In this article, we will look at 10 best defensive stocks to buy now. If you want to skip reading about the current economic situation, you can go to 5 Best Defensive Stocks to Buy Now.
On July 1 the Atlanta Fed’s GDPNow tracker, which monitors real-time economic data, released its latest estimates and showed that the GDP growth in the U.S. sank to a negative 2.1% in the second quarter of 2022. In the first quarter of 2022, the tracker put forth estimates which showed that real GDP growth in the U.S. had contracted by 1.6%. When an economy registers negative GDP growth for two consecutive quarters, it satisfies the technical definition of a recession.
On June 29 Fed chairman Jerome Powell explained how the Fed and U.S. policymakers are making efforts to anchor inflation, which is currently running at a 40-year high. Mr. Powell hinted to further rate hikes while reiterating his point of view on rising interest rates not posing a major risk to the economy. The Fed’s chair said that U.S. policymakers are dedicated to bringing inflation down, even if they have to “go too far”. Jerome Powell said:
“The risk is, that because of a multiplicity of shocks, you start to transition into a higher inflation regime, and our job is literally to prevent that from happening and we will prevent that from happening. We will not allow a transition from a low inflation environment into a high inflation environment.”
On the other hand, Jeremy James Siegel, professor of finance at Wharton School at the University of Pennsylvania, believes that the U.S. is not going to have a “severe recession.” In an interview with CNBC, Mr. Siegel said:
“I am not surprised that the 10-year drop below three, I mean that’s telling you really big slowdown. Because with inflation and the 10-year below three, commodity prices falling everywhere, I don’t think it is going to be a severe recession. But I think that we are in one of the most unique and unusual recessions, with unemployment at 3.6% and a strong labor market, yet demand and inflation are eating away at the purchasing power of the consumer.”
As of July 4, the Dow Jones Industrial Average is down 15% year-to-date, the S&P 500 has sunk by 20.25% since the beginning of 2022, the tech-heavy Nasdaq Composite has lost 29.72% since January 1, and the Russell 2000 has registered a year-to-date loss of 23.97%. Investors are reorganizing their portfolios to recession-proof them and are piling into non-cyclical and low-risk investments. Some of the best defensive stocks to buy now include Johnson & Johnson (NYSE:JNJ), The Procter & Gamble Company (NYSE:PG), and The Coca-Cola Company (NYSE:KO).
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Our Methodology
To determine the 10 best defensive stocks to buy now, we did a careful assessment of companies that belonged to noncyclical sectors, such as consumer staples, utilities, and healthcare. We picked stocks based on different features, with a preference for dividend-paying stocks, and narrowed down our selection to names that had positive analyst and investor sentiment associated with them.
Best Defensive Stocks to Buy Now
10. OGE Energy Corp. (NYSE:OGE)
Number of Hedge Fund Holders: 20
OGE Energy Corp. (NYSE:OGE) operates as a utility company that provides physical delivery and related services for electricity, natural gas, crude oil, and natural gas liquids in the United States. As of this April, Credit Suisse analyst Nicholas Campanella has a $42 price target and a Neutral rating on OGE Energy Corp. (NYSE:OGE). On June 14, Mizuho analyst Anthony Crowdell trimmed his price target on OGE Energy Corp. (NYSE:OGE) to $38 from $42 and reiterated a Neutral rating on the shares.
On May 19, OGE Energy Corp. (NYSE:OGE) announced that its board of directors declared a quarterly cash dividend of $0.41 per share of common stock. The dividend is payable on July 29 to investors of record on July 11. As of July 4, the stock has a forward dividend yield of 4.10%, a trailing-twelve-month PE ratio of 8.32, and has gained 17.87% over the past twelve months, all of which makes it an undervalued dividend-paying defensive stock to buy now.
At the close of Q1 2022, 20 hedge funds were bullish on OGE Energy Corp. (NYSE:OGE) with stakes worth $228.85 million. This is compared to 19 positions a quarter ago with stakes of $326.55 million.
In the first quarter of 2022, Zimmer Partners raised its stakes in OGE Energy Corp. (NYSE:OGE) by 66%, bringing them to $125.39 million. Zimmer Partners is the top shareholder in the company.
9. DTE Energy Company (NYSE:DTE)
Number of Hedge Fund Holders: 28
Analysts are bullish on DTE Energy Company (NYSE:DTE). As of May 23, Credit Suisse analyst Nicholas Campanella has a $140 price target and a buy-side Outperform rating on DTE Energy Company (NYSE:DTE). Wells Fargo analysts are also recommending DTE Energy Company (NYSE:DTE) to investors to recession-proof their portfolios.
On June 23, DTE Energy Company (NYSE:DTE) announced that its board of directors has declared a quarterly cash dividend of $0.885 per share. The dividend is payable on October 15 to investors of record on September 19. As of July 4, DTE Energy Company (NYSE:DTE) has a forward dividend yield of 2.74% and has gained 15.01% over the past twelve months, which makes it rank among the best defensive stocks to invest in right now.
