In Uncertain Markets, Quality Stocks Hold Up Best

Markets are still setting up for a year-end rally. But the selloff of the past month has taken many great companies far lower. While tech stocks have been hit the hardest, consumer goods companies have also seen heavy selling as they compete with the rising yields on bonds.

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  • That means investors may have a great opportunity to buy shares of defensive companies now, ahead of both a year-end rally and a likely move lower for interest rates later in 2024.

    Consumer goods giant Procter & Gamble (PG) reported great earnings that easily beat expectations, although some analysts saw the impact the strong dollar had on international sales. Shares rose on the news, bucking Wednesday’s market selloff.

    Shares are up 13 percent over the past year. That’s lagged the S&P 500’s performance by 5 points. But shares have held up much better in the most recent market selloff. And shares are trading at 23 times forward earnings, a fair price for the company’s large portfolio of consumer brands.

    Action to take: Investors may like shares here, or on any drop lower. At present, shares pay a 2.6 percent dividend yield, and the company has a record of increasing its payout over time.

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  • For traders, the January 2024 $160 calls, last going for about $1.45, should see mid-double-digit returns or better on a pop higher in shares before the end of the year.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.