5 Best Defensive Stocks to buy in September 2021

Value and defensive stocks haven’t don’t well over the last decade as growth stocks were the flavor of the season. However, we’ve seen some sector rotation this year and investors have pivoted towards defensive stocks as well.

What are the five best defensive stocks that you can buy in September 2021 and hold for the long term?

1. Berkshire Hathaway (NYSE: BRK.B)

Led by the legendary value investor, Berkshire Hathaway is a good defensive stock to buy. While markets might not see the stock as the typical defensive stock, Warren Buffett at the helm of affairs and an almost $145 billion cash pile makes it among the best defensive stocks to buy.

Buffett has been pretty defensive over the last year and was a net seller of stocks in the first quarter of 2020 even as US stock markets crashed. He was a net seller of stocks in the second quarter of 2021 which was the third consecutive quarter when the company sold more shares than it bought.

Berkshire Hathaway looks among the best defensive stocks

Berkshire Hathaway stock underperformed the markets by double digits in 2019 and 2020. The stock’s performance in this century hasn’t been satisfactory. However, it has looked good in 2021 amid the pivot to value stocks.

From a business perspective, Berkshire Hathaway is a conglomerate. It has several cyclical businesses like railroads and energy as part of the business. However, it also has several defensive businesses like GEICO insurance.

Buying Berkshire Hathaway stock is like betting on Buffett’s expertise. The Oracle of Omaha, as Buffett is known, hasn’t been able to find good acquisition opportunities as the market valuations are not what a value investor like him might like. However, given the expected increase in interest rates, value stocks might continue to outperform in the medium term which bodes well for BRK.B stock

Overall, Berkshire Hathaway looks like among the best defensive stocks to buy and hold for the long term.

67% of all retail investor accounts lose money when trading CFDs with this provider.

2. Verizon (NYSE: VZ)

Verizon stock is down almost 6% for the year and is underperforming the markets by a wide margin. However, with a stable business and a dividend yield of 4.5%, which is almost thrice of the S&P 500’s dividend yield, it is among the best defensive stocks to buy.

Notably, Buffett disclosed a big stake in Verizon in its fourth-quarter 2020 13F. Berkshire Hathaway holds a 3.8% stake in Verizon which is currently valued at $8.8 billion. The company is the seventh-largest holding for Berkshire Hathaway. The largest, of course, Apple, where Berkshire holds a 5.5% stake valued in excess of $140 billion.

Verizon looks like a good defensive stock to buy

Wall Street analysts meanwhile are not too bullish on Verizon stock. If the 27 analysts polled by CNN Business, only seven rate it as a buy while 18 rate them as a hold or some equivalent. Two analysts have a sell rating on the stock. Its median target price of $60.2 is an 8.6% premium over current prices. The stock’s highest and lowest target prices are $68 and $52 respectively. While the highest target price implies an upside potential of 22.7% over the next 12 months, the street low target price of $52 is a discount of 6.2%. In July, Cowen had raised Verizon’s target price to a street high of $68 and called it among the best defensive stocks.

Valuation and technical analysis

Verizon stock isn’t looking very bullish in the charts though. It has been facing strong resistance at the 50-day SMA (simple moving average) which is currently at $55.72. despite multiple attempts, the stock hasn’t been able to cross above the 50-day SMA which is a bearish indicator. The stock also trades below the 100-day and 200-day SMA. The 14-day RSI (relative strength index) is a neutral indicator but the MACD (moving average convergence divergence) gives a buy signal for Verizon stock.

Looking at the valuations, Verizon stock trades at an NTM (next-12 months) PE multiple of 10.4x. The multiples have averaged nearly 12x over the last three and five years. The discount to 10-year average PE of 13.12x is even steep. In fact, the current valuation multiples are near the lowest for Verizon. The lowest NTM PE for the stock was 9.4x which it hit in the stock market crash of 2008.

Overall, looking at the tepid valuations, high dividend yield, and the faith shown by Buffett, Verizon looks among the best defensive stocks to buy in September 2021.

67% of all retail investor accounts lose money when trading CFDs with this provider.

3. Coca-Cola (NYSE: KO)

Coca-Cola stock is another long-time Buffett favorite. The stock has however been an underperformer. KO stock is up only about 34% over the last five years which is way below that of the S&P 500. The stock has gained 7.5% in 2021 which is again much below that of the broader markets.

