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We have recently curated a list of the 10 Best Defensive Stocks According to Reddit. Today, we delve into where Philip Morris International Inc. (NYSE:PM) stands among these defensive stocks.
While September usually spells market downturns, the outlook for 2024 might be different with an anticipated rate cut. The current market conditions are marked by unpredictability, characterized by fluctuating highs and lows across different sectors. For the risk-averse investor, defensive stocks are a sensible choice in these times.
“Emphasizing Quality Stocks for Investors”
During a recent interview on Yahoo Finance, Emily Roland, the Co-Chief Investment Strategist at John Hancock Investment Management, shared insights on the impact of the September jobs report on the financial markets. Despite adding only 142,000 jobs in August, Roland remains optimistic about the economy’s prospects.
Addressing the market influence of NVIDIA and other tech giants like Broadcom, Roland suggested that any movement exceeding 50 basis points could hint at non-public information available to the Fed. While the economic outlook is not definitively pointing towards a recession, Roland noted a gradual deceleration in the US economy, accentuated by incomplete and weak economic data that complicates short and long-term predictions.
Roland expects measured steps from the Fed in cutting rates to prevent market jitters, advising investors to opt for quality stocks with strong balance sheets, high cash reserves, and robust return on equity rates to mitigate risks in this volatile environment.
She cautioned against overvalued mega-cap tech stocks and recommended exploring sectors like healthcare, consumer defensives, and utilities for investing in reasonably priced quality stocks.
Debate Over a 50 Basis Points Rate Cut
In another interview on Yahoo Finance, Claudia Sahm, Chief Economist at New Century Advisors, expressed concerns regarding the insufficient job additions in August to offset a potential downturn. Sahm advocated for an aggressive rate cut of at least 50 basis points to adapt to the unfolding economic scenario, contrasting Roland’s stance.
Citing Fed policies aimed at inflation control as a contributor to the soft job market, Sahm underscored the importance of comprehensive economic data beyond unemployment figures to gauge the economic trajectory accurately.
In times of market uncertainty, the focus shifts on secure investments. Explore the 10 best defensive stocks as per the Reddit list and also consider looking into the safest stocks to invest in currently.
Methodology Overview
In identifying the top stocks across utilities, finance, healthcare, and technology sectors, we scanned through multiple active subreddits. After compiling a preliminary list of 20 stocks, we narrowed down to the top 10 with the highest number of hedge fund holders as of Q2 2024.
Understanding why hedge fund preferences matter, our research indicates that mirroring the top stock picks of leading hedge funds can outperform the market. Our quarterly newsletter’s strategy, focusing on 14 small-cap and large-cap stocks each quarter, has shown a 275% return since May 2014, surpassing the benchmark by 150 percentage points (more details available here).
A line of factory workers assembling bottles of sparkling soft drinks on a conveyor belt.
The Coca-Cola Company (NYSE:KO)
Hedge Fund Holders: 68
The Coca-Cola Company (NYSE:KO) ranks seventh among the best defensive stocks currently. Based in Atlanta, United States, The Coca-Cola Company is a leading soft-drink manufacturer with a global reach encompassing over 500 brands across 200 countries.
Its successful business model focuses on localizing offerings. In Q2 2024, the company relaunched Ayataka, a popular tea brand in Japan, while also targeting major events like the Olympics and music festivals in Europe over conventional retailing.
With $12.3 billion revenue in Q2 2024, marking a 3% YoY growth, The Coca-Cola Company’s steady performance is evident with net sales climbing from $33 billion in 2020 to $46 billion in 2023. Over the past 5 years, its revenue and free cash flow have grown at 6% and 7% CAGR, respectively.
Being one of the biggest dividend payers, The Coca-Cola Company has consistently increased dividends by 3.65% over 5 years, maintaining a 67.74% payout ratio. Sustaining a dividend growth streak for 61 years, the company disbursed $8 billion in dividends in 2023 and is anticipated to pay out $8.4 billion in 2024, offering a forward dividend yield of 2.67% as of September 6.
As of the close of Q2 2024, The Coca-Cola Company was backed by 95 hedge funds with stakes totaling $31.98 billion. As of June 30, Berkshire Hathaway emerged as the largest shareholder with a $25.46 billion position.
PM holds the 6th position on our list of top defensive stocks. While acknowledging PM’s potential, we believe AI stocks offer superior returns in a shorter timeframe. For a promising AI stock trading at less than 5 times its earnings, refer to our report on the most affordable AI stock.
NEXT READ: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This content was originally published on Insider Monkey.