Rising interest rates and falling bond prices have hit some stocks particularly hard. That includes utilities and telecoms, as well as consumer goods companies. These firms tend to act as defensive stocks, holding up well in down markets while still moving higher in rallying markets.
Some of these stocks may have formed a bottom in recent weeks. But with the potential for an economic slowdown in the next year, these stocks could still be a bargain.
Should interest rates move lower, they’ll look more attractive than bonds. One company that looks interesting now is Clorox (CLX). Shares were just upgraded following strong earnings, and as the company updated on a cyberattack earlier this year.
The stock is still well off its 52-week highs, and would need to rally about 30 percent to get back to those highs.
Action to take: Long-term investors may like Clorox as a long-term investment near today’s prices. Besides the upside potential as shares move off their panic lows, the stock is a solid dividend growth play.
At current prices, shares yield just north of 4 percent. Combined with the capital gains potential, it’s clear that Clorox could offer market-beating returns, even if the overall market trades flat or lower next year.
For traders, the April 2024 $140 calls, last going for about $3.80, could see high double-digit returns from here on a rally in the next six months. Traders can always take early profits if Clorox shares have a strong rally this holiday season.
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.