A Defensive Play with Strong Growth Trends

When times get tough, investors turn to defensive stocks. Typically areas such as utilities or telecoms, these companies tend to offer slower prospective growth, but offer some strong income opportunities as well.

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  • Some other sectors such as consumer goods also fall into the defense space. But, under the right circumstances, companies in this space can see solid growth during an expanding economy as well.

    One brand in a defensive area that still looks set to grow? Alcohol and spirits. Goldman Sachs recently upgraded Constellation Brands (STZ), citing higher growth rates in the future and higher drinking trends.

    Shares have recently returned to their pre-pandemic highs. It’s easy to see why, with a 22 percent rise in revenue and a staggering 255 percent rise in earnings growth. Add in a 24 percent profit margin, and it’s a company with some strong prospects ahead of it.

    Action to take: Investors may like shares here, although at current prices the stock’s dividend yield is a bit skimpy at 1.3 percent.

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  • For traders, the continued rally in shares looks likely to continue. The July 2021 $250 calls, last trading for about $16.25, are a reasonable bet on the trend continuing. While a bit pricey per contract, traders can likely nab high-double-digit returns well before expiration.