These defensive stocks are the best portfolio protection in an uncertain market, analysts say

Published Sat, Mar 5 20229:16 AM EST

Markets were turbulent this past week, but Wall Street analysts named a handful of top stocks to weather the storm. Investors should buy companies that exhibit a wide range of defensive traits, analysts say. Defensive stocks tend to be stable, regardless of how the market may perform . CNBC Pro combed through top Wall Street research to find the best buying opportunities. They include Petco , Aflac , Globe Life , Quanta Services , McDonald's and Johnson & Johnson. Quanta Services The network infrastructure company was upgraded to buy from neutral earlier this week by investment firm B. Riley & Company. "In an increasingly uncertain economic environment that includes geopolitical uncertainty, investors should look at shares of PWR as a defensive investment," analyst Alex Rygiel said. In particular, the firm said Quanta has everything a shareholder could want including robust liquidity and profitable growth. Rygiel said he was particularly impressed by the company's earnings report in late February. "We believe PWR is well positioned across all of its segments to benefit from improving end market trends towards grid modernization, storm hardening, electric vehicle charging stations, and the needed interconnections for renewable energy sources," he wrote. Quanta is also well positioned to benefit from an infrastructure bill if one materializes. "Defensive stock in [an] uncertain market," Rygiel said. Shares of the company are up 0.2% in March. McDonald's Don't give up on shares of McDonald's, according to investment firm Guggenheim. In a recent note to clients, analyst Gregory Francfort urged shareholders to remain calm — but cautious — revealing that the fast-food giant has one of the highest exposures to Russia within the firm's coverage. Still, Francfort said he's sticking with the restaurant stock. "We feel comfortable with the defensive nature of the stock and are not adjusting our estimates today despite the rising tensions, but thought it was important to highlight the risk," he said. In addition, interest rates could also weigh on the stock's multiples, but that's not the firm's base case. Francfort noted that he has confidence that sales and revenue will remain strong over the long term. "We continue to think the outlook for top-line restaurant spending remains robust and are bullish on the 3-5 year sales and earnings outlook for the group, particularly companies that have variable revenue and fixed expenses," the firm wrote. McDonald's finished the week down nearly 5.5%. Petco Shares of Petco are down more than 7% this year, and it's time to buy the dip, Wells Fargo said ahead of the company's earnings report next week. In a note to clients, the firm wrote that "another beat appears likely, FY22 expectations are muted and we see no shortage of LT (long-term) opportunities and incremental growth levers in FY22." Petco's omnichannel initiatives also appear to be resonating with consumers quite well, leaving room for plenty of upside going forward, according to analyst Zachary Fadem and his team. "In the years ahead, we see strong secular growth, category defensiveness, and share opportunities via differentiation, digital, and vet/services," he added. Petco is not immune to supply chain and gross margin pressure either, but the firm believes those are "well understood" and that investors should accumulate shares. "All in, we view the WOOF story as underappreciated at ~10.5x NTM EV/EBITDA, and we see an attractive LT entry point considering stable category growth, underlying share gains and estimates that likely move higher," Fadem said. Johnson & Johnson - Raymond James, Outperform rating "After a tough January that improved late in the month across both broader markets and our health-care top picks list, February saw momentum continue early before sharp mid-month declines as both central bank and geopolitical risks weighed on markets. … For March, we are swapping out ANGO, and adding JNJ. ANGO continues to be our favorite small cap Med Tech story, but we believe JNJ may be more appropriate for March given the expected macro volatility. JNJ is more of a defensive name, and the recent court win removes an overhang, which should allow investors to focus more on the improving fundamentals." McDonald's - Guggenheim, Buy rating "While we like MCD as a stock, we wanted to note that it has substantial earnings exposure to the country that may not be fully appreciated by investors given the relatively low number of units. … We feel comfortable with the defensive nature of the stock and are not adjusting our estimates today despite the rising tensions, but thought it was important to highlight the risk. … We continue to think the outlook for top-line restaurant spending remains robust and are bullish on the 3-5 year sales and earnings outlook for the group, particularly companies that have variable revenue and fixed expenses." Quanta Services - B. Riley, Buy rating "Defensive stock in [an] uncertain market. … In an increasingly uncertain economic environment that includes geopolitical uncertainty, investors should look at shares of PWR as a defensive investment. … We believe PWR is well positioned across all of its segments to benefit from improving end market trends towards grid modernization, storm hardening, electric vehicle charging stations, and the needed interconnections for renewable energy sources." Aflac & Globe Life - Wells Fargo, Overweight ratings "AFL: While claims normalization happened, this has been well telegraphed by management in guidance, and AFL is generally looked to as a defensive investment in the life sector in periods of uncertainty given flight to quality nature of Japan and the U.S. GL: ¾ lifeco. benefits from an improving health landscape, with 4Q21 Covid impact $0.46. With Covid migrating back up in age, this suggests modestly declining average claim. GL has not seen material variable investment income like others, so screens attractive in light of continued market volatility." Petco - Wells Fargo, Overweight rating "While WOOF shares have underperformed over the last 3 months, we lean favorably into the Q4 print, as another beat appears likely, FY22expectations are muted and we see no shortage of LT opportunities. and incremental growth levers in FY22. … GM mix pressures well understood. … In the years ahead, we see strong secular growth, category defensiveness, and share opportunities via differentiation, digital, and vet/services. … All in, we view the WOOF story as underappreciated at ~10.5x NTM EV/EBITDA, and we see an attractive LT entry point considering stable category growth, underlying share gains and estimates that likely move higher."

Cars are paked at Petco store in Bloomsburg.

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Markets were turbulent this past week, but Wall Street analysts named a handful of top stocks to weather the storm.