Defensive companies have stable financial positions, reliable dividends, and predictable cash flows. Think of them as safe stocks.
Indeed, companies that provide defensiveness are sought after in times of stress. Right now, these safe stocks may be in higher demand, as capital continues to rotate in the market.
For those looking to take a defensive posture, here are three safe stocks I think are worth considering. These are among the top stocks in my portfolio and on my watch list right now.
Coca Cola (KO)
Coca-Cola (NYSE:KO) is a great option for those that value consistency over volatility over the long haul.
As a dividend stock, Coca-Cola is worth considering, having not decreased its dividend payout for 60 years, indicating a business that consistently invests in growth.
Despite having a relatively low dividend yield of 3%, Coca-Cola’s primary attraction lies in its predictability, which is not limited to its stable dividend but also its consistent share price.
With an increase in revenue percentage of over 8.3%, roughly 6% more than its 5-year median, and consistent profitability growth even in difficult market circumstances, the company has proven its reliability.
With a beta of 0.55, KO stock experiences roughly half the daily market movement, resulting in more gradual price declines compared to quick upward swings. This attribute makes it an appealing option for investors, especially during uncertain times.
Although Coca-Cola may not be the most exciting stock, it offers thriving revenues and earnings, resulting in a consistently increasing investment value. Regardless of accounting for its dividend payments, the value of the stock has increased by a factor of two over the last ten years.
Chevron (CVX)
Chevron (NYSE:CVX) is among the top dividend aristocrats and one of the two energy stocks in the list.
The energy sector was the only one among the 11 market sectors to have positive returns in 2022. The oil majors experienced higher profits due to record prices at the gas pump.
Traders are aware that prior success is no assurance of a successful future. Prices for gas are progressively rising currently, which is good for Chevron’s revenue in 2023 even if they compared favorably to the previous year at the start of the calendar year.
The company is likely to increase its share buybacks and dividend payments over time since that is how oil majors keep their investors satisfied. Chevron recently raised its quarterly dividend from $1.42 to $1.51.
Shareholders should expect revenue of at least $6.04 per share of CVX stock for the current year, plus the possibility of greater earnings in coming years.
Chevron has garnered the support of billionaires, such as Dalio who has invested $56 million and is also one of Buffett’s biggest holdings.
These billionaires may be drawn to CVX for similar reasons that make Devon a promising investment. However, Chevron’s status as a reliable business is undoubtedly a significant factor in their interest.
Berkshire Hathaway (BRK-B)
It is important to evaluate a stock’s fundamental strength before making a long-term investment decision, especially if following the investment strategies of renowned billionaire Warren Buffett.
Although Berkshire Hathaway (NYSE:BRK-B) is frequently suggested for buy-and-hold shareholders, it is always crucial to thoroughly research the shares prior to making an investment.
Berkshire Hathaway, with a market cap of $723.3 billion, is the biggest company on a U.S. stock exchange that hasn’t hit the trillion-dollar threshold.
Buffett recommends using operating cash flow to value Berkshire’s stock, but it decreased slightly in 2022 because of accounting-related issues within its financial and insurance holdings.
Therefore, it’s challenging to determine its aggregate value. It’s important to concentrate on the business’s assets and Buffett’s strategic investing approach rather.
Although Berkshire Hathaway has a history of producing profitable earnings, it may not consistently outperform the S&P 500 index. The shareholder letter for 2022 reveals that Berkshire’s stock has only dropped in four of the past 23 years since 2000, compared to the S&P 500, which fell in six.
— Chris MacDonald
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Source: Investor Place