The top battle-tested and defensive stocks to buy in an uncertain world, according to analysts

Published Sat, Oct 14 20237:37 AM EDT

Uncertainty reigns, but Wall Street analysts named a wide range of stocks this week that they believe are battle-tested buying opportunities. These companies' businesses are peaking at the right time, analysts say. CNBC Pro combed through the top Wall Street research to find stocks that are defensive in uncertain times. They include: Mattel , CBOE , Marsh & McLennan, Warner Music Group and O'Reilly Automotive. CBOE "A Strong Defensive Play In Uncertain Times," Piper Sandler analyst Patrick Moley headlined a report earlier this week devoted to CBOE. The global markets and exchange operator has a mix of derivative products that are well positioned amid increasing market and geopolitical uncertainty, Moley wrote. Piper said CBOE has recently seen S & P options volumes at some of the highest levels ever, referring to the number of options contracts bought and sold. Moley also recently named CBOE as his top pick for the fourth-quarter. "We believe there could be potential upside to CBOE's 4Q23 results given (1) seasonal volume tailwinds and (2) the potential for geopolitical uncertainty to drive increased demand for macro hedging/speculation via index derivative products," he wrote. CBOE shares are up 29% this year. Warner Music Group Warner Music shares are down 7.5% this year, but investors should buy the dip, according to Deutsche Bank. Analyst Ben Black says the stock has " durable revenue growth" with a "very favorable industry backdrop" as subscription music grows beyond the typical platform. In addition, deals with the likes of TikTok and price increases from digital service providers serve as positive catalysts, he said. Black also believes Warner Music boasts a strong lineup of music to be released in the months ahead and a new experienced CFO is on the way, he added. Taken together, Black sees plenty of long-term upside for investors. "Additionally, with considerable pricing power and only a small portion of revenue associated with advertising, we contend that WMG and music broadly is relatively recession resilient — a defensible characteristic that will be increasingly in focus as we cycle into FY24," he wrote. Marsh & McLennan "A defensive stock with growth characteristics," Deutsche Bank said recently in its initiation of coverage of the world's largest insurance broker. Analyst Cave Montazeri started coverage of Marsh & McLennan with a buy opinion, saying the stock has a proven record of growth even in a recessionary and rising rate environment. In addition, Marsh is poised to see the fruits of the past several years' hiring spree. "There is usually a 2-3 year lag before new hires become productive, so the company should start to see the full benefits of those hires in 2024," he said. Montazeri is also bullish on the company's new management team noting that Marsh maintains robust profit and loss momentum with more cross-selling across businesses to come. To be sure, Deutsche acknowledged that some of those tailwinds could turn into headwinds, particularly if the Fed begins to cut interest rates, but Montazeri says there's plenty of other positive catalysts to counteract that. "We view MMC as a company with an industry-defining brand, non-discretionary product relative to its clients' needs, a wide moat, and the ability to generate strong cash flow," he wrote. Marsh shares are up 15% this year. Warner Music Group- Deutsche Bank, buy rating "We maintain our positive view on WMG as we believe it will continue on its path of consistent, durable revenue growth that is supported by a very favorable industry backdrop. ... .Additionally, with considerable pricing power and only a small portion of revenue associated with advertising, we contend that WMG and music broadly is relatively recession resilient — a defensible characteristic that will be increasingly in focus as we cycle into FY24." CBOE- Piper Sandler, overweight rating "A Strong Defensive Play In Uncertain Times ... .We'd note that last week we chose CBOE as our favorite stock under coverage heading into 4Q23. ... .We believe there could be potential upside to CBOE's 4Q23 results given (1) seasonal volume tailwinds and (2) the potential for geopolitical uncertainty to drive increased demand for macro hedging/speculation via index derivative products." O'Reilly Auto — Citi, buy rating "We think the recent pullback in the shares presents an attractive buying opportunity for the stable, defensive retail stock. We believe business fundamentals are tracking in line for DIY, with steady market gains on the Pro DIFM [do it for me] side set to continue. Our model calls for modest upside vs. 2H23 Street estimates, with 2024 another algo year." Marsh & McLennan — Deutsche Bank, buy rating "A Defensive Stock with Growth Characteristics. ... .There is usually a 2-3 year lag before new hires become productive, so the company should start to see the full benefits of those hires in 2024. ... .We view MMC as a company with an industry-defining brand, non-discretionary product relative to its clients' needs, a wide moat, and the ability to generate strong cash flow." Mattel- Morgan Stanley, overweight rating "Importantly, in the face of uncertainty, MAT has one of the most defensive product portfolios across our coverage, with toys historically a key traffic driver for retailers during the holiday season. ... .Following a multiyear turnaround, MAT has cemented its status as the toy industry leader and partner of choice for major entertainment companies, culminating in the return of the Disney Princess and Frozen franchises in 2023. Read more about this call here.