Stocks to hide out in at times of market bloodbath

These consumer defensive stocks are trading well below their fair values and represent attractive buying opportunities.

Vikram Barhat 14 February, 2018 | 6:00PM

Investors around the world, particularly in North America, got a rude awakening earlier this month as they got reacquainted with stock market volatility. After rallying to all-time highs earlier in the year, on Feb. 5 the Dow Jones and the S&P 500 indices tumbled more than 4%, while the NASDAQ swooned 3.7%, a rout that wiped US$4 trillion off world equities, as concerns of the U.S. Federal Reserve moving faster than expected to raise interest rates sparked the biggest sell-off in six years.

While equities will no doubt claw back the losses over time, the recent stock market rodeo is a yet another reminder of the vagaries of the stock market and why it is important for investors to hedge their portfolios against such precipitous drops. Indeed, this is as good a time as any for investors to consider adding to their portfolio stocks from relatively stable sectors. One such sector is consumer defensive. The non-cyclical defensive sector comprises companies whose performance is tied to essential goods, which makes these companies better at absorbing economic ups and downs, one of the key triggers for market volatility.

It's said that consumer defensive stocks, or consumer staples, are great for downside protection, but tend not to participate in bull runs all that much. That the sector returned more than 13% in the United States in 2017, according to S&P Dow Jones Indices, is evidence that these stocks can also play a part in portfolio growth when the markets are rallying, while serving as an effective bulwark against wild market gyrations.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Anheuser-Busch InBev SA/NV ADR67.99 USD-1.31
Campbell Soup Co48.92 USD-0.91
Mondelez International Inc Class A57.49 USD-0.57
Procter & Gamble Co138.68 USD0.27

About Author

Vikram Barhat

Vikram Barhat  Vikram Barhat is a Toronto-based financial writer specializing in investing, stock markets, personal finance and other areas of the financial services industry. He also writes for CNBC, BBC, The Globe and Mail, and Toronto Star.

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