Last Friday we posted a story that referenced the thoughts of Barry Bannister, the head of Institutional Equity Strategy and chief equity strategist at Stifel, where he and his team made the case that there could be little upside in 2018 and a bear market could come in 2019. Other top Wall Street strategists also have suggested that the highs printed in late January will be the highs for the year.
The Stifel view is that it is time for investors to take a more defensive posture, but that doesn’t mean selling everything and going to cash. What it does mean, is moving to sectors of the market that are less volatile and often do better in poor markets. These sectors could include utilities, consumer household products, pharmaceuticals and real estate investment trusts (REITs).
We screened Stifel’s list of potential stocks to move to and own for the potential of a bear market. The firm cites 20 potential industries to look at that typically rise if these four conditions occur:
- If the U.S. 10-year Treasury yield is peaking.
- If five-year forward inflation falls. They note in years 6 to 10 per Treasury inflation-protected securities (TIPS).
- If West Texas Intermediate crude oil declines, and in step with that, if the dollar rises.
- If the 10-year Treasury yield minus the federal funds policy rate yield curve flattens.
We chose one stock from 10 of the most conservative industries. We screened for the best dividends and for stocks that were down year to date.
Duke Energy Corp. (NYSE: DUK) is one of the leading U.S. utility companies, given its stable earnings base, as a significant portion of the company’s earnings are derived from regulated operations. Also, the company has delivered a healthy financial performance in the past and remains an attractive option for income-seeking investors.
Duke shareholders receive an outstanding 4.74% dividend. The Wall Street consensus price target is $82.07, and shares closed Friday at $75.17. The 52-week trading range is $72.93 to $91.80.
Simon Property Group Inc. (NYSE: SPG) invests in the real estate markets across the globe. It engages in investment, ownership, management and development of properties. It primarily invests in regional malls, premium outlets and community/lifestyle centers to create its portfolio. Through its subsidiary partnership, it owns or has an interest in about 230 properties in the United States and Asia. The company also has a 28.9% interest in Klepierre, a European REIT with over 260 shopping centers in 13 countries.
Shareholders receive a 4.84% dividend. The consensus price target is $186.24. The shares ended Friday at $151.73, in a 52-week range of $150.15 to $176.17.
Altria Group Inc. (NYSE: MO) is a top mega-cap consumer discretionary stock to buy on Wall Street, and the company’s Marlboro brand remains one of the most recognizable in the world. Many Wall Street analysts concede that the stock has solid downside support owing to the generous dividend yield, which remains at a huge premium in relation to the 10-year Treasury rate.
Altria investors are paid a 4.72% dividend. The consensus target price is set at $77.46. The stock closed Friday at $59.27, and the 52-week range is $59.65 to $77.79.
Coca-Cola Co. (NYSE: KO) is the world’s largest beverage company, refreshing consumers with more than 500 sparkling and still brands. Led by Coca-Cola, one of the world’s most valuable and recognizable brands, its portfolio features 20 billion-dollar brands, including Diet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater, Powerade, Minute Maid, Simply, Georgia and Del Valle. Globally, it is the top provider of sparkling beverages, ready-to-drink coffees and juices and juice drinks.
Coca-Cola investors receive a 3.69% dividend. The posted consensus price target is $50.03. The stock closed Friday at $42.33, and it has a 52-week range of $41.91 to $48.62.
Kraft Heinz Co. (NYSE: KHC) is the third-largest food and beverage company in North America and the fifth-largest in the world, with eight $1 billion or more brands. The company’s iconic brands include Kraft, Heinz, ABC, Capri Sun, Classico, Jell-O, Kool-Aid, Lunchables, Maxwell House, Ore-Ida, Oscar Mayer, Philadelphia, Planters, Plasmon, Quero, Weight Watchers Smart Ones and Velveeta.
Shareholders are paid a 4.16% dividend. The consensus target price is $81.23. The shares closed Friday at $60.03 in a 52-week trading range of $60.49 to $93.88.