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5 Defensive Stocks That Are Surviving Brexit Turmoil
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The bloodbath in U.S. stocks continued into Monday with the markets off more than 1.5%, extending Friday’s post-Brexit sell-off. This was because investors were concerned about the economic and political consequences of U.K.’s vote to leave the European Union.
The Dow Jones Industrial Average declined 1.5% on Monday to close at its lowest level since Mar 10. Over the last the two sessions, the index has shed 871 points. Meanwhile, the S&P 500 dropped 1.8% and the Nasdaq Composite fell 2.4% in yesterday’s session.
With billions of dollars already being wiped off, what should investors do? One proven way to counter the volatility is to opt for defensive funds and stocks. These are generally immune to recession, economic slowdown or market volatility by virtue of the nature of their businesses. Defensive plays include utilities, medical companies, consumer staples and tobacco stocks – basically companies providing products and services that consumers cannot do without irrespective of market downturns or a wayward referendum across the Atlantic.
And investors have taken recourse to just that. Utilities and telecom were the only two to advance post Brexit among all S&P 500 sectors. Utility companies like American Electric Power Co., Inc. (AEP - Free Report) and American Water Works Company, Inc. (AWK - Free Report) as well as the U.S.-based retailer Dollar General Corp. (DG - Free Report) rose in the last two sessions.
Again, a few higher-yield dividend plays in the specialty real estate investment trust (REIT) segment are rising as well. Notably, these stocks mostly have an exclusive U.S. exposure and the belief that rates will stay lower for longer is helping their case. Then again, gold miners and pharmaceuticals rose on both Friday and Monday as many investors turned to safe-haven assets.
Our Choices
As the markets are expected to remain volatile for some time, it is vital to build your portfolio with prudence. This is why it would be better to pick safer bets at this point. In such a situation, picking stocks that are mostly domestic oriented, preferably with a low beta, would be a good option. Our picks are not only armed with a Zacks Rank #1 (Strong Buy) or 2 (Buy), but have also appreciated post-Brexit indicating that these haven’t been hurt by the broader market sell-off.
Connecticut Water Service, Inc.
The company’s core business is centered on providing water services in Connecticut and Massachusetts. Can anyone live without water even when the financial market is all haywire?
This Zacks Rank #2 (Buy) stock has a low beta of 0.24 and has experienced a healthy 3.71% gain in the last two trading sessions. Moreover, Connecticut Water Service derives nearly 92% of its earnings from its regulated operations that cushion it from market volatility. Thanks to its strong financial discipline, the rating agency Standard & Poor’s affirmed its ‘A’ corporate credit rating on the company. The agency also affirmed the company’s ratings outlook as stable. Strong credit rating will help this water utility to arrange funds for its capital projects at a favorable rate.
Shares of the U.S. focused cigarette manufacturer Altria Group hit a new 52-week high of $68.00 on Jun 24 and has seen its shares rising 2.4% in the last two days. One doesn’t really expect people to quit smoking or using tobacco just because of Brexit! Generally, companies like Altria benefit from the addictive nature of their tobacco products. In fact, an improving job scenario has increased consumers’ spending power, which is doing the trick for these stocks.
The company currently holds a Zacks Rank #2 and has a market beta of 0.48.
Headquartered in Arkansas, Tyson Foods produces, distributes and markets chicken, beef, pork, prepared foods and allied products. The stock has climbed 2.97% in the last two days and holds a Zacks Rank #2. The stock also has a beta value of 0.30.
Although the company is stretched over a vast geographical expanse in North America, Canada, Europe, Asia, the Middle East and Russia, will consumers give up having chicken, beef or pork for Brexit? Never.
This processed and packaged food company has seen a solid 35% increase in the share price so far in 2016. Even its share price increased 1.5% over the last two sessions. The company has operations across the U.S., Canada and Puerto Rico.
The company currently carries a top Zacks Rank #1 (Strong Buy) and has a low beta value of 0.41.
Shares of electric utility company Avista climbed 2.3% in the last two sessions. This stock has a low beta of 0.44 and holds a Zacks Rank #2.
Avista is a diversified energy company with utility and other subsidiaries operating across North America.
