidated Water (CWCO - Free Report) is a leading company involved in developing and operating seawater desalination plants and water distribution systems in areas where naturally-occurring supplies of potable water are scarce or nonexistent. Its strategies to expand operations through acquisitions and organic ventures with an important requirement for potable water are driving growth.
CWCO has an expected earnings growth rate of 217.4% for the current year. The long-term earnings growth rate for the stock is presently projected at 8%. The company’s board approved a quarterly dividend of 8.5 cents per share, payable Oct 31, 2022. Consolidated Water has a current dividend yield of 2.09%.
Consolidated Water has a Zacks Rank #2 and a Growth Score of A. Shares of CWCO have returned 55% in the year-to-date period.
Archer Daniels Midland (ADM - Free Report) is a U.S.-based multinational food processing and commodities trading corporation. ADM is riding on increasing product demand, improved productivity and continuous product innovations. Moreover, its strength in the Nutrition segment owing to significant gains in the Human and Animal Nutrition units remains a tailwind.
Archer Daniels has an expected earnings growth rate of 32.8% for the current year. The long-term earnings growth rate for the stock is presently projected at 6.96%. ADM paid out a quarterly dividend of 40 cents per share on Sep 7, 2022. ADM has a current dividend yield of 1.92%.
ADM carries a Zacks Rank #2 and a Growth Score of A. Shares of Archer Daniels have gained 26.9% in the year-to-date period.
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 3.04% for the current year. The long-term earnings growth rate for the stock is presently projected at 10.05%. MCK paid out a quarterly dividend of 54 cents per share on Oct 3, 2022. The declared dividend is a 15% hike from the prior quarter’s figure. MCK has a current dividend yield of 0.61%.
Currently, MCK has a Zacks Rank of 2 and a Growth Score of B. Shares of McKesson have returned 42.6% in the year-to-date period.
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Grab These Top 4 Defensive Stocks to Beat the Market Doldrums
The prolonged downslide of the U.S. equity market since the beginning of 2022 is pushing investors’ sentiment into the negative territory.
In the year-to-date period, the Nasdaq composite, the S&P 500 and the Dow Jones Industrial Average have been down 31.8%, 22.8% and 16.9%, respectively.
Key Pointers Behind Pessimism
The prevailing market downfall is an impact of the constant plummeting of tech stocks due to the coronavirus pandemic-triggered supply-chain challenges.
The U.S. government’s recent announcement of new export rules to cripple China’s technology sector is further pushing the already battered tech stocks in the bear market.
The ongoing geopolitical tensions, including Russia’s continuous attacks on Ukraine and the China-Taiwan conflict, resulting in global sanctions and energy crisis in the European Union continue to remain a headwind.
These factors are constantly triggering the inflation rate. The annual inflation rate is 8.3% for the 12 months ended August 2022,according to the U.S. Labor Department data published on Sep 13, 2022.
To counter the swelling inflation, the Federal Reserve has implemented five interest rate hikes so far this year to achieve a 2% inflation rate target. The Fed expects interest rates to reach 4.4% by this year-end, up from the current range of 3-3.25%.
Rising interest rates will continue to increase the cost of borrowing, which in turn, will affect consumer spending. It will also cause a higher unemployment rate, thus slowing down economic growth. Notably, the United States recorded two successive quarters of downturn.
Defensive Stocks: A Safe Haven Amid Economic Turmoil
Given the current market situation and the growing fears of an upcoming recession, investors are panicking to continue investing in the market. Does it mean that there are no sectors to invest in amid this market volatility?
To stay safe and avail returns in this unpredictable market condition, investors can pump their resources into the defensive sectors like consumer staples, utilities and health care.
These sectors comprise companies providing necessary products and services, which consumers will continue to access even during an unprecedented economic turmoil.
Stocks catering to the defensive sectors are less likely to get affected by the economic turbulence and will thus remain a suitable choice for stable earnings.
Defensive stocks also tend to offer high-dividend yields, and cater to capital preservation and income generation, thereby emerging as solid picks for investors to diversify their portfolio.
Our Top Stock Suggestions
We recommend four defensive stocks as these are less sensitive to take a hit from an economic downturn. Apart from strong fundamentals, these stocks have a Zacks Rank #1 (Strong Buy) or 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 stocks here.
The following chart shows the price performance of four picks in the year-to-date period.
Image Source: Zacks Investment Research
Lamb Weston (LW - Free Report) is a U.S.-based food processing company, which globally produces and distributes value-added frozen potato products, particularly French fries, and a range of appetizers. LW’s consistent efforts to boost offerings and expand capacity enable LW to effectively meet the rising demand conditions for snacks and fries.
Lamb Weston has an expected earnings growth rate of 42.3% for the current year. The long-term earnings growth rate for the stock is currently projected at 26.89%. The company’s board members recently approved a quarterly dividend of 24.5 cents per share, payable Dec 2, 2022. LW has a current dividend yield of 1.17%.
At present, Lamb Weston has a Zacks Rank of 1 and a Growth Score of A. LW has gained 33.4% in the year-to-date period.
Consolidated Water (CWCO - Free Report) is a leading company involved in developing and operating seawater desalination plants and water distribution systems in areas where naturally-occurring supplies of potable water are scarce or nonexistent. Its strategies to expand operations through acquisitions and organic ventures with an important requirement for potable water are driving growth.
CWCO has an expected earnings growth rate of 217.4% for the current year. The long-term earnings growth rate for the stock is presently projected at 8%. The company’s board approved a quarterly dividend of 8.5 cents per share, payable Oct 31, 2022. Consolidated Water has a current dividend yield of 2.09%.
Consolidated Water has a Zacks Rank #2 and a Growth Score of A. Shares of CWCO have returned 55% in the year-to-date period.
Archer Daniels Midland (ADM - Free Report) is a U.S.-based multinational food processing and commodities trading corporation. ADM is riding on increasing product demand, improved productivity and continuous product innovations. Moreover, its strength in the Nutrition segment owing to significant gains in the Human and Animal Nutrition units remains a tailwind.
Archer Daniels has an expected earnings growth rate of 32.8% for the current year. The long-term earnings growth rate for the stock is presently projected at 6.96%. ADM paid out a quarterly dividend of 40 cents per share on Sep 7, 2022. ADM has a current dividend yield of 1.92%.
ADM carries a Zacks Rank #2 and a Growth Score of A. Shares of Archer Daniels have gained 26.9% in the year-to-date period.
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 3.04% for the current year. The long-term earnings growth rate for the stock is presently projected at 10.05%. MCK paid out a quarterly dividend of 54 cents per share on Oct 3, 2022. The declared dividend is a 15% hike from the prior quarter’s figure. MCK has a current dividend yield of 0.61%.
Currently, MCK has a Zacks Rank of 2 and a Growth Score of B. Shares of McKesson have returned 42.6% in the year-to-date period.