At this point, it makes sense to start to consider some defensive growth stocks. Inflation, rising interest rates, and the COVID-19 pandemic have hit many growth stocks hard. U.S. inflation hit a 39-year high of 7%, and to curb this inflation, the Federal Reserve might raise interest rates as many as seven times in 2022, according to Wall Street.
These measures may bring inflation down to 4.6% this year, but will have adverse effects on the stock market. In a situation of rising interest rates, investors prefer to invest in safer and more defensive options, such as fixed income or defensive equities.
Indeed, high-growth stocks are frequently among the S&P 500’s top performers. However, inflation fears and supply chain problems could result in an upending of valuations this year. At least, that’s the worry many growth investors have. Accordingly, the search for top defensive growth stocks is on.
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As it happens, there are a number of great defensive growth options in today’s market. However, paring down one’s list into seven top options may be difficult.
Here are seven of my top picks, as far as long-term, defensive growth stocks go. These are all companies I think are worth a look in February on the recent market turmoil, given these companies’ excellent long-term prospects.
- Walmart (NYSE:WMT)
- International Business Machines Corporation (NYSE:IBM)
- Johnson & Johnson (NYSE:JNJ)
- Intel (NASDAQ:INTC)
- Amgen (NASDAQ:AMGN)
- Ford (NYSE:F)
- Atmos Energy (NYSE:ATO)
Defensive Growth Stocks to Buy: Walmart (WMT)
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Retail giant and the world’s largest private-sector employer, Walmart accounts for 9% of the USA’s retail sales. Even though WMT only grew 0.39% in the past year at the time of writing, this retail king remains amongst the market’s best defensive stocks because of its continuous expansion.
To counter the pandemic blues and takeover its e-commerce rivals, Walmart launched a subscription service like Amazon Prime.
Through Walmart Plus, users can order groceries, electricals, and various other goods at discounted rates and get them delivered within a day. This doubling-down on e-commerce is one of the key defensive factors many investors like with Walmart. Should shoppers fail to return to stores en masse, the hope is that online ordering will continue to provide for growth.
Rising inflation has hurt input costs, which Walmart has had to pass on to customers. However, looking at the company’s recent results, it’s clear that customers were willing to accept these higher prices.
Walmart pushed through supply chain issues, delivering revenue growth of 4.3% this past quarter, totaling more than $140 billion. Importantly, e-commerce sales rose 8%, and same-store sales rose 9.2%. These are very bullish numbers, spurring strong performance with WMT stock.
International Business Machines Corporation (IBM)
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This company might not be as famous as it was five years ago, but IBM is known for being consistent.
It has had its fair share of ups and downs but displays the potential to bounce back.
International Business Machines provides services like hardware, software, and cloud solutions. With its impressive dividend yield of 4.8%, 41 hedge fund holders include IBM in their portfolios. The company’s cash flows currently comfortably cover this dividend.
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However, investors may want to look forward to this company’s growth profile. Over the past quarter, IBM brought in revenue growth of 6.5%, a meaningful amount in the post-pending world. Earnings per share also beat estimates, leading to a bullish outlook on this stock.
This is one large-cap “legacy” company that’s worth a look at these levels. Should the company continue to grow its cloud business, IBM could be a sleeper stock at these levels.
Defensive Growth Stocks to Buy: Johnson & Johnson (JNJ)
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With a dividend that has increased for 59 consecutive years, Johnson & Johnson is a true Dividend Aristocrat. This dividend (currently yeilding around 2.5%), has provided investors in JNJ stock with stability for decades. I don’t expect that to change any time soon.
A true global conglomerate in the consumer staples and pharma space, Johnson & Johnson provides a business model that’s very defensive. Since JNJ consumer products are considered essentials, JNJ stock has been one of the steadier large-cap stocks out there during the pandemic.
For those worried about volatility moving forward, JNJ stock is a great pick. This company’s recent results show just how strong the company’s core business is.
Johnson & Johnson brought in double-digit revenue and earnings growth, beating expectations and bouncing materially on these results.
I think more of this is to come. As the company’s medical devices and pharmaceutical businesses expand, investors essentially pick up this exposure for free. This is more than a vaccine stock, and investors are starting to catch on.
