5 Best Defensive Stocks to Buy in December 2021

The emergence of the omicron variant has led to a lot of uncertainty in the markets and stocks, especially the growth names, have reacted to that. Then we have the sticky inflation situation and even Fed chair Jerome Powell believes the word “transitory” needs to be retired. In an uncertain economic environment, defensive stocks can be a good bet.

Meanwhile, after the sharp rise in 2020 and 2021, the 2022 expectations from the S&P 500 are quite muted and brokerages like Goldman Sachs and JPMorgan expect only single-digit returns from the markets. Here are the five defensive stocks that you can buy in December 2021 amid the current economic environment.

1. Starbucks (NYSE: SBUX)

Starbucks might not fit the definition of a true defensive stock amid the COVID-19 pandemic. The stock has underperformed the S&P 500 this year and is up around 9%, which is less than half of what the index has delivered. Meanwhile, after the underperformance, MKM Partners believes that Starbucks stock could rebound.

“Despite an operating model facing near-term pressures related to internal decisions and macro-related factors, and the understanding that a straight-line recovery is unlikely, we are choosing to look past these short-term hurdles,” said MKM Partners’ Brett Levy while upgrading the stock to a buy from neutral. The brokerage now has a $130 target price on the stock which is ahead of the median target price of $126.50.

Wall Street analysts have a consensus buy rating on the stock and 20 of the 33 analysts covering it have given it a buy rating. The remaining analysts have a hold rating on the stock.

Starbucks is a good defensive stock with a strong brand

Notably, like other companies in the business, Starbucks is also battling wage inflation and intends to increase wages further in 2022. It is also contemplating increasing the minimum hourly wages to $15. Some of the leading US companies have already increased the pay floor to $15 per hour. While higher wages would help Starbucks retain talent, it would also lead to short-term pressure on profitability.

Starbucks stock trades at an NTM (next-12 months) PE multiple of 33.8x. The multiples might appear somewhat high, but it should be read in context as Starbucks is expected to report only about a 4.3% increase in net income this year amid the cost headwinds. Next fiscal year, the company’s adjusted net income is expected to rise by almost 14%.

68% of all retail investor accounts lose money when trading CFDs with this provider.

2. Amgen (NYSE: AMGN)

Biopharma company Amgen looks like another good defensive stock to buy in December 2021. The stock has underperformed in 2021 and is down 8.1% for the year. However, after the crash, its valuations now look quite attractive, and it trades at an NTM PE of 12.3x which is below the long-term averages. Notably, while the broader market valuations are above their long-term averages, Amgen trades below the long-term average multiples.

AMGN is an attractive defensive stock with a high dividend yield

Earlier this week, Goldman Sachs initiated coverage of Amgen stock with a buy rating. The brokerage finds Amgen’s risk-reward attractive after the underperformance. Wall Street analysts have a consensus hold rating on the stock. However, its median target price of $232.50 is a 10% premium over current prices. Amgen has a dividend yield of 3.7% which looks quite healthy considering the measly dividend yield of the S&P 500.

If you are looking at an attractively priced defensive stock with a good dividend yield, Amgen should be on your radar in December 2021.

68% of all retail investor accounts lose money when trading CFDs with this provider.

3. Coca-Cola (NYSE: KO)

Coca-Cola looks like another good defensive stock to buy in December. The stock is also part of Berkshire Hathaway’s portfolio whose chairman Warren Buffet is known for his value investments. The stock is trading flat for the year and is underperforming the markets. however, it has a dividend yield of over 3% which is more than twice what the S&P 500 offers.

Wells Fargo finds KO a good defensive stock

Today Wells Fargo issued a bullish note on Coca-Cola stock. It said, “We estimate there’s 100bps upside flex to 2022 Street estimates for KO gross margins, and see GM a good story in KO’s delivery on algorithm in 2022. KO is a ‘flex to beat’ story in our view, with one of the more interesting price-cost lags in all of Consumer Staples. The stock sets up well, and we like risk-reward into next year.”

Consumer staples companies like Coca-Cola saw input cost inflation this year as prices of everything from packaging to labor costs went up. However, the companies have been trying to offset the higher costs through price hikes.

Wall Street analysts have a mixed rating on Coca-Cola stock, and it has 17 buys and 11 hold ratings. The stock has a median target price of $63 which is a premium of 15.4% over current prices. Overall, KO looks among the best defensive stocks with a stable and attractive dividend yield.

68% of all retail investor accounts lose money when trading CFDs with this provider.

4. Pfizer (NYSE: PFE)

Just when it looked that the boost from COVID-19 vaccine sales would soon taper away, the emergence of the omicron variant has put companies like Pfizer back in focus. The company’s COVID-19 vaccine is the only one to have received full FDA approval. The FDA has also extended the eligibility of Pfizer booster shot to all adults.

PFE is a defensive healthcare stock

Now reports suggest that Pfizer’s COVID-19 vaccine is effective against the omicron variant with a booster dose. PFE is among the best defensive stocks to play the COVID-19 vaccination story. BMO is among those brokerages that see value in PFE stock. Last month, analyst Evan David Seigerman initiated coverage of Pfizer stock with an outperform rating and $60 target price. BMO expects as many as 25 new product launches from Pfizer by 2025.

The healthcare sector is generally defensive in nature. Within the healthcare sector, Pfizer looks like a good buy for December 2021.

68% of all retail investor accounts lose money when trading CFDs with this provider.

5. Berkshire Hathaway (NYSE: BRK.B)

Berkshire Hathaway is not the usual defensive stock. The company is a conglomerate led by the legendary Warren Buffet and has exposure to several cyclical industries like railroads and energy. Also in its portfolio of publicly traded companies, it is overweight on banks while its biggest holding is Apple.

Berkshire is a defensive stock considering its $150 billion cash pile

This year Warren Buffet has spent billions on share repurchases. However, the company’s cash pile has continued to increase and hit almost $150 billion at the end of the third quarter. Berkshire Hathaway is a defensive stock because of the massive cash pile that the company is holding. If the markets crash, then Warren Buffet would be able to invest this cash efficiently which would drive value for Berkshire Hathaway investors.

Berkshire Hathaway stock underperformed the markets by a wide margin in 2019 and 2020. As the broader market valuation soared, Buffet couldn’t identify good investing opportunities. The Oracle of Omaha has been a net seller of stocks for four consecutive quarters now.

All said, a massive cash pile and Warren Buffet at the helm of affairs makes Berkshire Hathaway an attractive defensive stock to buy in December 2021.

Buy BRK.B Stock at eToro from just $50 Now!