In this article, we discuss 10 defensive stocks that Ken Fisher loves. If you want to skip our detailed analysis of Fisher’s investment philosophy, hedge fund returns, and history, go directly to Ken Fisher Loves These 5 Defensive Stocks.
Born in 1950, Kenneth Lawrence Fisher is an American investor, author, and founder of one of the largest investment management firms, Fisher Asset Management. It can be said that Ken Fisher inherited his skills and eye for the stock market as he was born to a famous stock investor, Philip A. Fisher.
Ken Fisher graduated with an associate degree in Economics from Humboldt State University in 1972. A few years later, in 1979, he founded Fisher Asset Management with only $250 as startup capital. As of the first quarter of 2022, the firm had over $169 billion in managed 13F securities. Fisher has authored 11 books on investing and wrote Forbes “Portfolio Strategy” columns for 33 years between 1984 and 2017. In 2011, Investment Advisor Magazine ranked him as one of the top 25 most influential figures in the financial industry.
Ken Fisher’s investment strategy revolves around taking risks, diversification, and cashing in on any opportunity that passes by. Fisher’s portfolio includes high-growth as well as defensive stocks to keep the balance in case of market volatility. This article will discuss the defensive stocks in Kenneth Fisher’s Fisher Asset Management portfolio.
Beta is the best way to calculate the volatility of each stock. The standard beta unit is 1. The stocks with a beta of less than 1 have low market volatility, which means the market won’t have much effect on them during its ups and downs. Even though defensive stocks are low risk, the downside is that the stocks won’t gain much during bull markets. The stocks that provide basic necessities such as healthcare, consumer staples, industrial equipment, and utility sectors are considered to be the least volatile and are a safe bet in a slow economy. With inflation at a four-decade high, it seems like a good time to consider investing in some defensive stocks.
According to Fisher Asset Management’s Q1 2022 13F filings, the firm had discretionary assets under management of $208.5 billion and $169.43 billion in managed 13F securities. Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and Alphabet Inc. (NASDAQ:GOOG) are some of the biggest names in Fisher Asset Management’s portfolio.
These stocks have been picked from the first-quarter 2022 13F holdings of Fisher Asset Management. Most of these stocks have a beta value of less than one. However, some stocks with a beta of more than 1 are also included. These are the stocks that have shown constant profitability, a good dividend yield, low market volatility during a bear market, and a strong cash position.
The hedge fund sentiment around each stock has been taken from Insider Monkey’s Q1 database of 912 hedge funds. The hedge fund sentiment and analyst ratings have also been mentioned around these stocks.
Ken Fisher Loves These Defensive Stocks
10. Johnson & Johnson (NYSE:JNJ)
Fisher Asset Management’s Stake Value: $113.1 million
Percentage of Fisher Asset Management’s Portfolio: 0.06%
Number of Hedge Fund Holders: 83
The pharmaceutical giant, Johnson & Johnson (NYSE:JNJ), is one of the top ten defensive picks of Ken Fisher as it mostly stays unaffected by macroeconomic impediments. Moreover, the company has a dividend yield of 2.57%. The increase of $0.07 to the quarterly dividend was declared on April 19 and paid out on June 7. As of June 24, the company has returned 11.57% to its investors over the past 12 months.
In the last 10 years, Johnson & Johnson (NYSE:JNJ) increased its sales by 50%. In the first quarter of 2022, the company reported an EPS of $2.67, outperforming the analyst estimates by $0.10. The company’s revenues missed the analyst estimates of $23.62 billion.
In 2021, Johnson & Johnson (NYSE:JNJ) closed 147 innovation deals along with 20 new equity investments and launched 20 new major products under its medical equipment division. In addition, long-term shareholders of the company have also received annualized returns of 13.2% on average.
“The largest additions in the rebalance, Johnson & Johnson was around 50 and 40 basis points incrementally. J&J underperformed in the quarter while its normalized free cash flows held steady and so its position size was topped off to match the stable cash flows.”