Intel Corporation (INTC)
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A massive supplier of semiconductor chips mainly used in the PC sector, Intel has been hit by a number of headwinds of late.
There are the macro-related headwinds hitting all stocks, but Intel’s market share has been eroded by competition. There are also concerns that its margins may not be as robust as investors initially thought.
Rivals such as AMD and Nvidia have established market dominance. Combine this with chip shortage worries, and the potential for competitors to pick up market share, and investors have what appears to be a listing proposition.
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However, INTC stock has held up quite well over the past five years. Indeed, this company has proven to be a bond-like play on technological growth.
With a dividend yield of 3% at the time of writing, Intel provides investors with steady income over time, along with some small capital appreciation upside potential.
For defensive investors looking to benefit from long-term growth trends, Intel is a stock worth considering. This company is more of a dividend play than anything else in my book. However, for stability, there are few better options in this space, in my view, at this valuation.
Defensive Growth Stocks to Buy: Amgen (AMGN)
As the world’s largest biotech drugmaker Amgen is also an excellent option for investors seeking defensive growth stocks.
Amgen’s performance in 2021 created negative investor sentiment, but AMGN is back on its upward trend and is trading at just below $230 after falling to $198 in November.
With its above-average dividend yield and recent drug approvals, Amgen could outperform the broader market for the remainder of 2022. Investors in this company enjoy an annual yield of 3.4%, which is highly appealing during a time of peak market uncertainties.
Furthermore, in May 2021, Food and Drug Administration approved Amgen’s lung cancer drug called Lumakras. By next year, this drug could bring in sales of $1.4 billion and be a game-changer in the market.
Additionally, another drug for severe asthma called Tezspire, which can treat millions of patients, was recently approved by the FDA.
Lastly, adding to its rebound journey is Amgen’s $365 million investment in a new packaging and assembly factor in Ohio. This will improve their production scale and help them attain a price target of $255 in 2022.
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After beating Tesla, Ford became the auto industry’s top growth stock in 2021. Despite market volatility and a massive chip shortage in the electric vehicle industry, F grew 136% last year.
It reached its two-decade peak of more than $25 per share last month but has since fallen precipitously since then. Analysts consider this correction vital for Ford’s future growth, and I tend to agree.
What makes the stocks of this automobile manufacturer interesting in 2022 is its focus on becoming a leader in the EV market.
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By 2030, Ford aims to generate 40% of its revenue from its EV segment. To do this, the company is leveraging its most famous brands, the Mustang and the F-150 pickup. In 2021, Ford delivered 27,140 Mustang Mach-E EV SUVs, and it will begin the sale of F-150 Lightning in 2022.
In fact, Ford had to shut down orders for its $20,000 Maverick pickup truck as a result of consumer demand. This shows the potential that this company has in the EV market. Compared to its competitors, Ford has a higher brand value and a reasonable stock price.
With its promising dividend yield of 2% and tremendous growth potential, Ford can continue its 2021 momentum into 2022.
Defensive Growth Stocks to Buy: Atmos Energy (ATO)
This S&P 500 company’s stock has risen 12% in the last three months. Atmos Energy Corporation is currently trading at a fair value of $107 and offers an annual dividend yield of 2.5%, which has grown 8.8% since last year.
Investors in ATO have received constant dividend payments for the last five years, at an annual increase of 8.75%.
In 2022, Atmos’ business displays massive upside potential, with an estimated earnings growth of 6.84%. This company is one of the USA’s largest natural-gas distributors. In its final quarter of 2021, Atmos reported revenue of $568 million, which represents a 19.6% year-over-year increase.
Atmos distributes natural gas in nine states and to more than 1,400 communities. Thus, most of this company’s revenue comes from its distribution segment. Last quarter, it brought in $523.9 million and witnessed a 21.8% year-over-year growth.
ATO is a perfect choice for risk-averse investors who wish to steer clear of market volatility. More than 90% of ATO’s investors start earning returns within six months of investing, and 99% receive profits within 12-months. This year experts estimate Atmos to offer earnings of $5.47 per share.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.
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