You get the sense the investors are pretty sure that the days of no volatility and calm markets that always seem to go higher are over, and it’s probably about time. For years, investors saw the market grind its way higher from a breakout over 1,500 on the S&P 500 on April 1 of 2013, to the current 2,717 level, a staggering 80% move. But 2018 has changed all that, and it may be time to get defensive.
Defensive sectors like consumer staples, utilities, telecommunications and real estate investment trusts (REITs) may be boring, but they are good areas to be in if the market decides to blow up. We screened the top stocks in those sectors in the Merrill Lynch research universe database and found five stocks rated Buy with which you can sleep at night.
Coca-Cola
This top Warren Buffet holding not only offers safety but an incredibly strong worldwide brand with 40% overseas sales. 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, the company’s 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 number one provider of sparkling beverages, ready-to-drink coffees and juices and juice drinks.
Through the world’s largest beverage distribution system, consumers in more than 200 countries enjoy Coca-Cola beverages at a rate of more than 1.9 billion servings a day. With coolers getting packed for picnics, parades and vacations you can bet that they will be stuffed with products from this iconic American company. Also remember that the company also owns 16.7% of Monster Beverage, which continues to deliver big numbers.
Coca-Cola investors are paid a solid 3.58% dividend. The Merrill Lynch price target for the stock is $52, while the Wall Street consensus target is set at $49.87. The stock traded early Tuesday at $43.43 apiece.
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Duke Energy
Duke Energy Corp. (NYSE: DUK) operates as a regulated utility company in the United States and is based in Charlotte, North Carolina. The company operates regulated electric utilities in the Midwest, Florida and the Carolinas and supplies electric service to approximately 7.5 million residential, commercial and industrial customers. Duke owns 50,000 megawatts of capacity.
The regulated gas utilities serve more than 1.6 million customers in the Carolinas and Ohio. A commercial arm owns contract renewables and pipelines across the United States. The Merrill Lynch analysts recently upgraded the stock and noted why:
We upgrade shares to Buy and raise our price target as we up estimates are a victim of large-cap regulated utility sell-off. Wall Street still does not believe management at $5.19 versus the Merrill Lynch estimate of $5.35 and implied range of $5.30-5.60. Story has been sizably de-risked in North Carolina, trading at 3-yr low and a 15% discount to peers on 2020 price to earnings.
Duke Energy shareholders are paid an outstanding 4.5% dividend. The Merrill Lynch price target now stands at $84, above the consensus target of $82.14. The shares traded at $78.85 Tuesday morning.
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Kraft Heinz
Kraft Heinz Co. (NYSE: KHC) was formed almost three years ago via the merger of H.J. Heinz and Kraft Foods. The company is the leading global food company, with $29 billion of annual revenues generated by well-known brands such as Kraft, Heinz, Oscar Meyer and Maxwell House.
The company is the third largest food and beverage manufacturer in North America, and it derives 76% of revenues from that market and 24% from International. The company’s many brands also include ABC, Capri Sun, Classico, Jell-O, Kool-Aid, Lunchables, Ore-Ida, Oscar Mayer, Philadelphia, Planters, Plasmon, Quero, Weight Watchers Smart Ones and Velveeta.
Shareholders are paid a 3.95% dividend. Merrill Lynch has an $85 price target, and the consensus target was last seen at $67.59. The stock was trading at $63.00 per share.
Simon Property
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.
One key driver of growth will include the more than $1.0 billion in development/redevelopment planned over the next few years. Merrill Lynch also feels that the company’s high-quality portfolio is weathering the retail storm better than most.
Shareholders are paid a 4.4% distribution. The $190 Merrill Lynch price target compares with a $184.86 consensus target. The shares were trading at $170.85.
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Verizon Communications
The stock of this top telecommunications company offers tremendous value and is still down almost 15% from highs posted back in February. Verizon Communications Inc. (NYSE: VZ) is a global leader in delivering the digital world.
Verizon Wireless operates America’s self-described most reliable wireless network, with 109.5 million retail connections nationwide. Verizon also provides converged communications, information and entertainment services over America’s most advanced fiber-optic network, and it delivers integrated business solutions to customers worldwide.
The company reported better-than-expected first-quarter results, as the wireless carrier lost fewer monthly phone subscribers than feared, and the company’s chief financial officer said it was continuing to explore a new video service. Total operating revenue rose to $31.77 billion from $29.81 billion a year earlier.
Verizon investors are paid an outstanding 4.76% dividend. Merrill Lynch has set a $58 price target. The posted consensus target is $55.88, and the stock traded at $49.49.
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These five top companies are liquid, pay big dividends and look like safe havens as the market volatility continues to churn. Needless to say, a massive market sell-off will take everybody down, but these five will weather the storm better than tech momentum darlings.
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