At the end of the first quarter of 2022, 28 hedge funds were long DTE Energy Company (NYSE:DTE) with stakes worth $482.27 million. In Q1 2022, Millennium Management raised its stakes in the utility company by 28%, bringing them to $139.73 million. Millennium Management is the largest stakeholder in the company.
Much like Johnson & Johnson (NYSE:JNJ), The Procter & Gamble Company (NYSE:PG), and The Coca-Cola Company (NYSE:KO), DTE Energy Company (NYSE:DTE) can help investors recession-proof their portfolios and weather a bear market.
8. Dominion Energy Inc. (NYSE:D)
Number of Hedge Fund Holders: 34
Dominion Energy Inc. (NYSE:D) operates as a multi-utility company that produces and distributes energy. The company operates through four segments: Dominion Energy Virginia, Gas Distribution, Dominion Energy South Carolina, and Contracted Assets. On June 30, UBS analyst Ross Fowler trimmed his price target on Dominion Energy Inc. (NYSE:D) to $90 from $99 but reiterated a Buy rating on the shares.
Dominion Energy Inc. (NYSE:D) was also mentioned among Wells Fargo’s top recession picks on June 14. We have included dominion energy in our rankings because the company pays dividends and its shares are on the rise. As of July 4, Dominion Energy Inc. (NYSE:D) has gained 3.69% year-to-date and the stock has a forward dividend yield of 3.29%.
At the close of Q1 2022, 34 hedge funds were long Dominion Energy Inc. (NYSE:D) with stakes worth $695.67 million. Of these, Ric Dillion’s Diamond Hill Capital was the largest shareholder, owning over 3.6 million shares of the utility company.
7. Colgate-Palmolive Company (NYSE:CL)
Number of Hedge Fund Holders: 50
Analysts are bullish on Colgate-Palmolive Company (NYSE:CL). On June 14, Wells Fargo analysts named Colgate-Palmolive Company (NYSE:CL) a top consumer staples stock pick to weather a recession. As of June 17, Argus analyst Christopher Graja has a $90 price target and a Buy rating on the stock. Moreover, on June 28, Evercore ISI analyst Robert Ottenstein reiterated his Outperform rating and $90 price target on Colgate-Palmolive Company (NYSE:CL), citing that the company’s defensive product portfolio and pricing power in emerging markets, such as Latin America, make it one of the best consumer staples stock for investors looking to recession-proof their portfolios.
Apart from its defensive product portfolio, another feature that makes Colgate-Palmolive Company (NYSE:CL) a defensive stock to invest in now is dividends. The company has been growing its dividends for the past 21 years and, on June 9, the company’s board of directors declared a quarterly cash dividend of $0.47 per share. The common stock cash dividend is payable on August 15 to shareholders of record on July 21.
The hedge fund sentiment for Colgate-Palmolive Company (NYSE:CL) is positive. At the close of Q1 2022, 50 hedge funds disclosed ownership of stakes in Colgate-Palmolive Company (NYSE:CL). These funds held stakes with a price tag of $2.59 billion in the company, up from $2.06 billion a quarter ago with 48 positions.
As of March 31, First Eagle Investment Management is the top shareholder in Colgate-Palmolive Company (NYSE:CL) owning over 11.29 million shares of the company. The investment covers 2.09% of the fund’s 13F portfolio.
6. Walmart Inc. (NYSE:WMT)
Number Of Hedge Fund Holders: 60
With inflation running at a 40-year high, Walmart Inc. (NYSE:WMT) is consumers’ go-to store to shop for everyday products because of the company’s more than 10,000 budget-friendly retail stores spread across 24 countries. Goldman Sachs is also recommending Walmart Inc. (NYSE:WMT) to stable-income investors that are looking to shelter from a recession.
Another reason why we included Walmart Inc. (NYSE:WMT) in our rankings is because of the company’s rich dividend history. As of July 4, Walmart Inc. (NYSE:WMT) has a forward dividend yield of 1.83% and has been consistent with growing its dividends for the past 48 years.
On June 27, Goldman Sachs analyst Kate McShane lowered her price target on Walmart Inc. (NYSE:WMT) to $138 from $160 but maintained a Conviction Buy rating on the shares.
At the close of Q1 2022, 60 hedge funds held stakes in Walmart Inc. (NYSE:WMT) worth $6.56 billion. This is compared to 63 positions in the previous quarter with stakes worth $7.13 billion.
As of March 31, GQG Partners is the dominating shareholder in Walmart Inc. (NYSE:WMT), owning over 15.43 million shares of the company, which amount to a stake of $2.29 billion. The investment covers 5.33% of Rajiv Jain’s 13F portfolio.
In addition to Walmart Inc. (NYSE:WMT), some of the best defensive bets right now include Johnson & Johnson (NYSE:JNJ), The Procter & Gamble Company (NYSE:PG), and The Coca-Cola Company (NYSE:KO).
Click to continue reading and see 5 Best Defensive Stocks to Buy Now.
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Disclosure: None. 10 Best Defensive Stocks to Buy Now is originally published on Insider Monkey.
