The markets are unusually volatile right now and it’s only to be expected when there are so many uncertainties with respect to COVID, U.S.-China relations and the economic situation. Analyst opinions, market research data, employment data and government announcements all do their bit to add to this volatility.
Any bit of news leads to overreaction by investors, including panic buying and selling. It’s exactly in times like this that a defensive strategy could come in useful.
So what exactly does it mean?
A defensive strategy looks at low-return steady performers, often companies dealing in everyday essentials that have fairly inelastic demand. These companies also pay a dividend.
The strategy works in a normal market too, for risk-averse, or new investors, or those that haven’t been studying the market for long. But in times like this, they are a no-brainer.
Not only does this strategy help you weather the storm but it also allows you to earn an income. Moreover, adding a few defensive plays to your portfolio helps you hedge your riskier bets.
So here are the main points I’ve considered when picking these stocks-
First, I’ve taken Zacks buy-ranked stocks. Zacks ranks are based on a number of considerations, including broker recommendations and estimates. They can therefore be leveraged to identify stocks with above average near-term upside potential.
Second, a beta value less than 1. While beta values of 2 or 3 may be acceptable in normal times, low volatility is typically understood by a beta value less than 1. Beta compares volatility of securities with that of the market. Zacks-calculated beta makes a 5-year comparison with the S&P 500.
Third, since we are looking for companies with some level of predictability here, I’ve picked those with at least 20% EPS growth over the last five years.
The fourth criterion is a minimum 10% estimated EPS growth for the current fiscal year, indicating that any fallout from the current crisis is limited.
Finally, each one pays a dividend that yields at least 2%.
Chicago-based AbbVie is a well-known pharma company that recently acquired Botox maker Allergan (NYSE:AGN) for $63 billion. The deal lowers its dependence on its flagship product Humira, which has lost patent protection in Europe and will face biosimilar competition in the U.S. in 2023. AbbVie’s Imbruvica is one of the most popular cancer drugs, which along with its newest drugs Skyrizi (risankizumab) and Rinvoq (upadacitinib) position it well for long-term growth.
Zacks Rank #1
Beta 0.85
5-year historical EPS growth 21.62%
Estimated EPS growth in 2020 19.74%
Dividend Yield 4.87%
BristolMyers Squibb Company (BMY)
New York-based Bristol-Myers Squibb (NYSE:BMY) is a one of the leading global specialty biopharmaceutical companies developing treatments for serious diseases. In addition to its blockbuster immune-oncology drug, Opdivo, Bristol-Myers has other oncology drugs like Revlimid, Sprycel, Yervoy and Empliciti. Its important immunology and cardiovascular drugs are Orencia and Eliquis.
Zacks Rank #2
Beta 0.72
5-year historical EPS growth 21.90%
Estimated EPS growth in 2020 30.92%
Dividend Yield 2.99%
Eagle Bancorp (NASDAQ:EGBN) Montana, Inc. EBMT
Helena, Montana-based Eagle Bancorp (NASDAQ:TBBK) operates as a holding company for American Federal Savings Bank that provides retail banking services in the south central portion of Montana. The company offers various deposit and loan products and services. The Bank is a federally chartered savings bank, engaging in typical banking activities: acquiring deposits from local markets and investing in loans and investment securities. Eagle Bancorp also offers real estate construction loans; consumer loans comprising auto loans, RV loans, boat loans, personal loans and credit lines, and deposit account loans; and commercial loans.
Zacks Rank #2
Beta 0.69
5-year historical EPS growth 20.98%
Estimated EPS growth in 2021 10.51%
Dividend Yield 2.04%
H&R Block, Inc. HRB
H&R Block Inc (NYSE:HRB). is a leading provider of tax preparation services. The company provides assisted income tax return preparation services, do-it-yourself (DIY) tax solutions and other products and services associated with income tax return preparation in the U.S., Canada and Australia.
Zacks Rank #1
Beta 0.81
5-year historical EPS growth 10.41%
Estimated EPS growth in 2020 332.34%
Dividend Yield 5.49%
Mackinac Financial (NASDAQ:MFNC) Corporation MFNC
Formerly known as North Country Financial Corporation, Manistique, Michigan-based Mackinac Financial Corporation operates as the bank holding company for mBank, which provides commercial and retail banking products and services in the U.S.
Zacks Rank #2
Beta 0.83
5-year historical EPS growth 17.29%
Estimated EPS growth in 2020 15.38%
Dividend Yield 5.30%
Virtu Financial (NASDAQ:VIRT), Inc. VIRT
New York-based Virtu Financial leverages cutting-edge technology to provide a wide array of financial services covering execution, liquidity sourcing, analytics and broker-neutral, multi-dealer platforms. The company was founded in 2008.
Zacks Rank #1
Beta -0.45 (negative value indicates inverse relationship with the market, i.e., it will move in the opposite direction as the market)
5-year historical EPS growth 22.84%
Estimated EPS growth in 2020 448.18%
Dividend Yield 4.17%
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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HR Block, Inc. (HRB): Free Stock Analysis Report
AbbVie Inc. (ABBV): Free Stock Analysis Report
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Eagle Bancorp Montana, Inc. (EBMT): Free Stock Analysis Report
Mackinac Financial Corporation (MFNC): Free Stock Analysis Report
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