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15 Stocks for Tailgating Season

These high-quality consumer defensive stocks are trading below our fair value estimates.

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Before we dive in, please forgive me: This list is not as whimsically compiled as it might seem. I screened our global equity research to target high-quality stocks (as measured by moat) with stable cash flows (medium or low fair value uncertainty), trading at a meaningful discount to our fair value estimate. 

The screen yielded a list that was dominated by consumer defensive stocks, many of them tobacco producers, alcoholic beverage-makers, and snack food and soft drink companies. These types of firms tend to be characterized by stable earnings, and many of them pay healthy dividends. They can add some stability to a portfolio as they tend to hold up relatively well during downturns while also participating in rising markets. For example, in 2008, there weren't too many places to hide; the broader Morningstar Global Markets Index lost a savage 42%, while the Morningstar Global Consumer Defensive index lost 24%--still bad but not as brutal. The sector tends to lag in strong equity rallies: Over all short-term periods the Global Consumer Defensive Index lags the Global Markets Index. But over 10-, 15-, and 20-year periods, it has gotten ahead of the broader index by losing less in tough markets.

Karen Wallace does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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