With the market dropping for three consecutive weeks, it’s understandable that investors are starting to get nervous. Market indices dropped by over 2% at one point this afternoon due to the potential ripple effects of a…
default of a major Chinese real estate company. When you add in recent concerns over the passage of fiscal measures and the infrastructure bill, things certainly appear dicey.
While I don’t believe we are headed for a market crash, there’s no reason for investors to consider less risky stocks in their portfolios. I consider safe or defensive stocks to be less risky due to a number of features. The first is beta. According to Investopedia, beta is a measure of the volatility of a security or portfolio compared to the market as a whole.
So, if a stock has a beta of 1, it has the same volatility as the market. That’s why I only want to consider stocks with a beta below 1. In addition, I also want companies that have a consistent history of positive earnings growth and a Buy rating in our POWR Ratings system. Three stocks that fit the bill are Colgate-Palmolive Company (CL – Get Rating), Quest Diagnostics Incorporated (DGX – Get Rating), and W.W. Grainger, Inc. (GWW – Get Rating).
CL a leading global consumer product company. In addition to its namesake oral care line, the company manufactures shampoos, shower gels, deodorants, and home care products sold in over 200 countries worldwide. It also owns specialty pet food maker Hill’s, which sells its products through veterinarians and specialty pet retailers.
The company’s stock has benefited from a solid second quarter where both its top and bottom lines rose year over year. This was due to continued business momentum and investments in the digital transformation. So far, CL remains on track with its growth management initiatives. For instance, its organic sales rose 5% due to higher volume and improved pricing.
In fact, this was the 10th consecutive quarter of organic sales growth around its target of 3-5%. Innovation has been key as part of this strategy, such as growing in adjacent categories and product areas. For instance, CL has created premium versions of its Oral Care products. This resulted in organic sales growth of 10% in the oral care segment in the most recent quarter.
E-commerce is another area where the company sees growth. Last year, CL saw 50% growth in e-commerce, and this growth accelerated in the second quarter this year. CL has an overall grade of B, which translates into a Buy rating in our POWR Ratings system. The company has a Stability Grade of B due to stable growth, as mentioned above and a Beta of 0.39.
This indicates the stock is less than 50% volatile than the market. CL also has a Quality Grade of A as its cash balance of $937 million as of the end of the second compares favorably to short-term debt of only 15 million. We also provide Growth, Value, Momentum, and Sentiment Grades for CL, which you can find here.
CL is ranked #18 in the Consumer Goods industry. For more top stocks in this industry, click here.
DGX is a leading independent provider of diagnostic testing, information, and services in the U.S. The company generates over 95% of its revenue through clinical testing, anatomic pathology, esoteric testing, and substance abuse testing with specimens collected at its national network of nearly 2,300 patient service centers, as well as multiple doctors’ offices and hospitals.
In the most recent quarter, the company had better-than-expected earnings and revenues. In fact, this was the first quarter since 2019 where it recorded organic base testing revenue growth. This was driven due to new hospital lab management contracts and more people returning to see doctors and get tests.
DGX is poised to continue this…
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