3 Top Defensive Stocks for Your Portfolio

Author: Craig Adeyanju

Estimated read time: 2 minutes

Publication date: 28th Oct 2019 10:40 GMT+1

With the lingering trade dispute between the United States and China, along with global economic growth concerns, predictions of an impending recession shouldn't be taken lightly — even for conservative investors. It generally a good practice to ensure a balanced portfolio, with limited exposure recession susceptible stocks. Adding defensive stocks to your portfolio can help you achieve some balance.

Defensive stocks are those whose underlying businesses have existed through different economic cycles and perform well regardless of the economic cycle. Stocks in the consumer staples, utilities, energy and healthcare sectors are generally considered defensive. Here're some defensive stocks to buy.


Costco Wholesale Corporation

Market Capitalization: $130.36 billion

Annualized Dividend & Yield: $2.60 (0.88%)

Year-To-Date Performance: 45.55%

Consensus Analyst Rating: Buy

Costco Wholesale Corp. (NASDAQ: COST), membership warehouse chain, belongs in the discount store industry. From the industry name, one can tell that it should fair relatively better in recessions — a period when consumers are always looking to stretch every dollar.

Between the beginning of 2008 and the end of 2009, which is about the time that the last global recession peaked, COST stock lost 15.18%. The S&P 500 lost 24.06% over the same period. By the end of 2010, COST has already back around pre-recession levels. The year 2011 saw the wholesale chain reach new all-time highs.

Impressively, Costco managed to grow its revenue by 6.51% between 2008 and 2009. Although, net income dipped by 8.2% during that time.


CVS Health Corporation

Market Capitalization: $84.66 billion

Annualized Dividend & Yield: $2.00 (3.08%)

Year-To-Date Performance: -0.64%

Consensus Analyst Rating: Buy

CVS Health Corp. (NYSE: CVS) is a health services and plan provider in the United States. These services are generally resistant to economic downturns because people will always need health services.

CVS stock lost nearly 19% between the beginning of 2008 and 2009. Over the same period, CVS grew its revenue by 28.68% and net income by 40.12%. Having acquired Aetna in a $69 billion deal, CVS now has an expanded reach in the U.S. that a recession is unlikely to significantly affect its business.


The Coca-Cola Company

Market Capitalization: $229.84 billion

Annualized Dividend & Yield: $1.60 (2.93%)

Year-To-Date Performance: 13.52%

Consensus Analyst Rating: Buy

Global food and beverage company Coca-Cola Co. (NASDAQ: KO) is another company that weathers a recession better. During the financial recession between 2008 and 2009, KO stock lost roughly 7.4%, which is a fairer performance than the S&P 500's 24% loss. During the same period, it grew its revenue by 7.39% and its net income by 14.09%.

Disclaimer: The writer is an experienced financial consultant who writes for Finscreener.org. The observations he makes are his own and are not intended as investment or trading advice.