Hello Bandits,
We heard you loud and clear – More opportunities to trade live! When we trade together, we learn together. We’re continuing our weekly live trading webinar open to all of our newsletter subscribers.
Click the button below to sign up and we’ll send you the details when we finalize them later this week.
Now back to regularly scheduled top pick…
What Are they
Defensive stocks are shares of companies that provide consistent dividends and stable earnings regardless of the state of the overall stock market. These companies are typically in industries that produce or distribute essential goods and services, such as utilities, consumer staples, healthcare, and telecommunications.
Welcome to Theta Bandits Top Pick Tuesday. We strive to bring you relevant free content, searching the markets and making plans to get ahead of what we think could be new potential winners in any portfolio. The start of August 2024 has seen the start of a potential correction, with the end unknown at this point. Instead of an individual pick, this week we are focusing on defensive stocks, a potential safety net for your portfolio.
Opinion
In times of economic uncertainty or market volatility, defensive stocks can be a haven for investors. These stocks are less sensitive to economic cycles, making them more resilient during downturns. For instance, people will continue to buy groceries, pay their utility bills, and need healthcare services regardless of the economic climate. This consistent demand translates into steady revenue streams for companies in these sectors, which can help cushion your portfolio against market fluctuations.
When looking at defensive stocks, consider looking major players in the sectors mentioned above. For example:
- Groceries: Procter & Gamble (PG:NYSE).
- Healthcare: Johnson & Johnson (JNJ:NYSE).
- Utilities: Waste Management (WM:NYSE).
These companies have a track record of delivering reliable returns and maintaining strong financial health. Analysts’ 12-month price targets for these stocks show potential for moderate but steady growth, and their dividend yields provide an additional income stream.
Plan
For defensive stocks, the best course of action is a strategy of building up a position by buying on weakness and holding through market cycles. These stocks are not typically high-flyers, but their stability and dividends can help smooth out the bumpy ride in the rest of the market. Focus on stocks with strong fundamentals, such as a solid balance sheet, consistent earnings, and a history of paying dividends. As these stocks often trade in a narrower range, consider setting your profit-taking and stop-loss points at key support and resistance levels to protect your investment.
Using the visuals, we are not showing the usual info as that is not the focus this week. Note the extended timeframe to show performance over a longer period. As with all stocks and these are no different, it is good to build on weakness and to trim profit when the price hits the target in your plan.
PG:
JNJ:
WM:
Want to see how you could attack these types of opportunities? sign up to attend our weekly Theta Bandits Webinar – When we trade together, we learn together!
RISK
While defensive stocks are generally less volatile than growth stocks, they are not completely risk-free. Economic shifts, regulatory changes, and company-specific issues can still impact their performance. Make sure to plan your trade within your risk tolerance and give the trade the time required to be successful, while setting and updating limits to mitigate risk and setting exit points for your position.
If you’ve been finding our picks helpful, imagine what the live version holds. You know what to do 👇
Disclaimer: This article is for informational and educational purposes only, not investment advice. We recommend researching and consulting with a financial advisor before making investment decisions. All actions based on this information are at your own risk.
