A possible economic hurricane headed our way remains on the debate floor.
Indeed, the yield curve is inverted and un-inverting, which is perhaps more worrisome. Inflation is still high, with interest rates likely to remain higher for longer. Many investors are searching for portfolio cushions such as top-tier defensive stocks that can withstand Category 5 winds.
Of course, predictions of the stock market’s demise have been greatly exaggerated, at least for the past couple years. Many in the financial markets thought something would break in 2022, with an even greater likelihood of a recession catalyst forming this year. So far, that hasn’t been the case.
And so, the economic pain from the Federal Reserve’s rate hikes continues to flow through to the economy (via long and variable lags). However, a solid investment thesis supports defensive stocks. For those looking to add a more defensive posture right now, here are three of the best options in the market.
Restaurant Brands (QSR)
Restaurant Brands International (NYSE:QSR) has unveiled a fresh stock buyback program, committing to repurchase $1 billion of its common shares within the next two years.
This initiative follows the completion of the company’s previous $1 billion buyback program. The decision to engage in stock buybacks comes on the heels of robust Q2 financial results, which oversees Burger King, Popeyes, Firehouse Subs, and Tim Hortons.
In August, Restaurant Brands revealed a 10% rise in Q2 sales compared to the previous year. The company outperformed Wall Street expectations with earnings per share of 85 cents, exceeding the projected 77 cents.
Revenue reached $1.78 billion, surpassing analysts’ forecasts of $1.75 billion. Burger King experienced remarkable same-store sales growth in Q2, surging by 10.2%, nearly double the anticipated 5.3%. Over the last year, QSR stock has surged by 14%.
Coca-Cola (KO)
Coca-Cola (NYSE:KO) is known for its dividends, but it could also offer capital gains. Despite a 7% decline this year, strong fundamentals support it.
Rising inflation and return-to-office efforts may boost caffeine demand, providing yet another catalyst for the world’s largest soft drink maker.
Coca-Cola’s value as a defensive gem really lies within its brand strength, which bolsters its pricing power. That was the key support for some stellar earnings in Coke’s recent quarters.
Indeed, Coca-Cola’s forward earnings multiple at 24.2-times might seem high, but its consistent, sturdy financial performance and pricing strategies make it attractive. Despite economic challenges, Coca-Cola’s branding allows for successful price increases, resulting in remarkable revenue growth. In Q2, the company exceeded revenue and profit expectations and raised its annual outlook, reinforcing its market leadership.
Berkshire Hathaway (BRK-B)
Berkshire Hathaway’s (NYSE:BRK-B) insurance underwriting business surged by 74% in Q2, reaching $1.25 billion. In addition, the company’s cash reserves grew to nearly $150 billion, benefiting from high interest rates and a $26 billion unrealized investment gain.
Despite challenges in certain segments, Berkshire Hathaway’s diverse portfolio contributed to a 6.6% increase in Q2 operating earnings. With a significant insurance float of $166 billion and ample cash reserves, it remains an attractive long-term investment.
Over the course of the long-term, Berkshire’s portfolio is likely to outperform the market due to the unique diversified and weather-resistant nature of its holdings.
Warren Buffett is one of the greatest investors of all time. And while he won’t be around forever, his curated team to succeed him has learned from the very best. This is a stock investors can feel safe owning for the long-term as a way to add exposure to industrials and more economically-sensitive names in their portfolio.
On the date of publication, Chris MacDonald has a LONG position in BRK-B, KO, QSR. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
