2 Defensive Stocks That Deserve a Spot in Your Portfolio
Amid uncertainty regarding the Fed's December rate hike, market volatility is rife, evident from the CBOE Volatility Index's 28.3% year-to-date gains. Following rapid monetary policy tightening, global investment banks have predicted a downturn in economic growth in 2023.
However, the U.S. economy seems resilient enough to sustain losses, and optimism is afloat. According to John Augustine, a chief investment officer with Huntington Private Bank, "We think stocks could stabilize. Inflation seems to be cooperating. So far earnings are too."
Nonetheless, caution remains critical at this hour, and defensive stocks could help investors wade through this phase with stable income generation. Therefore, fundamentally strong stocks Altria Group, Inc. (MO) and Sprouts Farmers Market, Inc. (SFM) might be ideal additions to your portfolio.
Altria Group, Inc. (MO)
MO and its subsidiaries manufacture and distribute smokeable and oral tobacco products in the United States. The corporation sells cigarettes, primarily under the Marlboro brand. It sells tobacco products to wholesalers and major retail businesses.
On October 27, 2022, MO signed a strategic alliance with JT Group. This collaboration aims to reduce harm for smokers across the globe and is a one-of-a-kind partnership toward launching smoke-free products.
On October 19, 2022, MO announced its agreement with a subsidiary of Philip Morris International Inc. (PM), which provides MO with cash payments totaling about $2.70 billion. Billy Gifford, MO's CEO, said, "We believe that this agreement provides us with fair compensation and greater flexibility to allocate resources toward Moving Beyond Smoking."
MO's gross profit came in at $3.70 billion for the third quarter that ended September 30, 2022, up marginally year-over-year. Its operating income came in at $3.11 billion, up 5.5% year-over-year, while its EPS came in at $0.12, compared to a loss per share of $1.48 in the year-ago period.
Street expects MO's revenue to increase marginally year-over-year to $21.06 billion in 2023. Its EPS is estimated to grow 4.3% year-over-year to $5.05 in 2023. It surpassed EPS estimates in three of four trailing quarters. Over the past year, the stock has gained 5.4% to close the last trading session at $45.82. It has a beta of 0.69.
MO has an overall B rating, which equates to a Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Quality. Within the A-rated Tobacco industry, it is ranked #3 out of 9 stocks. Click here for the additional POWR Ratings for MO (Growth, Value, Stability, Sentiment, and Momentum).
Sprouts Farmers Market, Inc. (SFM)
SFM operates as a food retailer and grocery store. The company's offerings include fresh, natural, organic food like fresh produce, bulk foods, vitamins and supplements, packaged groceries, meat and seafood, deli, baked goods, dairy products, frozen foods, body care, and natural household items.
In November, Jack Sinclair said, "We are excited about bringing the holiday season to life in our stores and are well-positioned to benefit from the ongoing health and wellness trends."
On November 2, 2022, SFM announced its partnership with DoorDash Inc. (DASH) for on-demand grocery delivery in select cities. Customers could order fresh, natural, and organic products from SFM by using the DASH mobile app or website. This innovative and convenient facility is projected to generate substantial revenue for SFM and DASH.
SFM's net sales came in at $1.59 billion for the third quarter that ended October 2, 2022, up 5.4% year-over-year. Moreover, its gross profit came in at $583.65 million, up 8.1% year-over-year. Its EPS came in at $0.61, up 8.9% year-over-year.
SFM's revenue is expected to increase by 6% year-over-year to $6.78 billion in 2023. Its EPS is expected to grow 3.4% year-over-year to $2.41 in 2023. It surpassed EPS estimates in all four trailing quarters. Over the past year, the stock has gained 23.7% to close the last trading session at $33.51. It has a beta of 0.42.
SFM has an overall B rating, equating to a Buy in our POWR Ratings system. The stock has an A grade for Quality. It is ranked #20 out of 39 stocks in the A-rated Grocery/Big Box Retailers industry. We have also rated SFM for Growth, Value, Stability, Sentiment, and Momentum. Get all SFM ratings here.
MO shares were trading at $46.03 per share on Wednesday afternoon, up $0.21 (+0.46%). Year-to-date, MO has gained 2.98%, versus a -14.21% rise in the benchmark S&P 500 index during the same period.