9. The Procter & Gamble Company (NYSE:PG)
Fisher Asset Management’s Stake Value: $139.58 million
Percentage of Fisher Asset Management’s Portfolio: 0.08%
Number of Hedge Fund Holders: 72
The Procter & Gamble Company (NYSE:PG) is an Ohio-based consumer goods company. The 5-year monthly beta of the company is 0.39, which makes the company quite stable during high market volatility. The Procter & Gamble Company (NYSE:PG) reported organic growth of 10% and sales volume increase of 3% in its third-quarter 2022 reports. The reports show that The Procter & Gamble Company (NYSE:PG) remains strong even in the bear market and will continue to be one of the best defensive stocks.
On June 21, following Deutsche Bank’s consumer conference in Paris, its analyst Steve Powers maintained a Buy rating on The Procter & Gamble Company (NYSE:PG)’s shares. However, he lowered the price target on the company to $157 from $171.
Hedge funds were loading up on The Procter & Gamble Company (NYSE:PG) stocks in the first quarter of 2022. According to the Insider Monkey database, 72 hedge funds had the company in their portfolios in Q1 2022, compared to 67 in the previous quarter. GQG Partners held the most significant stake in the company in the first quarter of 2022, valued at $1.515 billion. The fund also increased its holding by 32% in the company in the same quarter.
8. Unilever PLC (NYSE:UL)
Fisher Asset Management’s Stake Value: $224.3 million
Percentage of Fisher Asset Management’s Portfolio: 0.13%
Number of Hedge Fund Holders: 23
Unilever PLC (NYSE:UL) is a British consumer goods company. On June 16, the company joined hands with Genomatica, a renewable feedstock company, to scale and commercialize alternatives to palm oil and fossil fuel-derived cleansing ingredients. The demand for sustainably sourced palm oil is growing, which makes this venture a viable profit source for Unilever PLC (NYSE:UL) in the future.
With a 5-year monthly beta of 0.10, Unilever PLC (NYSE:UL) remains highly unaffected by the market volatility. On top of that, the company has quite a significant dividend yield of 3.94%. The trailing twelve-month payout of the company has been $1.94. Furthermore, Unilever PLC (NYSE:UL)’s 5-year dividend growth has been around 6.26%. The last quarterly dividend of $0.451 was paid out on June 16.
Unilever PLC (NYSE:UL)’s diversified business operations also make it an attractive stock during inflation. Additionally, the slow economy has had no negative effect on the company’s financials. In the first quarter of 2022, the company had a 7.3% YoY growth in net sales. At the end of the fiscal year 2021, Unilever PLC (NYSE:UL)’s balance sheet revealed $5.1 billion of cash and cash equivalents. Even though the company recorded $3 billion of preferred equity debt, the cash flow from operations was recorded at $9.07 billion, which easily covers up the company’s debt position.
“Unilever seems to be labouring under the weight of a management which is obsessed with publicly displaying sustainability credentials at the expense of focusing on the fundamentals of the business. The most obvious manifestation of this is the public spat it has become embroiled in over the refusal to supply Ben & Jerry’s ice cream in the West Bank. However, we think there are far more ludicrous examples which illustrate the problem. A company which feels it has to define the purpose of Hellmann’s mayonnaise has in our view clearly lost the plot. The Hellmann’s brand has existed since 1913 so we would guess that by now consumers have figured out its purpose (spoiler alert — salads and sandwiches). Although Unilever had by far the worst performance of our consumer staples stocks during the pandemic we continue to hold the shares because we think that its strong brands and distribution will triumph in the end.”
