After a brutal December wiped out a positive year for the major equity indexes in 2018, investors became worried that the bull market was over after almost 10 years. Whether 2019 brings as much volatility as 2018 remains to be seen, but many investors are concerned that valuations are becoming too high and cannot be supported much longer.
24/7 Wall St. has looked for value and defensive stocks that are likely to survive most major stock market volatility. These company names are leaders in consumer goods, utilities, and other areas of the economy that offer goods and services needed in good times and bad.
As 2019 kicks off, many analysts and investors are expecting the great earnings gains of 2018 to taper off now that the impact of the corporate tax reform has been fully embedded in expectations. At the same time, the U.S. Federal Reserve seems poised to finally start backing away from the endless interest rate hikes due to slowing economic growth in the United States and the major international economies. Meanwhile, the as-of-yet unresolved trade and tariff issues with China continue to have many in the business community worried.
Investors who have longer views than a week or a month tend to maintain the same level of exposure to the stock market in good times or bad. They may have less of their portfolio in stocks, and when they look for stocks, they tend to flock to shares of companies that they believe will keep operating well without major effects to their businesses if a major stock market selloff occurs.
Defensive stocks that can withstand bad markets tend to have a long history of dividends and dividend hikes. Warren Buffett is considered to be a prime value investor who looks for companies that will stand the test of time. His advice to investors has been simple but harder to implement: “Be fearful when others are greedy, and to be greedy when others are fearful.”
24/7 Wall St. has chosen a list of companies whose businesses will remain relatively stable during times of market turmoil. The list includes the most recent share prices, a 52-week trading range, and the current dividend yield on each company. We have also included information about each company’s history, revenue, or the size of its customer base. Expected revenue figures are from Thomson Reuters.
Investors should always consider that there are no assurances that defensive stocks will hold up in a down market. If the market loses 10% or 20% of its value in a short period, it tends to hurt most equities, although defensive stocks might hurt less. Here are 15 top defensive stocks that investors are likely to pour money into if they become worried about the next selloff turning into a major correction or even a bear market.
1. American Water Works Co. Inc. (NYSE: AWK), $92.50
> Industry: Utilities
> Yield: 2.0%
> 52-week range: $76.04 – $98.18
> Market cap: $16.7 billion
This is America’s largest pure-play water utility, serving drinking water, treating wastewater and other related services to roughly 14 million people in 45 states. The reality is that people are going to drink water, use water at home for food and cleaning, and shower every day.
2. American Electric Power Co. Inc. (NYSE: AEP), $76.00
> Industry: Utilities
> Yield: 3.5%
> 52-week range: $62.71 – $81.05
> Market cap: $37.5 billion
American Electric Power is a major electric utility in America and has been operating for more than 100 years. At last look, it served nearly 5.4 million regulated electricity customers in 11 states, and it uses nearly all sources of energy to produce electricity.
3. Clorox Co. (NYSE: CLX), $151.00
> Industry: Consumer products
> Yield: 2.5%
> 52-week range: $113.57 – $167.70
> Market cap: $19.4 billion
Clorox may not be as large as some of its consumer products competitors, but the company has been operating for more than 100 years and markets many consumer goods outside of its cleaning and bleach products, including household chemicals, petcare products, water filtration, food, and so on. Its shares soared more than 40% from trough to peak in 2018 — proof that it can withstand rocky markets. CLX share have pulled back in 2019.
4. Coca-Cola Co. (NYSE: KO), $47.50
> Industry: Beverages
> Yield: 3.3%
> 52-week range: $41.45 – $50.84
> Market cap: $202.2 billion
Dating back to the late 1800s, Coca-Cola is perhaps the most widely recognized beverage maker in the world. The company has increased its beverage choices outside of soda drinks over the years, adding water, sports drinks, health drinks, tea, coffee, and so on. Revenues are expected to grow to $33 billion in 2019, an increase of more than 5%.
5. Dollar General Corporation (NYSE: DG), $114.50
> Industry: Discount retail
> Yield: 1.0%
> 52-week range: $85.54 – $118.45
> Market cap: $30.0 billion
The nation’s most dominant dollar store retailer turned in positive gains in 2018, and it continues to find new niche geographies in which to open new stores. It dates back to before World War II during the Great Depression, and it has now expanded to offer higher priced goods with more than 15,000 stores in 44 states. Dollar stores proved to have a strong business model during and after The Great Recession a decade ago.