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Article Overview:
- Definition of consumer stocks
- Understanding defensive stocks
- Statistical insights of Procter & Gamble and Pepsico Inc.
Stock market investments are risky, and only those who have a fair degree of risk tolerance, ready to take losses in their stride, are the ones who can invest in shares. Whether you lose or gain from claims depends significantly on the investment strategies and portfolio. As a factor of safety, you must create a balanced and diversified portfolio to avoid the risk of putting all eggs in one basket. Having consumer defensive stocks in your portfolio is necessary to steady the ship when things go wrong.
Having an assortment of assets means that should some company shares perform poorly that cause losses, the damage will be minor. There are chances of neutralizing the effects owing to better performance of some other company shares you own. Although some investors can take high risks and often make high gains, the average investor would like to take the middle path. They take some calculated risks at times but would usually play safe.
The current scenario of the stock markets provides the perfect opportunity to focus on some of the best consumer defensive stocks that can help resist and overcome the tremors of the market.
Consumer defensive stocks – what is it?
As you can make out from the name, stocks that help you build a defense for your portfolio against any adverse movements belong to the category of defensive stocks. Although making profits or earning high returns is the goal of all investors, stock market investors have some other goals, too. They develop strategies to protect their portfolio and insulate it from the shocks of sudden market dip or financial downturn. Defensive stocks are very stable and provide consistent dividends regardless of the stock market condition. Defensive stocks tend to be more durable because there is a constant demand for the companies’ products that lend stability to the stocks during various phases of business.
However, defense stocks are not defensive stocks, as many people might think by figuring out the term’s literal meaning. Defense stocks manufacture defense equipment and weapons like ammunition, tanks, fighter jets, rifles, and many more.
Which type of company stocks are defensive stocks?
Going by the definition of defensive stocks, it might not always be correct to label some companies safe enough to offer defensive stocks. But as a rule of the thumb, companies that manufacture household and personal products, food and beverages, tobacco, and packaging usually come under this category. You can even consider companies providing education when looking for defensive stocks. By now, you must have got your answer to the question – what is a consumer defensive stock.
Now that the stock markets worldwide are reeling under the fears of discovering Omicron, a new variant of the novel coronavirus, and stock prices falling sharply, the defensive stocks are gaining prominence.
Here are some defensive stocks that can be hot buys now to protect your portfolio from the erosion of other stock prices.
The Procter & Gamble Company (PG)
PG is a renowned name worldwide in packaged consumer goods and the company founded in 1837 is among some of the oldest companies in the world. Healthcare, beauty, grooming, feminine, baby and family care, and fabric and home care are the five segments of operations of the company. The company uses various marketing channels like e-commerce, mass merchandisers, grocery stores, department stores, drug stores, and membership club stores for selling its products.
At the end of the first fiscal quarter on September 30, 2021, the company reported a 5.3% increase in net sales of $20.34 billion year-on-year. During this quarter, the company cash and equivalents amounted to $10.37 billion. The company’s EPS is likely to grow at 7% per year for the next five years. Out of 70 stocks in the Consumer Good industry, PG ranks #9.
Pepsico, Inc (PEP)
The worldwide food, snacks, and beverage business need no introduction. The company’s revenues for the third quarter of its fiscal on September 4, 2021, reported an increase of 11.4% to $20.19 billion year-over-year. The company’s non-GAAP profit touched $10.82 billion, a 9.2% rise over the previous year. Over the past nine months, the stock gained 24.7% and traded at $161.14 on November 27, 2021.
These stocks are good bets for those looking to buy consumer defensive stocks.
