2 defensive stocks that can withstand market volatility

2 defensive stocks that can withstand market volatility

We are caught in a market storm these days, facing downtrends and high volatility. It’s time for investors to start taking defensive stances with their portfolio additions.

Classic defensive plays, of course, are the dividends – but there are other defensive plays to be made. Investors can narrow their focus to stocks with strong product lines in key industries, where demand will remain sustainable even if the economy falls into recession. These companies, while they may feel hurt, will be able to continue to deliver both profits and returns to shareholders.

While this is a more complicated path than just jumping into div stocks, Wall Street analysts are up to the task. They have found stocks that occupy strong defensive positions and offer investors plenty of upside in a period of heightened market volatility.

We used the TipRanks data platform to dig into the details of 2 defense stocks that have recently received approval from Street analysts. Let’s look at why they think these names make attractive investment choices right now.

Rambus, Inc. (RMBS)

We’ll start with the semiconductor chip industry, where Rambus, a $2.7 billion company, holds a firm position in the memory interface space. Rambus offers series of premium memory interface chips, high-speed IP interface chips and security IP solutions. The company’s products have found use in data center, IoT, artificial intelligence and machine learning, and autonomous vehicles.

Rambus’ diverse product line and customer base, entrenched in the semiconductor industry, gives the company its defensive posture. These are products that will not lose their demand. even if customers limit orders, modern technology and industry simply cannot function without updated chips.

This can be seen in Rambus’ recent 2Q22 financial results. The company reported revenue and earnings topping previously published guidance. The top line reached $121 million, a 42.6% increase from the $85 million reported in the previous quarter. The company’s top line saw strong growth in all three of its divisions: product revenue rose 70% year over year to $53.3 million. contracts and other revenue increased 67% to $19.8 million. and royalties posted a more modest gain of 14% to $48 million. On the earnings side, diluted EPS more than tripled year over year, from 10 cents per share to 31 cents per share.

5-star analyst Sidney Ho, who weighs in at Deutsche Bank, supports Rambus, noting the company’s strong position and solid results: “RMBS delivered a solid beat-and-raise on strong demand across its product portfolio… . Given strong growth opportunities in both the product IP and Silicon businesses and a highly recurring licensing revenue stream, we view RMBS as one of the more defensive names in our coverage. With the stock valued at just ~4x our CY23E EV Sales/Sales, we like the risk-reward profile…”

Ho complements these comments with a Buy rating and a $32 price target, suggesting a one-year upside potential of 30%. (To follow Ho’s history, Click here.)

This stock’s consensus rating of Strong Buy is based on the consensus view of Wall Street analysts, who have submitted 3 positive reviews in the last few weeks. Shares are currently priced at $25.29 and the average target of $34.33 suggests a 36% upside for the next 12 months. (See Rambus’ stock prediction on TipRanks.)

Masco Corporation (MAS)

Next on our list, Masco Corp, is an $11 billion player in the construction industry, where it focuses on the building and home improvement sectors. Masco is a conglomerate whose accessories companies offer a wide range of branded products, ranging from wood stains to glass shower doors to cabinets, windows and their hardware – as well as everything needed for domestic plumbing, from pipes to valves to taps. kitchen sink. Masco has 30 manufacturing facilities in North America and is headquartered in Livonia, Michigan.

While there are questions about the real estate sector in the medium term – namely, what will happen if, as interest rates rise, home sales decline – Masco’s strong presence in home improvement will provide a high level of protection. Typically, when home sales decline, home improvement sees strength. Owners who can’t sell now may look to upgrade with an eye toward long-term value.

With that in mind, we can check the most recent financial release (2Q22) and see that Masco reported 8% year-over-year sales growth, totaling $2.35 billion. This generated an operating profit of $408 million and a margin of 17.3%. Adjusted EPS, at $1.14 per share, was flat year-over-year and fell short of the forecast of $1.19. Masco also reported total liquidity of $1.44 billion, including $440 million in cash and $1 billion in available revolving credit.

This stock has garnered interest from Wells Fargo’s Deepa Raghavan, who believes that despite falling short of expectations in the latest quarterly report, the company is well-positioned to weather the current environment.

“The CQ2 EPS failure was a surprise, but mgmt noted operational inefficiencies as the cause,” the analyst explained. “Nevertheless, MAS’ low-fare consumer exposure and strong balance sheet remain a defensive addition to the portfolio in a downturn. Net-net, we still like MAS.”

Going forward, Raghavan gives these shares an Overweight (Buy) rating, while the $62 price target suggests her belief in a 27% upside over the next year. (To follow Raghavan’s background, Click here.)

Wells Fargo’s view of Masco is bullish, but Wall Street in general is evenly split. the 10 recent ratings include 5 for Buy and Hold. That’s enough for a consensus Moderate Buy rating, while the average price target of $61.89 is almost identical to Raghavan’s target. (See the Masco stock forecast at TipRanks.)

To find good ideas for trading stocks at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that brings together all of TipRanks’ stock information.

Disclaimer: The views expressed in this article are solely those of the selected analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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