3 Defensive Investments to Make as the VIX Surges to 6-Month Highs


  • Prioritize protection with these defensive stocks to buy.
  • Wendy’s (WEN): Wendy’s provides a cheap place to fill quick nutritional needs.
  • Kroger (KR): Kroger could rise as a downwind beneficiary of the trade-down effect.
  • TJX Companies (TJX): TJX Companies may see cynical upside from mass layoffs.
Defensive Stocks - 3 Defensive Investments to Make as the VIX Surges to 6-Month Highs

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With the VIX indicator moving to a six-month high, investors may want to consider gradually pivoting toward defensive stocks. To be clear, I’m not suggesting hitting the panic button. However, it makes sense to respond to a potentially significant dynamic.

Besides the rising VIX – otherwise known as the fear index – the benchmark S&P 500 fell below the 5,000 level. As Lawrence G. McMillan, president of MacMillan Analysis mentioned, this breach “changes the investment picture to a large extent.” Further, the expert warned that the downside move officially ended the firm’s bullish position.

Again, this isn’t about panicking but rather being prudent. Below are a few solid ideas for defensive stocks to buy.

Wendy’s (WEN)

a Wendy's (WEN stock) sign
Source: Jonathan Weiss / Shutterstock.com

A fast-food specialist, Wendy’s (NASDAQ:WEN) operates a quick-service restaurant in the U.S. and internationally. Per its public profile, the company is involved in the operation, development and franchising of its brand. While it’s not as popular globally as say McDonald’s (NYSE:MCD), Wendy’s provides a delectable alternative to the major labels.

Fundamentally, the company should benefit from the cheap pick-me-up narrative. Yes, during economic hardships, people whittle down their personal budgets to the necessities. However, it’s practically impossible to be so draconian. Sometimes, you just need a quick bite to eat and Wendy’s is able to provide just that.

Though its financial performance isn’t exactly blowing the doors down, it generally beats its bottom-line targets. Last year, outside of a poor fourth-quarter print, the company’s average positive earnings surprise came out to 5.57%.

For fiscal 2024, experts project earnings per share of 99 cents on sales of $2.26 billion. That’s a modest but credible improvement over last year’s 97 cent EPS on revenue of $2.18 billion. Thus, it’s one of the defensive stocks to buy.

Kroger (KR)

Kroger (KR) Supermarket. The Kroger Co. is One of the World's Largest Grocery Retailers.
Source: Eric Glenn / Shutterstock.com

As a grocery store giant, Kroger (NYSE:KR) inherently commands permanent relevance. After all, people need to eat. So, in that sense, KR easily makes the rounds as one of the defensive stocks to buy. However, on a specific note, Kroger benefits from the trade-down effect. Should inflation continue to stubbornly stymie American households, they’ll likely cut down on discretionary expenditures.

Now, part of discretionary spending marries with the essentials, such as going to restaurants for the aforementioned nutritional sustenance. However, going out to eat at pricey establishments is an easy item to axe from the budget. That money can be directed to Kroger, which helps the defensive stocks argument.

One of the most attractive aspects of the company’s business is consistently solid financial performances. In the past four quarters, its average positive earnings surprise clocked in at nearly 8%. Therefore, I have difficulty buying the current year projections calling for declines in both earnings and sales.

Instead, I believe the high-side revenue target of $152.74 billion – up from last year’s $150.04 billion – is more than credible based on the trade-down effect.

TJX Companies (TJX)

An outside shot of a T.J. Maxx (TJX) store in Romeoville, Illinois.
Source: Joe Hendrickson / Shutterstock.com

Speaking of discretionary spending, not every idea in the ecosystem is an unviable one. For defensive stocks to consider, I’d take a look at TJX Companies (NYSE:TJX). As part of the apparel space, TJX certainly carries a elements of discretionary retail. It specializes in name-brand apparel but via an off-price business model. That’s an important distinction.

Buying name-brand fashion exclusively if you don’t have your other financial obligations squared away is a surefire way to live paycheck to paycheck. However, should inflation continue to dog the economy, more mass layoffs could be on the horizon. In that case, upgrading the wardrobe for job interviews and other related matters would likely be a must. Here, you want to make your first impressions count.

For me, TJX is a buy because of its financial consistency. In the past four quarters, the company’s average positive earnings surprise landed at 7.58%. By the end of the current fiscal year, earnings could reach $4.08 per share on revenue of $56.23 billion. That’s a decent improvement over last year’s result of earnings of $3.86 on sales of $54.22 billion.

On the date of publication, Josh Enomoto 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.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.

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