This year’s ongoing stock market strength is sending growth stocks surging again, but don’t discard defensive stock selections. The music may stop soon, and you don’t want to be the one left holding the bag. The Fed remains in a holding pattern, even if analysts read dovish sentiment in Powell’s remarks, and the yield curve remains inverted.
While you definitely shouldn’t eschew growth, tech or small-cap stocks, especially if you’re younger and have capital growth at the forefront of your investment strategy, don’t discount defensive stocks. Defensive stocks tend to remain stable during good times and bad, balancing reduced returns in bull markets with improved prospects in bearish conditions. If nothing else, anchoring speculative investments with these defensive stocks is a solid way to diversify your portfolio and protect against whatever may come next.
Constellation Brands (STZ)
Earlier this week, I talked about Constellation Brands’ (NYSE:STZ) strength as a cannabis stock, but that segment is just a small slice of the beverage market’s overall position — and the riskiest. The rest of Constellation’s operational model hinges on the success of its wide-ranging alcohol production and distribution model. That model, boasting brands like Modelo, Corona, Funky Buddha and a handful of other beer, wine and liquor labels, is successful enough to see sales explode over the past 10 years.
Part of Constellation’s defensive stock nature — besides the perennial popularity of most alcohol varieties, no matter the economy — is its diversified portfolio with growing segments that serve to offset slumps in others. Recently, beer sales in the lower-priced segments slumped. Still, Constellation says its premium brands will offset the dip enough to boost 2024’s projected revenue by as much as 9%, even as consumer discretionary brands continue their belt-tightening and austerity measures.
Constellation offers a modest dividend, shaking out to a 2.41% total yield with buybacks, so investors can also count on some additional beer money in their pocket when investing in this defensive stock.
Oracle (ORCL)
A tech stock like Oracle (NYSE:ORCL) may seem an odd choice on a list of defensive stocks, considering how even the strongest tech companies keep cutting costs and laying off staff. But B2B megalith Oracle has been largely immune from the tech sector’s fallout, remaining a top stock on the S&P 100 index and offering ERP, supply chain management, CRM and cloud solutions to some of the most well-known companies on the market.
Oracle stock boomed earlier this month after a solid earnings beat. That prompted company CEO Safra Catz to tell investors, regarding 2024’s projected growth, “Some of these goals might prove to be too conservative given our momentum.” Ultimately, Oracle’s defensive stock strength is all but assured, as companies of all sizes and stripes depend on the services it provides. Oracle’s wide-ranging software solutions are vital to their daily operations, and the switching costs are far too high to make, considering a cheaper competitor worth it.
Berkshire Hathaway (BRK-A, BRK-B)
Of course, few defensive stocks are as solid or internally diversified as Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B). Investing in Berkshire is a top strategy to follow Warren Buffett’s lead amid questionable economic conditions, while also cutting out the risk of selecting individual defensive stocks. With a diverse portfolio of more than 50 companies across various industries, such as real estate, transportation, energy and consumer goods, Berkshire Hathaway offers a straightforward path to diversification that places a premium on value and financial fundamentals.
Investors can tap into the Oracle of Omaha’s unique investment philosophy and market predictions by choosing Berkshire Hathaway. For example, Buffett is adopting a cautious stance in today’s high-rate regime, divesting from stocks like Chevron (NYSE:CVX) and others to maintain a robust cash reserve. The strategy of internal “rebalancing” can protect investors from adverse economic developments, while also preparing to capitalize on future opportunities by investing in undervalued companies. That includes a secret stock Buffett is building an increasingly large position in.
On the date of publication, Jeremy Flint held no positions (directly or indirectly) in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.