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5 Defensive Stocks That Are Surviving Brexit Turmoil
The bloodbath in U.S. stocks continued into Monday with the markets off more than 1.5%, extending Friday’s post-Brexit sell-off. This was because investors were concerned about the economic and political consequences of U.K.’s vote to leave the European Union.
The Dow Jones Industrial Average declined 1.5% on Monday to close at its lowest level since Mar 10. Over the last the two sessions, the index has shed 871 points. Meanwhile, the S&P 500 dropped 1.8% and the Nasdaq Composite fell 2.4% in yesterday’s session.
With billions of dollars already being wiped off, what should investors do? One proven way to counter the volatility is to opt for defensive funds and stocks. These are generally immune to recession, economic slowdown or market volatility by virtue of the nature of their businesses. Defensive plays include utilities, medical companies, consumer staples and tobacco stocks – basically companies providing products and services that consumers cannot do without irrespective of market downturns or a wayward referendum across the Atlantic.
And investors have taken recourse to just that. Utilities and telecom were the only two to advance post Brexit among all S&P 500 sectors. Utility companies like American Electric Power Co., Inc. (AEP - Free Report) and American Water Works Company, Inc. (AWK - Free Report) as well as the U.S.-based retailer Dollar General Corp. (DG - Free Report) rose in the last two sessions.
Again, a few higher-yield dividend plays in the specialty real estate investment trust (REIT) segment are rising as well. Notably, these stocks mostly have an exclusive U.S. exposure and the belief that rates will stay lower for longer is helping their case. Then again, gold miners and pharmaceuticals rose on both Friday and Monday as many investors turned to safe-haven assets.
Our Choices
As the markets are expected to remain volatile for some time, it is vital to build your portfolio with prudence. This is why it would be better to pick safer bets at this point. In such a situation, picking stocks that are mostly domestic oriented, preferably with a low beta, would be a good option. Our picks are not only armed with a Zacks Rank #1 (Strong Buy) or 2 (Buy), but have also appreciated post-Brexit indicating that these haven’t been hurt by the broader market sell-off.
Connecticut Water Service, Inc.
The company’s core business is centered on providing water services in Connecticut and Massachusetts. Can anyone live without water even when the financial market is all haywire?
This Zacks Rank #2 (Buy) stock has a low beta of 0.24 and has experienced a healthy 3.71% gain in the last two trading sessions. Moreover, Connecticut Water Service derives nearly 92% of its earnings from its regulated operations that cushion it from market volatility. Thanks to its strong financial discipline, the rating agency Standard & Poor’s affirmed its ‘A’ corporate credit rating on the company. The agency also affirmed the company’s ratings outlook as stable. Strong credit rating will help this water utility to arrange funds for its capital projects at a favorable rate.
Altria Group (MO - Free Report)
Shares of the U.S. focused cigarette manufacturer Altria Group hit a new 52-week high of $68.00 on Jun 24 and has seen its shares rising 2.4% in the last two days. One doesn’t really expect people to quit smoking or using tobacco just because of Brexit! Generally, companies like Altria benefit from the addictive nature of their tobacco products. In fact, an improving job scenario has increased consumers’ spending power, which is doing the trick for these stocks.
The company currently holds a Zacks Rank #2 and has a market beta of 0.48.
Tyson Foods, Inc. (TSN - Free Report)
Headquartered in Arkansas, Tyson Foods produces, distributes and markets chicken, beef, pork, prepared foods and allied products. The stock has climbed 2.97% in the last two days and holds a Zacks Rank #2. The stock also has a beta value of 0.30.
Although the company is stretched over a vast geographical expanse in North America, Canada, Europe, Asia, the Middle East and Russia, will consumers give up having chicken, beef or pork for Brexit? Never.
B&G Foods Inc. (BGS - Free Report)
This processed and packaged food company has seen a solid 35% increase in the share price so far in 2016. Even its share price increased 1.5% over the last two sessions. The company has operations across the U.S., Canada and Puerto Rico.
The company currently carries a top Zacks Rank #1 (Strong Buy) and has a low beta value of 0.41.
Avista Corporation (AVA - Free Report)
Shares of electric utility company Avista climbed 2.3% in the last two sessions. This stock has a low beta of 0.44 and holds a Zacks Rank #2.
Avista is a diversified energy company with utility and other subsidiaries operating across North America.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>