7 . Caterpillar Inc. (NYSE:CAT)
Fisher Asset Management’s Stake Value: $1.62 billion
Percentage of Fisher Asset Management’s Portfolio: 0.95%
Number of Hedge Fund Holders: 54
Caterpillar Inc. (NYSE:CAT) is a multi-industry company that manufactures and sells heavy machinery, engines, and financial services. The company has a dividend yield of 2.16% compared to the industry average of 1.26%. Caterpillar Inc. (NYSE:CAT) has increased its dividend four times in the last five years at an average annual increase of 9.19%. On June 8, the company announced a raise of 9 cents to the quarterly cash dividend to $1.20, payable on August 19 to the shareholders of record at the close of business on July 20, 2022.
On May 20, after Caterpillar Inc. (NYSE:CAT) announced its $15 billion share repurchase program, Tigress Financial analyst Ivan Feinseth raised the company’s price target to $282 from $278. The analyst retained a Buy rating on the company shares.
According to the Insider Monkey database, 54 hedge funds had a combined value of over $4 billion in Caterpillar Inc. (NYSE:CAT) in Q1 2022. Bill and Melinda Gates Foundation Trust held the most prominent stake, with 7.35 million shares of the company worth $1.638 billion.
Caterpillar Inc. (NYSE:CAT) along with Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and Alphabet Inc. (NASDAQ:GOOG) is one of the best defensive stocks to invest in.
Oakmark Funds mentioned Caterpillar Inc. (NYSE:CAT) in its Q2 investor letter. Here is what the firm said:
“Having followed the company closely for north of a decade, Caterpillar is a name we know well. For much of its history, the operating efficiency of the company left much to be desired, but its underlying competitive position was rarely in doubt. A series of actions over the past decade (e.g., LEAN implementation, improved service mix, optimized manufacturing footprint) helped to narrow the gap between Caterpillar’s potential and its realized results, driving material margin expansion and strong share price performance. In our view, the company remains among the highest quality industrials in the market, but its underlying business is cyclical, which can translate to large swings in both performance and investor sentiment over short time periods. Our ability to focus on the long-term, sustainable earnings power of a business (rather than getting distracted by near-term fluctuations) is our most significant edge when investing in cyclical businesses. Due to the inherent volatility in Caterpillar’s end markets and operating performance, we suspect we’ll have a future opportunity to own this high-quality business at a more attractive price once the cycle turns and today’s enthusiasm wears off.”
6. Novo Nordisk A/S (NYSE:NVO)
Fisher Asset Management’s Stake Value: $1.77 billion
Percentage of Fisher Asset Management’s Portfolio: 1.04%
Number of Hedge Fund Holders: 31
With five years monthly beta of 0.24, Novo Nordisk A/S (NYSE:NVO) is one of the least volatile companies in Fisher Asset Management’s portfolio. Thanks to their diabetes drug, Ozempic, the company has performed better than the Large Cap Pharmaceuticals industry average of +19.3% at +36.9%. Excluding the dividend yield, Novo Nordisk A/S (NYSE:NVO) has returned 335.78% to its investors in the last ten years as of June 9.
According to Novo Nordisk A/S (NYSE:NVO)’s first-quarter 2022 reports, the company reported an EPS of $0.88, surpassing the estimates of $0.82. The revenue consensus for the quarter was $5.53, which Novo Nordisk A/S (NYSE:NVO) outperformed with a revenue of $6 billion.
Of the hedge funds tracked by Insider Monkey, Novo Nordisk A/S (NYSE:NVO) 31 had stakes in the company worth $4.49 billion in the first quarter of 2022. In the previous quarter, 28 funds were bullish on the company with stakes worth $4.43 billion. The hedge fund sentiment on Novo Nordisk A/S (NYSE:NVO) was positive.
“Given market strength, every sector provided positive returns during the quarter, led by Technology. Hardware and semiconductors were the primary contributors, although software performed better in terms of stock selection. Our Health Care investments in pharmaceuticals, particularly the diabetes duo of Eli Lilly and Novo Nordisk, performed well, but medical specialties lagged.”
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Disclosure: None. Ken Fisher Loves These 10 Defensive Stocks is originally published on Insider Monkey.