24/7 Wall St. » Defensive Stocks

Defensive Stock… Bracing For Coca-Cola Earnings (KO, PEP)

247wallst — Wed, 11 Feb 2009 21:53:45 +0000

Thursday morning we will get earnings from The Coca-Cola Company (NYSE: KO), and this will likely be the big set-up play for Friday’s Pepsico, Inc. (NYSE: PEP) earnings. We have prepared a detailed preview for Coca-Cola’s earnings.
Coca-Cola is expected to earn $0.61 EPS and $7.52 billion in revenue, according to First Call. For the coming quarter estimates are for $0.66 EPS and $7.32 billion in revenue; and for fiscal-2009 the consensus estimates are $3.19 EPS and $33.07 billion in revenue.

Options traders appear to be prepared to a move of more than $1.50 in either direction.

Coca-Cola’s shares have fallen since Friday. The stock is now trading within spitting distance of its lows of last October and November. For whatever it is worth, the 5-year lows are between $38.00 and $39.00.

This is supposed to be one of the go-to defensive stocks. Yet, most analysts have been backing off on their ratings. The average target is around $52.00, 25% higher than today. Long-term estimates have only come down marginally over the last 3 months. That is odd considering that multi-nationals have been claiming the dollar’s strength is eating into profits from overseas operations.

The latest data shows Coca-Cola trading at an expected 3.1-times 2008 revenue and 3-times expected 2009 revenue. Coca-Cola also is valued at 13.9-times 2008 expected earnings and 13.6-times 2009 expected earnings. Pepsi is valued at 14.6-times 2008 expected earnings and 13.9-times 2009 expected earnings.

These two are very similar but Pepsi has the snack food business that changes the mix. Coca-Cola will likely influence what is expected from Pepsi on Friday.

Jon C. Ogg
February 11, 2009

Posted in Defensive Stocks, Earnings, Food Tagged: Coca-Cola, COKE, Coke earnings, Defensive Stocks, KO, PEP, Pepsico

The VIX Crosses Above 30….An Omen, Or Closer To An Extreme

247wallst — Wed, 15 Aug 2007 15:33:15 +0000

DJIA                   12,861.47; -167.45 (-1.29%)
S&P500             1,406.70; -19.84 (-1.39%)
NASDAQ          2,458.83; -40.29 (-1.61%)
10YR- Bond       4.706%; -0.026%
NYSE Volume 3,365,515,000
NASD Volume 2,267,149,000

The CBOE VOLATILITY INDEX, or the beloved "VIX," has crossed back above the 30 threshold now. This is the near-term high for that index. The DJIA didn’t just close under 13,000, it closed under 12,900. It would be easy to put on a bargain hunter’s hat and try to say this is a great buying opportunity, but trying to fight the tape is something that has be done by those with unlimited resources or by those that don’t need to worry about short-term fluctautions.

As far as the year is concerned, the DJIA is still up but barely. The DJIA closed at the of DEC-2006 at 12,621.69 and we closed at 12,861.47 today.

Today’s weak market close puts us at a recent high on the VIX that hasn’t been seen March 2003 when the VIX got as high as 33.61 after seeing highs north of 34 in the months before that. In July and August of 2002 the VIX traded up in the 40′s, the same as after September 11.

As we get to extreme readings in a call and orderly day, why is it that it is easy to get the feeling that we are going to have to get a major shakeout day before the selling climax feels closer? A 400-point drop is historically just a run of the mill bad down day on a percentage basis, so we’d be considering something far worse if this feeling is true. Hopefully it won’t come to that.

Here were some winning DJIA components just last week when the market was as bad as today. We also discussed defensive stocks for a crummy market, and those are the sort of stocks investors usually flock to when they want to go for a safety net but still be exposed to the stock market.

Jon C. Ogg
August 15, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Five Winning DJIA Components On a Bad Day (August 10, 2007) (IBM, JNJ, PG, XOM, UTX)

247wallst — Fri, 10 Aug 2007 09:44:35 +0000

The DJIA is down more than another 150 points today, although it had been down 200 in pre-market activity before the Fed added liquidity this morning. We have been down actually less than triple digits before the last slide took us lower. Usually the market just shoots first and asks questions later, but right now there are actually some DJIA components that are either holding up quite well and some that are actually positive on the day. If the market slides further or tanks again you can kiss these gains here goodbye as well.

IBM       IBM                      $111.36 +$0.63 (+0.5%)
JNJ       J&J                      $60.88 +$0.05 (+0.1%)
PG       P&G                      $65.23 +$0.26 (+0.4%)
UTX       UNITED TECH $72.73 +$0.36 (+0.50%)
XOM       EXXON MOBIL $84.14 +0.54 (+0.65%)

Here were our defensive stocks for a crummy market from last week.

Jon C. Ogg
August 10, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Defensive Stock ‘Havens’ For A Crummy Market (PEP, KO, MRK, NVO, PG, CAG, BUD, HRL, CL, MO, CG MCD, KFT, NVO, WTR)

247wallst — Fri, 03 Aug 2007 15:18:46 +0000

It’s yet another crummy day in the markets with roughly a 280 DJIA point drop before the closing bell went off. Bear Stearns added the most fuel at the end of the day, unemployment was not a big enough help, and American Home Mortgage (AHM) shut most operations. There are many bulls still out there after the malaise ends, and the questions still seem to be around WHEN rather than IF. As always, there are many unleveraged companies that make basic products that are deemed the defensive stocks. We try to simplify the list of names down to the true economically immune names, although there in reality is no such thing as an immune stock. Sell programs kicked in at the end of the day, and these probably got hit too.

If you are looking for buys in a crummy market you want to usually look at the stocks that produce you goods you have to consume. If you eat it, drink it, or smoke it, it’s a defensive stock. We won’t stop using toiletries either. There are many other defensive stocks, but here is a group of stocks from our classic list and we’ve removed the "leveraged names" and those which would do well only in a moderate economic drop. Here goes:

Coca-Cola (NYSE:KO) and Pepsi (NYSE:PEP)….does anyone ever stop drinking sodas or water, or stop eating chips?

Anheuser Busch (NYSE:BUD)….if you drink alchohol, you only drink more when things are bad.

Hormel (NYSE:HRL)….canned meats, deemed on the cheap. Spam is a delicacy somewhere, or at least that is people keep saying.

Kraft (NYSE:KFT)…. maybe it’s too tied to activists, Buffett, Phillip Morris, or whatever, but it’s monster play in the sector.

McDonalds (NYSE:MCD)….best fast food play off the mid to lower income, and they won’t always eat at home regardless.

ConAgra (NYSE:CAG)….food giant that is fairly valued.

Altria (NYSE:MO) & Loews Carolina Group (NYSE:CG)….who says smoking is all bad? Smoking kills, but people insist on buying.

Merck (NYSE:MRK)….drug king did well on last earnings.

Proctor & Gamble (NYSE:PG) and Colgate-Polmolive (NYSE:CL)….they get into your pocketbook regardless of the market unless you stop shaving, washing hands, and brushing your teeth.

Here are two runner-ups:

Novo Nordisk (NYSE:NVO)…. This is a bit challenging since it’s an ADR based in Denmark, but they are virtually a pureplay on insulin and diabetics need it regardless of a market crash.

Aqua America (NYSE:WTR)….largest independent water and waste water play, although high P/E ratio.

As a final reminder, there is no such thing as a "HAVEN" if there is a total market crash. If the market falls 5% in a day or two, these are probably going to get hit hard too. But people will own stocks and many firms HAVE TO own stocks. The defensive names are where they tend to flock to first.

Jon C. Ogg
August 3, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.