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Which stocks offer a defensive play in case of a recession? Jim Tierney, AB CIO of Concentrated U.S. Growth breaks down which industrial sectors are most poised to protect investors amid a volatile economic situation.
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Defensive Stock Plays for Investors to Consider Amid Recession Concerns
As the economy continues to cope with the impact of the COVID-19 pandemic, investors are growing anxious about a looming recession. One way to weather the storm is to consider investing in defensive stocks, which are companies that tend to perform well in times of economic uncertainty.
Defensive stocks are typically found in industries that provide essential goods and services, such as healthcare, utilities, and consumer staples. These companies tend to have stable earnings, strong cash flows, and lower volatility than more cyclical stocks. Here are some defensive stock plays for investors to consider in the current economic climate:
1. Healthcare
The healthcare sector is a defensive play that investors should consider. Healthcare stocks have shown resilience during times of economic turmoil, as people tend to prioritize their health and well-being even during tough times. The sector also benefits from long-term demographic trends, including an aging population that requires more healthcare services.
Investors can look to healthcare companies such as Johnson & Johnson, UnitedHealth Group, and Pfizer. These companies have diverse product portfolios, strong cash flows, and significant resources to invest in research and development.
2. Utilities
Utilities are another defensive sector that investors should consider, as they provide essential services that consumers cannot do without. Utility companies operate in regulated markets, which means they have stable revenue streams and predictable earnings. These factors make utilities a good investment during a recession or other economic downturn.
Investors can look to companies such as Dominion Energy, Duke Energy, and American Electric Power. These utilities have a long history of steady dividends, which can provide a reliable source of income during tough economic times.
3. Consumer Staples
Consumer staples are products that people use on a daily basis, including food, beverages, household items, and personal care products. These products tend to be recession-resistant, as people continue to purchase them even during tough economic times.
Investors can look to companies such as Procter & Gamble, Coca-Cola, and PepsiCo. These companies have strong brand recognition, diverse portfolios, and significant resources to invest in marketing and research and development.
4. Telecom
Telecom is another defensive sector that investors should consider. Telecom companies are in a unique position to benefit from the increasing demand for internet and mobile connectivity. As people continue to work from home and rely on technology to stay connected with friends and family, telecom companies are well-positioned to benefit from this trend.
Investors can look to companies such as Verizon, AT&T, and T-Mobile. These telecom companies have solid revenue streams, strong cash flows, and significant resources to invest in expanding their networks.
In conclusion, defensive stock plays are a good option for investors looking to protect their portfolios during a recession or other economic downturn. Healthcare, utilities, consumer staples, and telecom are all sectors that historically perform well during tough economic times. Investors should do their research and consider their risk tolerance before investing in any defensive stocks.
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