Beat the vagaries of the market with 4 top-ranked defensive bets – September 19, 2022


The US stock market has been in decline for the past few trading sessions, which has led to bearish sentiment among investors. The S&P 500, DOW and Nasdaq are down 19.3%, 15.8% and 9.6% respectively since the start of the year.

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

Additionally, fiscal stimulus and lower interest rates to stimulate the economy during the pandemic-induced shutdowns have created an inflationary bubble that is a major headwind.

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

In addition, soaring interest rates will continue to increase the cost of borrowing, which will negatively impact consumer spending, thereby slowing economic growth.

The United States recorded two successive quarters of decline.

Given the current situation, it would be prudent for investors to put their money into defensive sectors like consumer staples, utilities and healthcare. These sectors include businesses that provide needed products and services, which consumers will continue to avail themselves of even in the worst economic times.

Therefore, stocks aimed at defensive sectors are less likely to be affected by economic turmoil and will therefore remain a suitable choice for risk-averse investors.

Additionally, defensive stocks tend to offer high dividend yields and preserve capital and generate income, thus becoming solid choices for any investment plan.

Stocks to buy

We recommend 4 defensive stocks, as they are less susceptible to the consequences of an economic downturn. Along with strong fundamentals, these stocks have a Zacks rank of #2 (buy) and a growth score of A or B. Additionally, these companies regularly pay dividends. You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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

Image source: Zacks Investment Research

Corteva (VAT Free Report) provides products to the agricultural input industry, which protect against weeds, insects and other pests and diseases, thereby improving crop health. CTVA’s recent partnership with BASF Agricultural Solutions to develop future herbicide-tolerant soybeans for farmers in North America and beyond continues to be positive.

CTVA forecasts a profit growth rate of 20.5% for the current year. Corteva’s board of directors paid a quarterly dividend of 15 cents per share on September 15, 2022, reflecting an annualized peak of 7.4% from its previous quarterly dividend.

Currently, Corteva has a growth score of A. The stock’s long-term earnings growth rate is currently projected at 15.3%. CTVA has returned 29.8% year-to-date.

Hershey (HSY Free Report) is a world leader in chocolate and non-chocolate confectionery. HSY has grown in the confectionery business with constant acquisitions. His redemptions continue to increase the strength of the portfolio and increase income. This was seen in the second quarter of 2022, where buyouts of Pretzels, Dot’s and Lily’s pushed net sales up 5.3 points.

Hershey forecasts a 14.3% profit growth rate for the current year. HSY paid a quarterly dividend of $1.036 per share for its common stock and 94.2 cents for its Class B common stock on September 15, 2022, reflecting a 15% upside. HSY has a current dividend yield of 1.9%.

Hershey has a growth score of B. The stock’s long-term earnings growth rate is currently projected at 7.7%. HSY has returned 13.7% year-to-date.

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

NFG forecasts a profit growth rate of 38.9% for the current year. Members of its board of directors have declared a quarterly dividend of 47.5 cents per share for its shareholders of record as of September 30, 2022, payable October 14, 2022. National Fuel Gas has a current dividend yield of 2.8%.

NFG also carries a growth score of B at present. The stock’s long-term earnings growth rate is currently projected at 13.7%. National Fuel Gas has gained 7.7% year-to-date.

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 remarkable. MCK has played a crucial role in COVID response efforts in the United States and abroad through the distribution of vaccines, ancillary supply kits, and COVID-19 testing.

McKesson forecasts a 2.4% profit growth rate for the current year. Its board of directors approved a quarterly dividend of 54 cents per common share, a record as of September 1, 2022, payable October 3, 2022. The declared dividend is up 15% from the previous quarter’s figure.

Currently, MCK has a growth score of B. The stock’s long-term earnings growth rate is currently projected at 10.1%. Shares of McKesson have returned 39.3% year-to-date.


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