Recent inflation reports spooked investors, sparking a sell-off on Wednesday, but defensive stocks could provide some stability the next time markets get rocky. The producer and consumer price indexes released this week showed annualized inflation still above 2%, a worrisome sign for investors hoping that the Federal Reserve could soon begin lowering interest rates. Now, fed funds futures pricing data suggests that the first rate cut could come as late as September, according to the CME FedWatch Tool. Those fears have contributed to a pullback in the market, with the S & P 500 slipping around 1% since the start of April. Still, the benchmark index has climbed 9% since the start of 2024. Investors could consider rotating into more defensively focused names to prepare for market volatility. On this front, CNBC Pro’s screener tool offers some ideas. To find these names, CNBC Pro looked for S & P 500 stocks that meet the following criteria: Beta under 1, meaning these names are less volatile than the market Net income compound annual growth rate of 20% or more over past three years Gross margins of 30% or more Upside to the average analyst’s price target of at least 10% Of the hundreds of stocks in the index, just four check all of these boxes. Click here to see the list, exclusively for CNBC Pro subscribers. Amid a period defined by artificial intelligence and technology’s outperformance, ServiceNow and Roper Technologies offer investors a way to both play defensive while staying exposed to the sector. ServiceNow has performed around in line with the Nasdaq Composite this year, with a gain of less than 10%. Of the 41 analysts covering the stock, 38 rate it a buy or strong buy, and the consensus average price target implies more than 10% in upside ahead for the software stock, according to LSEG. Roper, on the other hand, has struggled this year, with the software stock’s shares falling slightly in 2024. But analysts see a rebound on the horizon, with the typical one polled by LSEG having a buy rating with a price target reflecting a rally of more than 10%. The stock also has a dividend yield of 0.6%. NOW ROP YTD mountain ServiceNow vs. Roper, year to date Outside of technology, TJX also made the list. The parent of T.J. Maxx and HomeGoods has lagged the broader market this year, adding just over 2%.The average analyst polled by LSEG has a buy rating and sees shares jumping more than 16% in the next year. The stock has a dividend yield of 1.6%. Coterra Energy was the final name on the list. The average analyst has a buy rating and foresees nearly 14% of upside, per LSEG. Coterra has a dividend yield of 2.9%, and shares are up 9% this year. One of the analysts who is bullish on the stock is UBS’s Josh Silverstein. He said this week that Coterra was the firm’s only buy-rated name in the natural gas exploration and production space. Coterra has a “growing oil exposure, top-tier balance sheet, [and] strong shareholder return profile,” Silverstein told clients. “We don’t see them as an average E & P given this profile.”
These 4 stocks can help investors play defense as inflation rattles the market
Apr 12, 2024
