3 Defensive Stocks Weathering the Market Storm

Key Points

• The stock market declined dramatically last week, driven by a disappointing July jobs report and rising recession fears.
• Despite the market downturn, Johnson & Johnson, Coca-Cola, and Procter & Gamble posted gains, demonstrating resilience and potentially serving as defensive safe-haven investments.
• JNJ Closed the week up over 2%, breaking above major resistance, and reported strong earnings with a P/E of 10.23 and a 3.02% dividend yield.

In a week where fear, uncertainty, and widespread selling swept the market, three stocks stood out for their resilience: Johnson & Johnson NYSE: JNJ, Coca-Cola NYSE: KO, and Procter & Gamble NYSE: PG.

Despite the overall market closing down over 2% and breaking its uptrend support line, these stocks managed to post gains. The tech sector led the dramatic selling, falling over 5%, with all significant sectors following closely behind in the red. Is it time to consider these stocks' defensive or safe-haven plays during the volatile and uncertain market?

Stocks Plunge on Disappointing Jobs Report and Recession Fears

Stocks plummeted on Friday due to a weaker-than-expected July jobs report, heightening recession concerns. The S&P 500 fell 1.84% to 5,346.56, the Nasdaq Composite slid 2.43% to 16,776.16, marking a decline of over 10% from its recent all-time high, and the Dow Jones Industrial Average dropped 610.71 points, or 1.51%, to close at 39,737.26, hitting a session low with a 989-point drop.

The Labor Department reported that nonfarm payrolls increased by only 114,000 in July, down from June's 179,000 and well below the expected 185,000. The unemployment rate rose to 4.3%, the highest since October 2021.

Amid fears that the Federal Reserve's decision to maintain current interest rates might have been a mistake, investors flocked to bonds, pushing the 10-year Treasury yield to its lowest since December.

Megacap stocks saw significant losses last week, with Amazon plunging 8%  after missing revenue estimates and issuing a weak forecast, Intel dropping 26% on poor guidance and layoffs, and Nvidia falling 1.8% after a 6% decline the previous day.

3 Stocks Bucking the Trend

1. Johnson & Johnson: An Attractive Defensive Play

Johnson & Johnson, a US-based multinational pharmaceutical company, closed the week up by over 2% and broke above major resistance near $163 from earlier in the year. The company recently reported its earnings on July 17th, 2024, posting $2.82 earnings per share (EPS) for the quarter, beating the consensus estimate of $2.71 by $0.11. The firm earned $22.45 billion during the quarter, compared to the consensus estimate of $22.33 billion, with revenue up 4.3% compared to the same quarter last year. 

JNJ appears attractive from a defensive standpoint and as a value and income play, with a P/E of 10.23 and a dividend yield of 3.02%.

2. Coca-Cola: A Safe Haven in Volatile Markets

The Coca-Cola Company, a leader in the beverage industry, has long been considered a safe haven in volatile markets. The company is a top-rated dividend stock, with a dividend yield of 2.8% and a P/E of 27.73. Despite the sea of red, shares of Coca-Cola closed the week at 52-week highs, ending the week up 3.4%.

Like JNJ, KO recently reported earnings and topped estimates for the quarter. On July 23rd, 2024, Coca-Cola posted $0.84 EPS for the quarter, beating the consensus estimate of $0.81 by $0.03. The business earned $12.40 billion during the quarter, compared to analyst estimates of $11.78 billion, with quarterly revenue up 3.3% year-over-year. Analysts are bullish on KO, with a Moderate Buy rating based on 15 analyst ratings and a consensus price target forecasting over 1% upside.

3. Procter & Gamble: Known for Its Strength in Market Downturns

Procter & Gamble, a consumer goods behemoth, is known for weathering market downturns due to its essential products and broad portfolio. PG ended the week up just over 0.5%, near its 52-week high and potential breakout level. 

The company, which has a 2.37% dividend yield, recently reported earnings and topped analysts' EPS estimates. On July 30th, 2024, Procter & Gamble posted $1.40 EPS for the quarter, beating the consensus estimate of $1.37 by $0.03. The firm earned $20.53 billion during the quarter, compared to the consensus estimate of $20.69 billion. Based on twenty-one analyst ratings, PG has a Moderate Buy rating and a price target forecasting over 2% potential upside.