If you thought you were in for a calm November, you’d be wrong. We have now entered the second correction of 2018, with the tech-heavy Nasdaq Composite Index down over 5% on a one-month basis. On a three-month basis this loss extends to almost 12%. In fact, even the relatively stable Alphabet is now posting a loss on a year-to-date basis.
With tech stocks looking like an increasingly risky bet, analysts have been getting more bullish on some key defensive names. These are stocks from sectors like utilities, healthcare and consumer goods.
Here we use TipRanks’ Trending Stocks tool to pinpoint the best-rated defensive stocks right now. All five stocks covered below have received only buy ratings from top analysts in the last three months. As you will see below, here we highlight only the best-performing analyst consensus and price target.
This is because TipRanks tracks and ranks analysts based on their average return and success rate. As a result, we can zone in on ratings from analysts who consistently outperform the market. And with trading so choppy right now, it’s reassuring that these analysts tend to get it right.
Let’s take a closer look now at these five ‘Strong Buy’ defensive stock picks from top analysts now:
1) Merck
Merck & Co (MRK – Research Report) is one of the world’s largest pharma companies, delivering revenue in 2017 of over $40 billion. The pharmaceutical giant is seeing big and steady sales of its cancer drug Keytruda.
Keytruda works by aiding the body’s own immune system to fight and kill cancer cells. “Merck has distinguished itself with excellent IO [immunotherapy] execution” cheered top BMO Capital analyst Alex Arfaei (Track Record & Ratings) on November 16.
The analyst adds: “If Merck maintains ~40% long-term share of the U.S. IO market, this would imply sales potential of $9.4Bn by 2030. That is plausible given Merck’s strong execution in IO so far.” He is currently forecasting US Keytruda sales of $7.4Bn by 2030, but says this seems conservative given recent trends, especially given the recent FDA approval for Keytruda + chemotherapy for non-small cell lung cancer (NSCLC).
Arfaei currently has an $80 price target on “Strong Buy” rated Merck. Indeed, in the last three months, Merck has received five consecutive buy ratings from top-ranked analysts. This is with an average analyst price target of $82 (10% upside potential).
2) Estee Lauder
Beauty stock Estee Lauder (EL – Research Report) has received a slew of recent buy ratings from the Street. Analysts are celebrating the company’s high-quality earnings beat and bullish guidance, even with China-related risks priced in. Bear in mind, in the last one month, shares have rallied almost 13%.
“We look very favorably upon the Q1 delivery and updated guidance” five-star Oppenheimer analyst Rupesh Parikh (Track Record & Ratings) wrote on October 31. He called the stock one of his favorite names in the consumer-packaged goods space.
Notably, confidence in the stock should improve now that “EL guidance has built in a moderation of sales growth in China and travel retail, impact of all known tariffs including a planned increase in China, and announced closings of department stores.”
The analyst believes the company’s leading position in the global prestige beauty category, a strong management team, and consistent M&A track record can drive continued market share gain. Indeed, the prestige beauty category specifically has been growing at a faster rate than the lower-end mass products in eight of the past nine years.
Overall, five best-performing analysts have published recent Buy ratings on the stock. Their average Estee Lauder price target of $158 indicates 11% upside potential.
3) Pattern Energy
With a focus on clean energy, Pattern Energy (PEGI – Research Report) owns and operates 12 wind power projects in the US, Canada and Chile. From a Street perspective, it’s worth keeping a closer eye on Pattern Energy, especially given its generous dividend yield.
“With a dividend yield of ~9%, we continue to believe PEGI is significantly undervalued” Oppenheimer analyst Colin Rusch (Track Record & Ratings) told investors on November 5. The company announced a 4Q18 distribution of $0.422.
He explained: “We believe its underwriting practices are in line with industry best practices and its wind resource modelling capabilities are among the industry leaders.” Moreover, Pattern Energy has first right of refusal over the purchase of a solid portfolio of assets, which Rusch believes can support ‘superior stock performance’ over the next couple of years.
In total this ‘Strong Buy’ stock has an average analyst price target of $24. This positions the stock for close to 20% upside potential from current levels.
4) Cigna Corp
US health insurance stock Cigna (CI – Research Report) is on track for its whopping $52 billion acquisition of Express Scripts to close by the end of the year. In addition to receiving Department of Justice (DoJ) approval in September, the companies have received approval from 23 states, with 6 left to go.
And analysts are optimistic about the stock’s prospects going into this crucial period. Most notably, Leerink analyst Ana Gupte (Track Record & Ratings) raised her price target for Cigna to $260 from $250 on November 19. Her new price target suggests prices can surge 23 percent. Gupte is becomingly increasingly confident on the stock as the deal nears approval.
Similarly, Cantor Fitzgerald’s Steven Halper (Track Record & Ratings) has just reiterated his Cigna buy rating. This is with a $245 price target. “We continue to see many strategic benefits to the ESRX acquisition given its large footprint of third-party payers and self-insured employers, mail order and specialty pharmacy operations” says Halper.
With 11 top analyst buy ratings in the last three months alone, Cigna scores a ‘Strong Buy’ analyst consensus. We can also see that the average analyst price target currently stands at $251 (19% upside potential).
5) Trupanion
Last but not least we have Trupanion (TRUP – Research Report), a pet insurance company for cats and dogs. What sets Trupanion apart is that its insurance policies come with no payout limits. “Off the leash” is how five-star RBC Capital analyst Mark Mahaney (Track Record & Ratings) described the company following its stellar Q3 earnings report.
He reiterated his Trupanion buy rating on November 9 with a $44 price target. Given that the stock is currently trading at just $25, his target translates into upside potential of over 70 percent.
“We view TRUP’s top-line results as encouraging, with EBITDA and pet growth continuing to outperform expectations,” Mahaney wrote in his investor report. And for investors, TRUP offers both growth and reliability: “We continue to believe TRUP has the characteristics of a high-growth, subscription-based, ’Net company and benefits from a highly recurring model, which adds predictability.”
He believes Trupanion is facing a massive total addressable market of more than $3 billion to $5 billion, and calls the shares ‘an attractive investment’ so long as there’s no significant, unexpected slowdown in pet policy growth.
Overall, this ‘Strong Buy’ stock has a bullish $42 average top analyst price target (58% upside potential).
Enjoy the Research Report on the Stocks in this Article:
Cigna Corp (CI) Research Report
Estee Lauder (EL) Research Report
Pattern Energy (PEGI) Research Report
Trupanion (TRUP) Research Report
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