On-again, off-again U.S.-China trade tensions. An inverted yield curve. Worries about global economic growth. These factors have injected a good deal of uncertainty into the market during the past two weeks. Whether or not stocks continue their upward march is anyone’s guess. But playing a little bit of defense with your stock portfolio may not be the worst idea.
Last week, we shared some inexpensive, defensive stock ideas. Specifically, we homed in on stocks in Morningstar’s Defensive Super Sector, which includes the healthcare, consumer defensive, and utilities sectors--pockets of the market that are generally immune to economic cycles. We then narrowed the field further by screening for names with Morningstar Economic Moat Ratings of wide or narrow within that Super Sector, ensuring that we were cherry-picking only the financially healthiest and most profitable companies. We tossed out stocks with high or greater Morningstar Uncertainty Ratings, thereby eliminating companies with less predictable cash flows. And lastly, we demanded that these defensive names be trading at Morningstar Ratings of 5 stars--significantly below our fair value estimates. Just nine stocks made the cut.
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Susan Dziubinski does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.