Investing

Defensive Stocks Standing Strong as Broader Stock Market Indexes Tank

Jon C. Ogg

Published: August 7, 2019 11:15 am

Last Updated: January 30, 2020 5:39 pm

When the stock market is taking it on the chin, it’s often useful to take note of which stocks are rallying despite the negativity. This is a time when many investors seek refuge in defensive stocks that have little fluctuation during less than certain times. While true market crashes will punish almost all stocks, there always seem to be a handful of stocks that rally or hold their own during harder times.

24/7 Wall St. has taken a look at the defensive stocks that are holding up fine on a day that the Dow Jones industrials were down another 400 points and the S&P 500 had lost almost 35 more points.

Electric utilities tend to be a top defensive play when stocks are down, particularly when interest rates fall to lower their long-term borrowing costs. American Electric Power Co. Inc. (NYSE: AEP) was up 56 cents (0.6%) at $89.70 a share. Duke Energy Corp. (NYSE: DUK) was trading up $0.22 (0.25%) at $89.14. AEP has a dividend yield of 3.0% and Duke comes with a 4.2% dividend yield.

Water almost certainly will not go out of style under any logical circumstance. American Water Works Co. Inc. (NYSE: AWK), the nation’s largest water utility, was trading up 76 cents (0.6%) at $118.18. Aqua America Inc. (NYSE: WTR), which is now a water and gas utility following the acquisition of Peoples, was up $0.51 (1.2%) at $41.66 on Wednesday morning. American Water Works has a 1.7% dividend yield and Aqua America’s is 2.2%.

Food and beverages tend to be defensive as well, within reason as it pertains to costs. Coca-Cola Co. (NYSE: KO) was up $0.10 or 0.2% at $52.38. Rival PepsiCo Inc. (NYSE: PEP), which is beverages and snack foods, was down just two cents at $126.43. Coca-Cola has a dividend yield of 3.05% and PepsiCo comes with a 3.02% yield.

Consumer products tend to be rather defensive as well. Procter & Gamble Co. (NYSE: PG) was trading up 45 cents (over 0.3%) at $114.73. Clorox Co. (NYSE: CLX) was up $1.41 (0.9%) at $155.73. P&G comes with a 2.6% dividend yield while Clorox has a 2.75% yield.

Major pharmaceutical stocks tend to be defensive as well because people are going to need their medicines regardless of the economy. That said, drug prices remain a political target from both sides of the aisle these days. Bristol-Myers Squibb Co. (NYSE: BMY) was up 0.2% at $45.77. Larger rivals and Dow members Pfizer and Merck were both in the red. Bristol-Myers has a 3.5% yield.

Gold is also back in vogue as a defensive segment now that rates are tanking and geopolitical risks are plentiful. Newmont Goldcorp Corp. (NYSE: NEM) was up $1.25, or 3.3%, at $39.24. Barrick Gold Corp. (NYSE: GOLD) was $0.67, or 3.8%, higher to $18.24. These two gold-mining giants each have completed mergers and are now virtually the same size in market cap at about $32 billion. Newmont has a 1.47% yield and Barrick has just a 0.91% yield.

Any day you look at the sea of red in the market and see that the defensive stocks are the ones with the big gains, its means that investors are looking for refuge in the market.

On last look, the yield on the two-year Treasury note was 1.52% and the yield on the 10-year Treasury note was 1.61%. The yield on the 30-year Treasury note also was down to 2.14%. Many of these stocks handily outyield long-term Treasuries at this point, and investors assume that the value of stocks will rise over time.