The bulls ran for cover today as commodities and financial stocks are pulling the market lower. After two huge ‘sell the news’ earnings reactions were followed by even more ‘sell the news’ earnings reactions, investors are trying to find cover now that a pullback is being seen. The first place to go is defensive stocks since this is a defensive pullback rather than an economic game-changer of a pullback.
With the DJIA down 1.8%, we wanted to see which stocks of our investable defensive stock universe were either up or were down less than the broad market. Coca-Cola Co. (NYSE: KO) was the only stock higher on the day and that was after earnings and on its share buyback acceleration. Coke was also only one of two DJIA components up on the day in late-day trading. Other defensive stocks that were trying to hold their own by being down less than the overall market are Johnson & Johnson (NYSE: JNJ), Kraft Foods Inc. (NYSE: KFT), ConAgra Foods, Inc. (NYSE: CAG), Campbell Soup Company (NYSE: CPB), Hormel Foods Corporation (NYSE: HRL), McDonald’s Corporation (NYSE: MCD), American Water Works Company, Inc. (NYSE: AWK), Altria Group, Inc. (NYSE: MO), Vector Group Ltd. (NYSE: VGR), Reynolds American Inc. (NYSE: RAI), Procter & Gamble (NYSE: PG), and Palmolive Company (NYSE: CL). Of our traditional 20 go-to defensive stocks, that makes 13 that are doing better than the market on a relative basis.
Johnson & Johnson (NYSE: JNJ) was also down less than the market, but that was after its earnings report this morning. Shares were down 1.1% at $63.15 and its 52-week range is $56.86 to $66.20. J&J posted a 2% gain in profits, but sales are under pressure in some areas. Joint replacement is weak and recalls in its consumer products continue. This was recently one of three picks as a defensive stock for a down market.
Food was the larger safety net today: Kraft Foods Inc. (NYSE: KFT) is down 0.7% at $31.44; ConAgra Foods, Inc. (NYSE: CAG) is down ‘only’ 0.27% at $22.54; Campbell Soup Company (NYSE: CPB) is down just over 1% at $36.02; Hormel Foods Corporation (NYSE: HRL) is down 0.75% at $44.53; and McDonald’s Corporation (NYSE: MCD) is down 0.5% at $76.95 after recent all-time highs.
Water, the source of life… American Water Works Company, Inc. (NYSE: AWK) is also proving that water is the place to be as the water utility has been the place to be. This was recently our top of the list of go-to defensive picks for water investors as well. With a steady business plan and a rising dividend, it is nor surprise that American Water Works is only down 0.21% at $23.60 on the day.
Tobacco is looking like they are smoking it up. Altria Group, Inc. (NYSE: MO) has pulled back from its recent highs of $25.00, but shares are still down ‘only’ 0.8% at $24.70. Vector Group Ltd. (NYSE: VGR) is down 0.85% at $18.43 and Reynolds American Inc. (NYSE: RAI) is down the least of the three with a drop of 0.7% at $61.87. This is what happens when you are too stressed to quit smoking. Surprisingly, beer companies were worse off.
Consumer products are living up to their defensive posture as well. Procter & Gamble (NYSE: PG) is down 0.3% at $63.17 while Colgate-Palmolive Company (NYSE: CL) is down by 0.8% at $76.10. Deodorant, tooth and hygiene products are needed in all markets.
So, if you can eat it, drink it, smoke it, or if you have to apply it to your body, those are the stocks outperforming (performing less badly) the broad market. Defensive stocks are doing their job today.
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JON C. OGG