In times of economic hardship, defensive stocks are favored by investors for their resilience. These stocks are less vulnerable to the broader economic downturn and offer a sense of stability. As interest rates rise and the economy slows, investors are likely to turn to defensive stocks as a protective measure for their portfolios.
That said, here are three defensive stocks that investors may want to consider for their portfolios.
PepsiCo (NASDAQ:PEP) has emerged as a successful investment choice, delivering positive returns to shareholders. Despite facing significant cost pressures, the company implemented a successful pricing strategy that safeguarded profit margins without negatively impacting demand. Moreover, PepsiCo recently provided an optimistic outlook for 2023, raising expectations for sales and earnings performance.
Investors had plenty of reasons to be pleased with Pepsi’s recent sales update. Organic revenue growth remained strong at 14%, matching the impressive gains seen in 2022. Despite a slight decline in overall sales volumes, the acceptance of higher prices on snacks and beverages contributed to positive performance. PepsiCo reported a 3% decrease in food segment volume and a 1% increase in beverage volume. CEO Ramon Laguarta expressed satisfaction with the company’s performance and business momentum, highlighting the resilience of its categories and geographies.
PepsiCo’s acquisition of Frito-Lay has been instrumental in driving the company’s upward trajectory. With Frito-Lay contributing 27% of the total revenue, PepsiCo has successfully diversified its business. The brand’s presence across various grocery store sections, spanning snacks to beverages, positions it for sustained demand. While some investors may consider it late to invest in the stock, I believe it remains an attractive long-term investment opportunity.
Johnson & Johnson (JNJ)
Johnson & Johnson (NYSE:JNJ) is a prominent name in the medical industry, known for its solid business and reliable performance. Beyond its medical technology segment, the company also has a consumer health unit undergoing a spin-off. One compelling reason to invest in JNJ is the enduring demand for its products, ensuring its longevity in the market. It stands as a safe choice for retirement stocks and a resilient business overall.
In the first quarter, Johnson & Johnson exceeded market expectations with a revenue of $24.75 billion and an adjusted EPS of $2.68. However, the stock experienced a downturn as the company revised its 2025 sales target from $60 million to $57 million. On a positive note, Johnson & Johnson provided an optimistic outlook for 2023, anticipating sales of $97.9 billion to $98.9 billion and earnings per share between $10.60 and $10.70. These updates have generated mixed reactions among investors.
With over 135 years of operation, Johnson & Johnson has established a reliable foundation. The company’s commitment to consistent income is evident as it raised its dividend for the 61st consecutive year. Currently offering a 3.1% yield, its stock trades at less than 15 times this year’s earnings projections. Analysts anticipate moderate single-digit growth in both earnings and revenue.
Berkshire Hathaway (BRK-B)
Berkshire Hathaway (NYSE:BRK-B) is a promising candidate for the trillion-dollar club. With a market cap exceeding $700 billion, the conglomerate offers a diverse portfolio of private and public companies, including a significant stake in Apple. What sets Berkshire apart is its ability to secure exclusive deals inaccessible to ordinary and institutional investors.
Berkshire Hathaway increased its holdings of Occidental Petroleum in May 2023 and may continue to expand its stake in the company. The conglomerate received regulatory approval in August 2022 to potentially acquire up to 50% of Occidental.
Warren Buffett and Charlie Munger, the masterminds behind the firm, are known for their deliberate and astute deal-making approach. They have instilled the same principles in the next generation of portfolio managers, ensuring a smooth transition when the time comes. While no one can replicate Buffett or Munger, the existence of a well-established succession plan provides reassurance for future leadership changes.
On the date of publication, Chris MacDonald has a position in BRK-B. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.
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