However, the stock does pay a healthy dividend yield of almost 3% which is twice that of the S&P 500 index. However, when it comes to the best defensive stocks, KO is among the top rankers. 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.

KO is among the best defensive stocks to buy

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.

Coca-Cola has a median target price of $62.05 which is a premium of 9.4%. Its street high target price is $67 which is a premium of 18.1%. Its street low target price is $55 which is a discount of 3.1%. Of the 27 analysts polled by CNN Business, 16 rate KO as a buy or some equivalent while the remaining 11 rate the stock as a hold. None of the analysts has a sell rating on Coca-Cola stock.

KO stock forecast

Morgan Stanley is among the brokerages that are bullish on KO stock. “Short term, we see a well-above consensus post-COVID topline/EPS recovery ahead; longer term, a return to pre-COVID outsized sales growth vs. peers, improved execution under a reorganization, and higher margins with productivity and lower marketing spending, said Morgan Stanley analyst Dara Mohsenian.

Overall, if you are looking at a good defensive stock that can deliver consistent earnings throughout the business cycle and is also transforming the business for the coming years, KO will fit the bill.

The stock is looking reasonably bullish on the charts too and trades above the 50-day, 100-day, and 200-day SMA.

67% of all retail investor accounts lose money when trading CFDs with this provider.

4. Mondelez International (NYSE: MDLZ)

If you are looking at a defensive stock in the consumer staples industry, MDLZ stock is among the best names. The stock is underperforming in 2021 and is up about 6.5% which is only about a third of what the S&P 500 has risen over the period. However, it does pays a good dividend and the current yield is about 2.3%.

The median target price for MDLZ stock is $71 which is a 15.1% upside potential. Its street high target price of $71 implies an upside of 21.5% while the street low target price of $66 is a premium of 7% over current prices.

Most Wall Street analysts are bullish on MDLZ stock and 19 of the 23 analysts covering it rate it as a buy or some equivalent. Four analysts rate it as a hold. None of the analysts has a sell rating on this defensive stock.

MDLZ is among the best defensive stocks

JPMorgan is bullish on MDLZ stock and sees it as a defensive stock worth buying. “We continue to see MDLZ as a must own stock within our coverage universe, particularly for investors with multi-year time horizons,” it said in its note. The brokerage added, “With most other food producers still facing significant margin risk from inflation over the next two to three quarters, MDLZ – with its limited inflation, inflation potentially peaking in 3Q21, and strong pricing power in many markets – stands out as a relatively dependable story, in our view.”

Notably, most consumer staples companies are battling food inflation as input prices, as well as packaging costs, have gone up. Last month, Piper Sandler had downgraded Campbell Soup from a buy to neutral cutting higher packaging costs amid multi-year high steel prices.

Its valuations also seem reasonable at the stock trades at an NTM PE multiple of 20.6x which is in line with what it has traded over the last three years. Overall, MDLZ has a strong product portfolio and a good brand. It is among the best defensive stocks to buy and hold for the long term.

67% of all retail investor accounts lose money when trading CFDs with this provider.

5. American Water Works Company (NYSE: AWK)

Utility stocks are also good defensive bets. Within the utility space, AWK looks like among the best defensive stocks to buy. AWK is a public utility company that provides drinking and wastewater services.

In April, it said that it will acquire the wastewater treatment and collection system for the City of York. The transaction will add 45,000 customer equivalents for the company. AWK has been expanding its business, both through acquisitions and organic growth, and expects its earnings to rise between 7-10% between 2020 to 2024.

However, while utilities are known to pay generous dividends, AWK has a dividend of 1.3% which is slightly lower than that of the S&P 500.

AWK is a good defensive stock to buy

AWK stock has gained 23% so far in 2021 but analysts see it falling over the next 12 months. It has a buy rating from only six analysts while 11 rate it as a hold. One analyst has rated AWK as a sell. Its median target price of $181 is a discount of 2.2%. The street high target price of $190 is a premium of 2.6% while the street low target price of $156 is a discount of 15.7%.

Meanwhile, the stock looks in a technical uptrend and trades above the 50-day, 100-day, and 200-day SMA. If you are looking at a utility stock that is growing its business, AWK is among the best defensive stocks to buy.

Buy AWK Stock at eToro from just $50 Now!