We recently compiled a list of the 10 Best Defensive Stocks According to Reddit. In this article, we will look at where Walmart Inc. (NYSE:WMT) stands against the other defensive stocks.
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.
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).
A manager standing in a hypermarket, pointing out items available for wholesale.
Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders: 95
Walmart Inc. (NYSE:WMT) is one of the biggest retail companies in the world that operates retail outlets, wholesale units, and e-commerce sites in more than 20 countries serving over 240 million customers every week. The company’s e-commerce platform provides services to mass consumers, low-income customers, and small business owners. Walmart entered the e-commerce space in 2000 and reported $100 billion in e-commerce sales in the fiscal year 2024, up from $73 billion in FY 2022. Walmart Inc. (NYSE:WMT) is also a well-known brick-and-mortar retailer with 10,500 stores globally.
The company currently operates 210 distribution centers and has a private fleet of 9,000 tractors, 80,000 trailers, and 11,000 drivers, all of which make quick deliveries possible. In the past 12 months, within the US, Walmart delivered 4.4 billion items on the same day or the next day, and 30% were delivered within three hours.
Walmart Inc. (NYSE:WMT) is making significant investments in innovating its customer offerings and storefront. In FQ1 2025, the company launched a generative AI-powered product search tool and a data analytics platform allowing customers to shop more effectively and receive intuitive product recommendations based on their likes and dislikes. As for its brick-and-mortar stores, by the end of FY 2026, the company expects 65% of its stores and 55% of its fulfillment centers to be run by automation.
Walmart’s e-commerce footprint is increasing, as evidenced by a 36% growth in sellers on its marketplace in the fiscal first quarter of 2025. Overall, the company is on track to add $130 billion in sales if it achieves its 4% sales growth target over the next five years.
Analysts are bullish on WMT and their 12-month median price target of $81 points to a 6% upside from current levels. Overall, WMT was held by 95 hedge funds at the close of Q2 2024 with total stakes amounting to $9.19 billion. As of June 30, Fisher Asset Management was the largest shareholder with a position worth $3.08 billion.
Overall WMT ranks 3rd on our list of the best defensive stocks to buy. While we acknowledge the potential of WMT as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than WMT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.