September is typically the worst month for the markets, however with a much anticipated rate cut, 2024 might be a different story. The current market environment is unpredictable. We’re seeing higher highs and lower lows in different categories and for risk-averse investors, defensive stocks are the best bets right now.
“Investors Must Consider Quality Stocks”
On September 7, Co-Chief Investment Strategist at John Hancock Investment Management Emily Roland appeared in an interview on Yahoo Finance to discuss the impact of the September jobs report on financial markets. Roland has a bullish view on the economy, overall, considering that only 142,000 jobs were added in August.
Roland talked about how NVIDIA is influencing the overall market condition, reiterating that the company held the power to bring the market down, followed by other giants such as Broadcom. She believes that anything more than 50 basis points does signal that the Fed may know something that the general public does not.
Roland further added that while we cannot predict a recession coming, the US economy is decelerating at an easy pace. She also pointed out that weak and incomplete economic data has added to the uncertainty, making it hard to predict economic outcomes in the short and long run.
Roland expects that the Fed will be taking cuts slowly and won’t implement drastic measures, to not spook out the market. She believes investors should refrain from taking massive risks and invest in solid quality stocks, with great balance sheets, high cash, and strong return on equity rates.
She’s particularly concerned about mega-cap tech stocks and highlighted that, while they may be attractive, these giants do have a valuation issue, with forward earnings going above and beyond 30. Roland suggests that investors must explore other quality areas of the equity market with reasonable prices such as healthcare, consumer defensive, and utility stocks.
Is a 50 Basis Points Rate Cut Needed?
To shed light on the economic conditions of the United States, New Century Advisors Chief Economist, Claudia Sahm, appeared in an interview on Yahoo Finance on September 7. Sahm was overly concerned about the number of jobs added in August and how they were not enough to outdo a mini-recession. Sahm emphasized that the status quo is giving a clear direction as to how the Fed should proceed. She suggests that the Fed should ease its policies, potentially cutting rates by at least 50 basis points, contrary to what Roland suggested.
Sahm also added that a possible explanation for the softening labor market are Fed’s policies to curb inflation, indicating the need for more economic data points. She emphasized that unemployment data alone is not enough to predict a lingering recession and that broader economic data should be taken into account.
An uncertain market calls for safe investing. With that let’s take a look at the 10 best defensive stocks according to Reddit. You can also take a look at the safest stocks to invest in now.
A trader at a stock exchange, vigorously watching the stocks’ trends in the stock market.
Our Methodology
We looked at the best stocks in the utilities, finance, healthcare, and technology sectors by sifting through multiple active subreddits. We compiled an initial list of 20 stocks and then picked the top 10 with the largest number of hedge fund holders, as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10. Colgate-Palmolive Company (NYSE:CL)
Number of Hedge Fund Holders: 52
Colgate-Palmolive Company (NYSE:CL) is one of the best defensive stocks to buy according to Reddit. The manufacturing company is based in New York, United States, and owns some of the most popular fast-moving consumer goods brands in the world. These include Protex, Speed Stick, PCA Skin, and Sanex.
In the second quarter of 2024, the company logged $5.06 billion in net sales, up by 4.9% year-over-year. For the past four quarters, Colgate-Palmolive Company (NYSE:CL) has been delivering double-digit growth rates in operating profits, net income, and earnings per share. For the complete fiscal year 2024, the company expects net sales to grow from somewhere between 2% and 5%. Additionally, the company saw an increase in organic sales by 9%, year-over-year. The company revised its full-year guidance of organic sales to 8% from the previously projected 7%.
Despite being based in the US, Colgate-Palmolive Company (NYSE:CL) has a strong international presence, accounting for 70% of its revenue. The company believes that its core strategy lies in making reinvestments into the business. In its Q2 2024 earnings release, the company highlighted that its growing sales coupled with an increase in advertising by 18% secures the long-term expansion goals of the business.
Latin America is a major market for the company, accounting for 25% of the company’s sales. Sales from Latin America grew by 7.6% year-over-year, while organic sales expanded by 18.8%. The region also logged $417 million in operating profits, the highest among all divisions in terms of dollar value. The company’s position in this segment and global market share of 41.3% across 200 countries is proof of its dominant position in the industry.
