US SHARES REVIEW - 'DEFENSIVE' STOCKS ARE SHINING BRIGHTLY: INVESTORS WANT 'JAM TODAY', NOT 'BLUE SKY' TOMORROW.
23rd August 2022
A wobble in the market is painful for most stock market investors. However, the silver lining on that particular cloud is the valuable evidence which it throws up, highlighting those stocks that are proving to be most resilient when investors are skittish.
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Our recently completed technical analysis of the S & P 100 index component stocks revealed that 15 of these have very bullish charts.
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The breakdown per sector is as follows:- 5 pharmaceuticals, 1 energy, 1 technology, 2 banking & finance, 1 defence and 5 consumer products.
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The pharmaceutical sector enjoyed an enormous boost to earnings from the Covid scare, but that may now be priced into these stocks. The danger in buying now, is that one may be buying on the crest of a wave - and with apologies for mixing my metaphors, that train has almost certainly left the station.
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The presence of one energy stock and one defence stock on the very bullish chart list, is not surprising due to the rise in oil prices and the invasion of Ukraine respectively.
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Two banking & finance stocks are included in the very bullish chart list. Again, that is not surprising, as rising interest rates should restore margins in that sector.
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The fact that one technology stock continues to have a very bullish chart, despite the correction in that sector, is particularly noteworthy. That stock is Qualcomm and I am pleased to report that it was one of the seven US stocks recommended on this website in December 2021. Refer to that article on the Market Topics section of this site for further information on this impressive business.
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That leaves us with the consumer products sector, which is a classic defensive sector i.e. these companies supply everyday essential items for consumers, so their earnings remain durable during downturns in the economy (but conversely, earnings don't rise very much in the good times).
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However, there are two stand out stocks in this sector; Procter & Gamble and Colgate Palmolive. Both of these also had very bullish charts, back in the days before the Ukraine invasion, when the market trend was strongly upwards.
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Despite the recent downturn in equity markets, these two stocks still have very bullish charts. Why? You can read all about them on this site, as there were previously recommended here - see Market Topics; US Shares Recommendations in December 2021 for the former, and October 2020 for the latter.
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Finally, one of the banking & finance stocks, Morgan Stanley, which still has a very bullish chart, despite the market downturn, was recommended here in December 2021.
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The other banking & finance stock that currently has a very bullish chart is Met Life. The remaining three consumer products stocks that now have bullish charts are Coca Cola, Pepsi and Mondelez. All are in the food and drink sector, so they are classic defensive stocks. However, their performance was not as impressive when the bull market was continuing to roar, for the very same reason.
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I therefore see no need to make any changes to the US stocks that were previously recommended on this website. Three of these had very bullish charts in the bull market, and continue to have very bullish charts in the bear market. Furthermore, they have stood up to a detailed examination of the fundamentals. There is nothing more one can ask for here. The only risk one really has to bear, in my opinion, is random risk i.e. the chance of some completely unexpected event changing everything. That risk is unavoidable when one is investing in shares. In the longer term, it is usually offset by some surprises on the upside also.
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The other US stocks that were previously recommended, continue to have bullish charts, so I see no need to cut any of these from the portfolio at this time.
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Finally, for the record, here is the list of US stocks previously recommended:-
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1. Qualcomm (Dec 2021)
2. Procter & Gamble (Dec 2021)
3. Morgan Stanley (Dec 2021)
4. Colgate Palmolive (Oct 2020)
5. Microsoft (Jan 2020)
6. Union Pacific (Dec 2021)
7. Berkshire Hathaway 'B' (Dec 2021)
8. Amazon (Dec 2021)
9. Accenture (Dec 2021)
10. Texas Instruments (Oct 2020)
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The above portfolio has outperformed the market to date. A detailed review of the performance of each stock will follow in December 2022, when 12 months have elapsed from the most recent recommendations.