Analyst say investors should flock to these 'defensive' safe havens amid uncertain markets

Published Sat, Sep 17 20228:56 AM EDT

Wall Street analysts urged investors to remain calm this week amid the market turmoil and invest in companies with defensive characteristics. These companies are well-positioned in an uncertain world, according to analysts. CNBC Pro combed through Wall Street research to find the top safe haven stocks. They include: Amazon, Dollar General , Quanta , Workday and NETSTREIT. Dollar General Evercore ISI recently added the discount retailer to its "Fab 5" Portfolio List which also contains stocks like HD, SHW, ORLY, and AMZN. The firm says it calls this group the "New Defensives." "Retailers with pricing power and traffic are best positioned into year-end," analyst Greg Melich wrote. Dollar General has "initiative traction and favorable staples demand at 19.5x '23 EPS," he added. The analyst says he also likes Dollar General's favorable exposure to consumables and food. In addition, Melich says the company's low double digit total shareholder return is "attractive." "The good news is inventory has stopped getting worse. If demand firms into '23, EPS could accelerate," the firm said. Melich has a price target of $260 per share and the stock is up 3.3% this year. Workday The financial and human capital management cloud software company hosted its annual analyst day earlier this week and investment firm Canaccord came away feeling more bullish after the event. Analyst David Hynes says the stock is a "a relatively safe place to hang your hat amid [the] uncertainty." The firm said its checks show that Workday is a "category leader among mid- market and large buyers when it comes to vision, reputation, and ability to execute." The stock is down 44% this year, but that makes the valuation attractive, according to the firm. Meanwhile, as more and more companies move operations to the cloud, Workday is well positioned to be a key beneficiary, the analyst wrote. "Profitable growth is core to the story," he says. Hynes also named two big reasons why the stock has plenty of room to run: Workday enjoys minimal competition and there's plenty of signs that margin expansion is just around the corner. "We think you're getting both here, which is why WDAY remains a BUY," the analyst added. Quanta Services There's a lot to like about the electrical infrastructure company, investment firm Stifel said earlier this week. The stock is up almost 20% this year and Quanta is a beneficiary of the Inflation Reduction Act, analyst Noelle Dilts and team wrote earlier this week. The company appears to be firing on all cylinders right now, with "defensive, secular exposure to electric T & D (transmission and distribution) and renewables, " she said. In particular, the analyst says utilities are attractive as investments are made to modernize electrical grids and systems. The firm also sees Quanta involved in the build-out of electric vehicle infrastructure. "The drivers of electric utility investment in Electric Transmission and Distribution infrastructure are intact and should persist even in a weaker economic environment," Dilts said. The firm which has a price target of $154 per share, is also forecasting "strong free-cash flow over the next three years." "We remain very positive on the multi-year outlook the company, as Quanta's positioning at the nexus of the energy transition to lower carbon generation should support strong multiyear growth," she added. Dollar General- Evercore ISI, Outperform rating "We prefer companies with pricing power, traffic growth & sticky membership models. Some call them compounders. We call them the New Defensives. ... .Retailers with pricing power and traffic are best positioned into year-end. ... .Fab Five defensive Pivot. DG in, WOOF out. ... .DG offers initiative traction and favorable staples demand at 19.5x '23 EPS. ... .low double digit TSR is attractive. ... .The good news is inventory has stopped getting worse. If demand firms into '23 EPS could accelerate." Quanta Services- Stifel, Buy rating "Defensive, secular exposure to electric T & D (transmission and distribution) and renewables. ... .The drivers of electric utility investment in Electric Transmission and Distribution infrastructure are intact and should persist even in a weaker economic environment. ... .We remain very positive on the multi-year outlook the company, as Quanta's positioning at the nexus of the energy transition to lower carbon generation should support strong multiyear growth. ... .Forecasting strong free-cash flow over the next three years." Amazon- Bernstein, Outperform rating "The puts and takes on Amazon are interesting to consider. On the one hand, Amazon accounts for ~40% of US eCommerce sales, or 8.4% of total retail. At that size it's understandable that overall sales trajectory may mimic overall retail performance during downturns. Indeed, European sales has dipped into declining territory reflective a weakened consumer and pressured GDP. On the other hand, Amazon may offer the most defensive position in US eCommerce given the very heavy skew towards non-discretionary product mix." NETSTREIT Corp.- Raymond James, Strong buy rating "Despite having one of the most defensive/high quality portfolios and expectations for outsized earnings growth vs peers, NTST has been largely left out of that defensive rotation as investors became concerned with NTST's capital markets risk: the company needs to access the public markets for both debt and equity to execute its external growth strategy at a time when debt and equity costs are both moving higher. ... .While our call isn't out of consensus, we do believe the timing is unique — we think being able to buy this stock near $20 is a no-brainer, especially given the company's long capital runway." Workday- Canaccord, Buy rating "A relatively safe place to hang your hat amid [the] uncertainty. ... .We took the opportunity to speak with a handful of prospective customers & partners, conversations that reinforced our conviction in the view that the majority of HCM and Financial systems of record are ultimately moving to the cloud, & Workday is the clear category leader among mid- market & large buyers when it comes to vision, reputation, & ability to execute. ... .We think you're getting both here, which is why WDAY remains a BUY. ... .Profitable growth is core to the story."