At the end of Q2 2024, 52 hedge funds owned stakes in Colgate-Palmolive Company (NYSE:CL), with total stakes amounting to $2.73 billion. Of this, First Eagle Investment Management was the largest shareholder with a position worth $875.86 million, as of June 30.
ClearBridge Investments’ ClearBridge Sustainability Leaders Strategy stated the following regarding Colgate-Palmolive Company (NYSE:CL) in its Q2 2024 investor letter:
“Colgate-Palmolive Company (NYSE:CL), added to the portfolio in 2023, started outperforming materially toward the tail end of last year as growth, margin and market share momentum began to turn favorably, and that momentum has continued year to date as the stock has nicely outperformed the large cap staples group. The fundamental upside has been driven by a combination of healthy organic growth (with positive volumes), good gross margin progression, and strong re-investment spending supporting market share gains and future growth.”
9. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 64
The Procter & Gamble Company (NYSE:PG) ranks ninth on our list of the best defensive stocks according to Reddit. The company behind Pampers, Always, Oral-B, Pantene, and Gillette sells its products in over 180 countries.
The Procter & Gamble Company (NYSE:PG) manages several small business units including baby, feminine, family, beauty, health, grooming, and fabric care. These SBUs manage 10 product categories and are present in focus markets that account for 80% of the company’s sales and 90% of the company’s profit.
In the past quarter, the company made significant investments to improve productivity, bringing in $2.3 billion for the business. These measures surrounded improvements in packaging, enhanced brand communication, and the launch of superior products. Nine of its 10 product categories logged massive organic sales in the quarter while five of its seven core regions grew organically at a rate of 2% for all its markets.
While the company is facing challenges due to geopolitical tensions in the Middle East and China, the company’s strong financial position makes it one of the best defensive stocks to buy. The company logged $20.5 billion in sales during the fiscal fourth quarter of 2024. For the fiscal year ended 2024, The Procter & Gamble Company (NYSE:PG) returned $14 billion in cash to shareholders, $9.3 billion in dividends, and $5 billion in share repurchases.
At the end of Q2 2024, 64 hedge funds owned stakes in The Procter & Gamble Company (NYSE:PG), with total stakes amounting to $7.73 billion. Of this, Fisher Asset Management was the largest shareholder with a position worth $2.9 billion, as of June 30.
8. PepsiCo, Inc. (NASDAQ:PEP)
Number of Hedge Fund Holders: 65
PepsiCo, Inc. (NASDAQ:PEP) is one of the largest food companies in the world. The company is home to some of the most consumed products in the world including Lays, Doritos, Cheetos, Gatorade, Pepsi-Cola, and Mountain Dew. These iconic brands are used by people in more than 200 countries and generate over $1 billion in revenue every year.
While the company increased its organic revenue by 2.3% year-to-date, in the second quarter of 2024, PepsiCo, Inc. (NASDAQ:PEP) plans to advance its productivity initiatives and commercial investments to manage growth. By the fiscal year ending 2024, the company expects to increase organic revenue by 4%, return $8.2 billion to shareholders, and log an 8% increase in earnings per share.
The company has more than 500 brands at its disposal making it one of the best defensive stocks to buy according to Reddit. It has grown its revenue by 30% between 2020 and 2023. While declining prices across the globe may be a cause of concern, the company’s diversified business and solid growth trajectory minimize the risk attached to macroeconomic changes.
Analysts are bullish on PEP and their 12-month median price target of $183 points to a 3% upside from current levels. By the end of Q1 2024, 62 hedge funds included PepsiCo, Inc. (NASDAQ:PEP) in their portfolios with total stakes amounting to $4.35 billion. Fisher Asset Management emerged as the largest stakeholder, with a position worth $1.21 billion.
Artisan Partners mentioned PepsiCo, Inc. (NASDAQ:PEP) in its Q1 2024 investor letter. Here is what the firm said:
“In the demographics/consumer trends theme, slowing sales volumes led us to focus more on services versus goods. As an example, we sold our position in food and beverage leader PepsiCo given slowing growth in its underperforming core beverage business, one which generates about 60% of revenues. Adding to the uncertainty of growth prospects beverages, PepsiCo was forced by local lawmakers and industry wholesalers to shift to a new distribution model during the rollout of Hard Mtn Dew, a new line of drinks that combines Mountain Dew with malt liquor.”
