Investors are looking for safe haven stocks that won’t get killed if we are into another bear market. In this case, investors usually flock to defensive stock names during a bear market or when they are concerned that the market may not run much more. The recent wave of selling pressure is making many investors rethink their technology and growth investments as the recovery has started to slow considerably. Defensive stocks should be the winners in uncertainty, particularly as bond yields are next to non-existent.
24/7 Wall Street looked through some of our existing go-to stocks in the defensive stock sector to find some stocks that are likely to hold up if the stock market pressure continues to push stocks lower. Our screening process has us looking at Church & Dwight Co. Inc. (NYSE: CHD), Johnson & Johnson (NYSE: JNJ), and NextEra Energy, Inc. (NYSE: NEE) in our latest round of defensive picks.
Not all defensive stocks are created equal and some are more attractive or less attractive through time when compared to their peers. We wanted to look through our defensive stocks universe and pick out names which offer safety but also those which have grown and are expected to keep growing earnings and revenues from 2010 to 2011. We have also looked for stocks in today’s screen that have already seen their shares pull back off of highs enough that even another tailspin won’t likely steal too much from investors’ piggy banks.
Wrap this consumer products stock…
Church & Dwight Co. Inc. (NYSE: CHD) is one of the smaller consumer products companies, but it has solid brands to the tune of Trojan, Arm & Hammer, OXICLEAN, Arrid, and more. The company did not escape earnings entirely unscathed despite beating earnings estimates. After all, the post-earnings reactions were not exactly the most receptive for Procter & Gamble (NYSE: PG) and Colgate-Palmolive Company (NYSE: CL).
The company recently posted almost 4% organic sales growth and 27% earnings growth with a slightly higher dividend. On the dividend, the current yield is 1.1% and that is under its peers. C&D has been paying down debt and it has the highest dividend coverage of its peers. In short, that dividend will be much higher in time. Moody’s even recently upgraded its debt ratings to investment grade.
At $60.31, its 52-week trading range is $54.54 to $69.95. This 15% pullback from highs is not routine. The Thomson Reuters estimates are $3.90 EPS for 2010 and $4.39 EPS for 2011. That gives forward earnings multiples of 15 for 2010 and 13.7 for 2011, or a blended figure of under 14.5. That is not dirt cheap, but it is in-line with peers and its multiple of 2.4-times book value is a discount to peers.
There is a gross margin issue affecting consumer products companies today called trade spending, where consumer products companies are having to spend more in-store to get better placement or to get promotions in those stores. C&D has not been able to escape this, but neither have competitors, and it may be an issue with us for some time. The $4.3 billion market also makes this one unique compared to its larger peers. If shares ever get ‘too cheap,’ an acquirer would be more than happy to own this company if management would agree to a deal.
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