Back to top

Image: Bigstock

6 Defensive Stocks Worth Buying as Coronavirus Cases Rise

Read MoreHide Full Article

Nearly three months have passed since the coronavirus outbreak originated in Wuhan. So far, the deadly virus has infected nearly 799,724 people worldwide, and caused 38,721 deaths. In the United States, major cities are under lockdown and with the steep rise in COVID-19 cases people have been asked to stay indoors and maintain social distancing.

No drug or vaccination has been found yet. There is also a huge shortage of personal protective equipment and respirator ventilators, globally.

The pandemic has taken a huge toll on the global economy. Kristalina Georgieva, chief of International Monetary Fund (IMF) last week said that“we have entered a recession" and that might be worse than 2009. However, the global economy may rebound in 2021 if the spread of the virus is contained and companies can address the liquidity and solvency issues.

Additionally, economists at the Federal Reserve’s St. Louis district project believe that the coronavirus-led economic downturn could lead to employment reduction of 47 million, increasing unemployment rate to 32.1%.

The U.S. economy and consumers have been hit hard by the virus outbreak as loss in job and shutdowns dampened confidence. The Conference Board’s Consumer Confidence Index is expected to fall to 115 in March from 130.7 in February. Discouraging economic data amid rapid spread of coronavirus has heightened volatility in the market.

Why Defensive Stocks?

Amid this volatility, investing in defensive stocks like utilities, healthcare and consumer staples can be beneficial. Defensive stocks provide stable returns regardless of market conditions asthey cater to basic human necessities. Hence, demand for these products or services are constant irrespective of market gyrations.

However, these stocks do not give high returns when the economy is expanding, compared to technology and cyclical sectors. But at times of uncertainties like this when a health scare has disrupted economies across the globe, these defensive stocks act as safe assets for investors.

6 Must-Buy Stocks

Given the current economic slowdown we have shortlisted six defensive stocks that can return well on investment. What’s more, each of our picks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Our first choice is American States Water Company (AWR - Free Report) . It provides water and electric services to residential, industrial, and other customers in the United States. Water and electricity demand is always constant even during lockdown.

The company’s expected earnings growth rate for the current year is 4.7% compared with the Zacks Utility - Water Supply industry’s projected earnings growth of 2.9%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 3.2% upward over the past 60 days.

Another utility firm on our list is Algonquin Power & Utilities Corp. (AQN - Free Report) . The company owns and operates a portfolio of regulated and non-regulated generation, distribution, and transmission utility assets in Canada and the United States.

The company’s expected earnings growth rate for the current year is 6.4% compared with Zacks Utility - Electric Power industry’s projected earnings growth of 3.1%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 4.7% upward over the past 60 days.

Next we have InMode Ltd. (INMD - Free Report) , aminimally-invasive aesthetic medical product designer, developer and manufacturer.

The company’s expected earnings growth rate for the current year is 14.1% compared with the Zacks Medical - Products industry’s projected earnings growth of 8.6%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 5.7% upward over the past 60 days.

We also recommend drug maker, Regeneron Pharmaceuticals, Inc. (REGN - Free Report) . The company has expanded clinical trials of rheumatoid arthritis drug Kevzara for coronavirus treatment to patients.

The company’s expected earnings growth rate for the current year is 16.2% compared with the Zacks Medical - Biomedical and Genetics industry’s projected earnings growth of 8%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised nearly 6% upward over the past 60 days.

On our list, we also have consumer staples firm, Grocery Outlet Holding Corp. (GO - Free Report) that owns and operates a chain of grocery store. The lockdowns and quarantines have led to increased demand for grocery, dairy and deli, produce, refrigerated and frozen, which the company sells across the United States.

The company’s expected earnings growth rate for the current year is 12.7% compared with the Zacks Consumer Products - Staples industry’s projected earnings growth of 0.8%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 9.9% upward over the past 60 days.

Lastly we have, US Foods Holding Corp. (USFD - Free Report) thatmarkets and distributes fresh, frozen, and dry food items across the United States.

The company’s expected earnings growth rate for the current year is 13.9% compared with the Zacks Food - Miscellaneous industry’s projected earnings growth of 2.9%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 3.8% upward over the past 60 days.

Zacks Top 10 Stocks for 2020

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2020?

Last year's 2019 Zacks Top 10 Stocks portfolio returned gains as high as +102.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.

Access Zacks Top 10 Stocks for 2020 today >>