Following a 24% S&P 500 return in 2023 and 7.8% year-to-date (YTD) gains in 2024, investor satisfaction is running high.
However, volatility teaches caution, prompting a shift to defensive stocks for investors seeking stability amid potential market downturns. While defensive stocks offer less growth potential in bull markets, they provide security during market volatility. That’s a position I think a lot of investors find themselves in right now.
While optimism is warranted, acknowledging potential obstacles is crucial. For instance, last year’s banking crisis and ongoing commercial real estate challenges signal caution. Defensive stocks offer stability even in bull markets, providing reliable dividends amidst market fluctuations.
Let’s explore three defensive stocks to add to your lineup.
PepsiCo (PEP)
PepsiCo (NASDAQ:PEP) disappointed investors with a rare revenue miss in North America due to temporary price hikes, leading to a stock drop. Despite challenges like high interest rates, its mature status and consistent performance make it a valuable investment. Also, Pepsi offers a whopping 3.1% dividend yield, showcasing a 9.5% revenue growth in 2023.
Currently, PepsiCo is a crowd favorite regarding defensive stocks, since it’s perfect for investors seeking growth in consumer staples. Its diversified portfolio includes beverage and snack brands, such as Frito-Lay, offering additional revenue streams. Despite challenges in 2023, like shifts in consumer habits due to weight loss drugs, Pepsi attributed a rare revenue miss to pricing adjustments.
In other news, PepsiCo marked 50 years in Ireland with ’50for50′ campaign, starting with a tree-planting event at the Crann Centre. This underscores the company’s commitment to community welfare. Since 1974, PepsiCo has been integral to Cork’s food industry, aiming to inspire positive change through 50 charitable acts. Kate Jarvey, Crann Centre founder, noted the symbolic gesture, symbolizing growth and resilience.
For long-term investors seeking growth, income and a good corporate citizen, PepsiCo is looking more and more like the defensive pick worth considering.
Berkshire Hathaway (BRK-B)
Despite adding to some positions in Berkshire Hathaway’s (NYSE:BRK-B) portfolio and initiating new ones in 2023, Warren Buffet has consistently sold stocks for the past five quarters.
The robust market performance has left Buffett with a significant cash reserve of $167.6 billion by the end of 2023, challenging his investment choices. However, one stock stands out as an exception. Buffett continued purchasing shares throughout 2023 and is likely to continue doing so.
Also, the company embodies the “blue-chip” concept, historically outperforming the market. Despite recent stagnant returns, its value investing strategy under Warren Buffett’s patient guidance has been pivotal. Buffett’s contrarian approach of favoring undervalued stocks amasses a cash reserve of $157 billion amidst improving economic conditions.
This surplus suggests potential undervaluation, reflecting Berkshire’s resilience amid macroeconomic uncertainties.
Total Stock Market ETF Vanguard (VTI)
Many investors love Vanguard’s Total Stock Market ETF (NYSEARCA:VTI) because of the exposure to a wide range of stocks. Vanguard tracks over 3,700 companies in the U.S.
While it aligns with the S&P 500‘s structure, it offers exposure beyond the dominant stocks. The fund’s diversification appeals to those seeking broader market exposure beyond tech. ETFs simplify investment diversification across various industries, providing comfort and ease in portfolio management.
Standing out due to being simple yet effective, Vanguard fund is tied to the S&P 500. Thus, passive investors looking to ride the stock market’s wave higher can do so via this ETF and pay relatively minuscule fees.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
