Investing
15 Defensive Stocks That Will Survive the Stock Market Meltdown
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Monday, February 5, 2018, was one of the most brutal trading days since the 2010 flash crash, when the Dow Jones Industrial Average sold off rapidly with over a 1,000 point collapse, which was the worst one-day drop in terms of points. Similar to the rapid drop in 2010, the market lost 1,175 points on Monday to close at 24,345 and at one point the Dow went just under 24,000 in late afternoon trading. That means the market has registered a 10% market correction from its all-time peak just two weeks earlier.
The remarkable thing about the large drop is that there was no single fundamental change to trigger it. The market trading functions were working properly, although the speed of the selling was lightning fast. Machine-based trading definitely played a role in the drop, but one issue that acted to exacerbate the crater was a lack of buying at the time that the broad markets were taking out key support levels. This market selling began days ago due to fears of higher inflation, stronger wages and a rapid rise in long-term interest rates, with the 10-year Treasury yield rising from 2.40% to 2.85% in a single day. So, there was fear that wage inflation would be followed by a Federal Reserve decision to rapidly raise interest rates, with some chances growing that the Fed would raise short-term rates more than three times in 2018.
Ironically, Monday’s drop coincided with the swearing in of new Federal Reserve Chair Jerome Powell. Exiting Fed Chair Janet Yellen did suggest that stock prices were high.
Monday’s big drop in the stock market wiped out all the year’s strong market gains. The market is also down from January 26, 2018, which was the first time the Dow broke above 26,600. Monday’s trading action may continue because the sell-off has only moved the stock market to a 10% correction after its gains in January, the major gains from the last year and the exponential gains over the past nine years.
24/7 Wall St. tracks many fundamental issues in the economy and in corporate America, as well as the larger economic picture globally. As part of a broader economic view, corporate earnings are still growing rapidly as corporate tax reform begins. Companies will now keep 79 cents of every dollar they earn after taxes, after having only been able to keep 65 cents on the dollar before. Additionally, global U.S. gross domestic product are both expected to keep rising, and an increase in deposit rates by the Fed is likely because of economic strength.
For investors who have longer views, beyond a few days, some will flock into shares of companies that they believe will keep operating well without major effects to their businesses if the market continues to fall. Many of these public companies also have a long history of dividends. Warren Buffett’s advice to investors has famously been to “be fearful when others are greedy, and to be greedy when others are fearful.”
24/7 Wall St. has chosen a list of companies that will operate fine in times of market turmoil and probably will operate well from financial standpoint even if economic turmoil were to arise. The list includes the share price as of Monday, a 52-week trading range and the current dividend yield.
While there are no assurances that these defensive stocks will not drop in price, these are traditionally companies that investors seek as safe havens if the market plunges and they would rather not put their money into low-yield fixed income investments.
Altria Group Inc. (NYSE: MO), $66.05
> Industry: Big Tobacco
> Yield: 3.8%
> 52-week range: $60.01 to $77.79
American Water Works Co. Inc. (NYSE: AWK), $78.75
> Industry: America’s largest water utility
> Yield: 2.05%
> 52-week range: $71.70 to $92.37
American Electric Power Co. Inc. (NYSE: AEP), $66.50
> Industry: Large U.S. utility
> Yield: 3.6%
> 52-week range: $62.69 to $78.07.
Clorox Co. (NYSE: CLX), $127.00
> Industry: Consumer products
> Yield: 2.4%
> 52-week range: $123.58 to $150.40
Coca-Cola Co. (NYSE: KO), $44.90
> Industry: Beverages and soft drinks
> Yield: 3.1%
> 52-week range: $40.22 to $48.62
Conagra Brands Inc. (NYSE: CAG), $35.65
> Industry: Food giant
> Yield: 2.25%
> 52-week range: $32.16 to $41.68
Duke Energy Corp. (NYSE: DUK), $76.30
> Industry: Largest American utility by value
> Yield: 4.5%
> 52-week range: $75.81 to $91.80
Johnson & Johnson (NYSE: JNJ), $132.25
> Industry: Health, pharma, consumer products
> Yield: 2.3%
> 52-week range: $112.62 to $148.32
Kimberly-Clark Corp. (NYSE: KMB), $113.00
> Industry: Consumer products giant
> Yield: 3.3%
> 52-week range: $109.67 to $136.21
Kraft-Heinz Co. (NASDAQ: KHC), $74.25
> Industry: American and global food giant
> Yield: 3.2%
> 52-week range: 74.71 to $97.70.
McDonald’s Corp. (NYSE: MCD), $164.75
> Industry: The king of fast (and cheap) food
> Yield: 2.3%
> 52-week range: $123.95 to $178.70
PepsiCo Inc. (NYSE: PEP), $114.90
> Industry: Beverages, soft drinks and snack foods
> Yield: 2.6%
> 52-week range: $104.53 to $122.51
Procter & Gamble Co. (NYSE: PG), $81.05
> Industry: Consumer products giant
> Yield: 3.1%
> 52-week range: $80.10 to $94.67
Verizon Communications Inc. (NYSE: VZ), $50.50
> Industry: Telecom
> Yield: 4.3%
> 52-week range: $42.80 to $54.77
Walmart Inc. (NYSE: WMT), $100.10
> Industry: World’s largest retailer
> Yield: 1.9%
> 52-week range: $66.37 to $109.98
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