5 Best Defensive Stocks to Buy in March 2022

US stock markets are in a correction zone and several of the growth stocks have hit their 52-week lows. The situation does not seem to be getting any better amid the continuous escalation in the Russia-Ukraine war. Defensive stocks might be a good option amid the current market turmoil.

Defensive stocks are low beta names and their earnings are less sensitive to economic cycles and geopolitical turmoil. These include companies that produce daily use goods and services whose demand is not much impacted, whether we are in a recession or an economic upcycle. Here are the five best defensive stocks that you can buy in March 2022?

1. Berkshire Hathaway (NYSE: BRK.B)

Berkshire Hathaway is not a defensive stock in strict terms. However, the fact that it is led by the legendary value investor Warren Buffett, and is sitting on a cash pile of $146.7 billion, makes it a proxy defensive stock. Buffett has been quite defensive about investing the cash and was a net seller of stocks in all four quarters last year.

Even Buffett seems to love Berkshire stock at these prices and the company has repurchased almost $52 billion worth of shares over the last two years. After outperforming the S&P 500 mildly last year after two consecutive years of massive underperformance, BRK.B is also outperforming the markets in 2022.

Berkshire is a good defensive stock

Amid the pivot towards value and defensive stocks, Berkshire Hathaway stock is in the green this year while markets have plummeted. In this year’s annual letter, Buffett said “Today, though, we find little that excites us. That’s largely because of a truism: Long-term interest rates that are low push the prices of all productive investments upward, whether these are stocks, apartments, farms, oil wells, whatever.”

He added, “Berkshire’s current 80%-or-so position in businesses is a consequence of my failure to find entire companies or small portions thereof (that is, marketable stocks) which meet our criteria for long-term holding. Charlie and I have endured similar cash-heavy positions from time to time in the past. These periods are never pleasant; they are also never permanent. And, fortunately, we have had a mildly attractive alternative during 2020 and 2021 for deploying capital.”

All said, given the crash in markets, Buffett seems to be putting the massive cash to work and has revealed a $5 billion investment in Occidental Petroleum. If you are looking for a defensive stock that can deliver market-beating returns over the medium to long term. Berkshire would fit the bill.

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2. Petco (NYSE: WOOF)

Pet adoption has increased after the COVID-19 pandemic which bodes well for pet care companies like Petco. While the stock has fallen sharply from the peaks, Wells Fargo believes that it is a defensive stock worth betting on at these prices.

Wells Fargo finds Petco a good defensive stock

Wells Fargo said “While WOOF shares have underperformed over the last 3 months, we lean favorably into the Q4 print, as another beat appears likely, FY22expectations are muted and we see no shortage of LT opportunities. and incremental growth levers in FY22. … GM mix pressures well understood.” It added, “In the years ahead, we see strong secular growth, category defensiveness, and share opportunities via differentiation, digital, and vet/services. … All in, we view the WOOF story as underappreciated at ~10.5x NTM EV/EBITDA, and we see an attractive LT entry point considering stable category growth, underlying share gains and estimates that likely move higher.”

Wall Street analysts are also bullish on WOOF stock and it has eight buys, three hold, and one sell rating. Its median target price of $25 is a 37% premium over current prices. If you are looking for defensive stock in the pet care industry, Petco looks like a good bet.

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3. Coca-Cola (NYSE: KO)

Consumer beverage companies like Coca-Cola and PepsiCo are among the most prominent defensive stocks. It is also among the top holdings for Berkshire Hathaway. While Buffett has been holding the shares for quite some time now, the price action has disappointed over the last five years. That seems to be changing now as KO stock is in the green this year despite the market crash. As investors seek solace in defensive names, stocks like Coca-Cola have seen buying interest.

KO is a defensive stock that Buffett also likes

KO looks like a good defensive stock to buy given the nature of its business. During the pandemic, the stay-at-home consumption of its products increased. Now as the economy has reopened, outdoor cola consumption is rising.

The company has been trying to diversify its business from carbonated drinks and is also betting on the healthy drinks space. It is also focusing on the snacks market where it lags behind rival PepsiCo.

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4. Lockheed Martin (NYSE: LMT)

Defense stocks like Lockheed Martin look like good defensive stocks to buy now especially considering the geopolitical situation. We might see a structural increase in global defense budgets over the next decade and its signs are already visible, with Germany announcing a massive increase in its defense budget.

Defense stocks look good defensive bets amid the turmoil

As more countries increase their defense budgets, and countries like India, which is among the biggest defense importers, reduce their reliance on Russia, defense stocks could see better days ahead. Also, the US might permit more high-tech defense exports to allies in Asia and elsewhere to counter the growing threat from Russia and China.

Lockheed is also a good defensive stock to buy considering the high revenue visibility. Its F-35 Joint Strike Fighter, which accounts for a big chunk of its sales, has a total value of $400 billion which gives a lot of revenue visibility. LMT stock is also in the green in 2022, along with other defense stocks. Its dividend yield of 2.4% also looks attractive for investors looking out for defensive stocks.

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5. Invesco Defensive Equity ETF (NYSE: DEF)

The Invesco Defensive Equity ETF is based on the Invesco Defensive Equity Index. According to Invesco, “The Index uses a rules-based approach to select companies that potentially have superior risk-return profiles during periods of stock market weakness while still offering the potential for gains during periods of market strength. The Index is computed using the gross total return, which reflects dividends paid.”

DEF is a good defensive ETF

ETFs can be a good investing strategy, especially for investors who lack the time or analytical skills to pick individual stocks. Especially under the current market environment, where we have heightened volatility, ETFs could turn out to be a better bet.

The ETF is well diversified with over 100 stocks and has an annual expense ratio of 55 basis points. Looking at the current turmoil in markets, defensive investors might be better off in a defensive ETF like DEF instead of individual stocks.

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