Investing

Legendary Wall Street Strategist Says Buy Defensive Value Now: 9 Dividend Stocks Fit the Bill

If there is one voice on Wall Street that we always listen to, it is Stifel’s Barry Bannister. We have watched and documented his market calls for years, some of which are among the most incredible and courageous ever made by a sell-side research chief equity strategist and his staff.

In the first quarter of 2020, as the COVID-19 pandemic was unfolding, the stock market was absolutely crushed. We saw a stunning decline of 34% from the February 19, 2020, high to the low on March 23. That high-velocity sell-off included a startling day on March 16 when the Dow Jones industrials dropped 12.9%, the second-biggest one-day drop after the disaster in 1987. The S&P 500 fell 12%, its third-biggest percentage drop, and the Nasdaq declined a staggering 12.3%, the biggest loss ever for the tech-heavy index.

Into the teeth of the withering sell-off, Bannister and the Stifel team had the foresight to make a prediction for a strong market bounce. On March 19, just four short days before the final surge of selling and investor capitulation on March 23, the Stifel prediction was for a relief rally that would carry the S&P 500 to the 2,750 level by April 30. On March 23, the index hit an intraday low of 2,191 and closed at 2,237.

In early April, as a surge of alarming news on the pandemic flooded the airwaves, Stifel came out and defended the call, telling clients to stand their ground. In the middle of April, as the rest of Wall Street was finally on board, they raised the end of April target to 2,950. On April 30, in line with the laserlike call from Stifel, the S&P 500 closed at 2,912, after hitting an intraday high of 2,930 and after trading to 2,950 the day before.

The calls got even better as 2020 wore on. Now Bannister is out with a roadmap to handle yet another withering stock market sell-off. This one was created by years of incredibly bad Federal Reserve policy, massive government spending and an administration that has crippled the energy industry and helped to foster the worst inflation in 40 years.

Plain and simple, the Stifel strategy is to go with defensive value stocks and selected growth stocks. Given the nervousness, we screened the defensive value sectors cited in the recent Stifel report and found nine stocks within those sectors that are Buy-rated across Wall Street and pay dependable dividends. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Altria

This maker of tobacco products offers value investors a great entry point now as it has been hit as cigarette sales have slowed. Altria Group Inc. (NYSE: MO) is the parent company of Philip Morris USA (cigarettes), UST (smokeless), John Middleton (cigars), Ste. Michelle Wine Estates and Philip Morris Capital. PMUSA enjoys a 51% share of the U.S. cigarette market, led by its top cigarette brand Marlboro.

Altria also owns over 10% of Anheuser-Busch InBev, the world’s largest brewer. In March 2008, it spun off its international cigarette business to shareholders. In December 2018, the company acquired 35% of Juul Labs, and it has purchased a 45% stake in cannabis company Cronus for $1.8 billion.

Shareholders receive a 6.80% dividend. Deutsche Bank has a $60 target on Altria stock, and the consensus target is $57.04. The stock closed on Wednesday at $53.89 a share.

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