The search for stability and stable returns over time ought to be a primary focus of most investors right now. Yes, risk-taking growth investors have been rewarded during this record bull market in recent decades. However, there’s an entire class of investors who haven’t lived through a crash and seen what it can do to investors psychologically over periods of time. Needless to say, now is the time to pursue defensive stocks.
It’s unclear whether the Federal Reserve will be able to step in and save the day, if certain risks such as a sovereign debt crisis or other monetary policy-related issues take hold. Accordingly, a flight to safety could be in order, but if you’re buying after everyone else already is, that means it’s not likely many hedges will pay off in the way many may think.
For those looking to take a more defensive portfolio tilt right now, here are three equities I think are worth considering.
Coca-Cola (KO)
Among the top consumer packaged goods companies in the world, Coca-Cola (NYSE:KO) is best known for its core soft drinks business. However, the company has continued to expand beyond soft drinks, offering a range of snack products as well that makes this consumer discretionary stock one long-term investors would be right to consider at any point in an economic cycle.
In good times and bad, consumers are likely to reach for that affordable treat at the store or at a restaurant. In this way, Coca-Cola has built a business model that’s relatively recession-resistant. Furthermore, despite a relatively high multiple compared to its peers in the consumer discretionary space, this is a brand with some of the most incredible power in the world of beverages and snack goods.
If a recession is around the corner, having some portion of a portfolio insulated from volatility is a good thing. That’s not to say this stock can’t decline—it has seen sharp selloffs in the past. However, each selloff has proven to be a great buying opportunity in hindsight. This is largely due to the prevalence and importance of this global giant.
Berkshire Hathaway (BRK-B)
Warren Buffett is widely regarded as one of the best investors of all time. His Berkshire Hathaway (NYSE:BRK-B) represents a collection of companies spanning many industries. These industries stand out in their cyclical importance and defensive nature.
Buffett’s investing style has long since changed to one of buying quality companies at a fair price. In doing so, the investing giant has diversified his portfolio into higher-growth businesses. These businesses have plenty of economic upside during bull markets, but defensive positioning during downturns.
For those looking for exposure to tech, industrials, financials, insurance and energy companies, Berkshire’s portfolio of world-class publicly-traded stocks stands out as a beacon of hope in this new age of capitalism. You can see why this made our list of the top defensive stocks.
Restaurant Brands (QSR)
For investors looking for more international exposure in terms of defensive stocks, Restaurant Brands (NYSE:QSR) is among the top companies I’ve been pounding the table on in the past. QSR stock is down considerably from its recent peak, making now an intriguing time to consider adding exposure to this fast food giant.
Restaurant Brands operates a series of world-class banners in the fast food space. These include the likes of Burger King, Tim Horton’s, Popeye’s and other banners that have continued to provide solid growth. Much of this growth has come from emerging markets. Having said that, the company is also seeing strong same-store sales growth from its base.
Over time, I expect Restaurant Brands to be a steady growth stock. It may have cash flows that grow in line with the population growth seen in its core markets. Trading at just 17-times earnings with a 3.4% dividend yield, there’s a lot to like about this stock fundamentally. Furthermore, with a potential recession around the corner, this is the kind of stock investors may want to own for the so-called trade down effect. This is where diners opt for less-expensive meals out when strapped for cash.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
