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7 Defensive Stocks That Will Help You Sleep Better at Night

7 Defensive Stocks That Will Help You Sleep Better at Night

By    |   Friday, 08 January 2016 08:03 AM

The so-called “FANG portfolio” has grabbed a lot of attention in the past few weeks as the strong gains of four companies — Facebook, Amazon, NetFlix and Google — masked underlying weakness in the broader market.

But as every broker reminds investors in disclosure statements: Past performance is no guarantee of future results.

Sven Carlin, an investment manager writing in a Seeking Alpha blog, put together a “Sleep Well” portfolio of seven stocks that might not be high-flyers like the FANGs, but he estimates their stable fundamentals will support 3 percent annual gains for the next five years.

“The main argument behind the Sleep Well portfolio is that a portfolio with stable companies that have a wide moat, low debt levels and a valuation lower than the S&P 500 average should outperform the index in the long term,” he writes. “I found seven stocks that have relatively low P/E ratios with stable or growing earnings.”

The portfolio of stocks has an average P/E ratio is 14 times while the dividend yield is 3.18 percent. Stock buybacks make up about 2 percent of the market value of these companies on average, according to Carlin’s analysis.

7-Stock Portfolio to Help You Sleep
  1. Gilead Sciences (GILD)
  2. Merck & Co. (MRK)
  3. Johnson & Johnson (JNJ),
  4. 3M Co. (MMM)
  5. Eaton Corp. (ETN)
  6. Wal-Mart Stores (WMT)
  7. Exxon Mobil Corp. (XOM)
“The Sleep Well portfolio is for the patient accumulator of wealth while the FANG is for the one that is ready to risk a lot more and bet on the uncertainties the future will bring,” he writes. “From a probabilities perspective I cannot say that either of the two portfolios is riskier than the other as both portfolios have its pro and cons but the required 50% growth rate necessary for a positive return with the FANG stocks is easily questionable, with the exception of Google.”

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The so-called "FANG portfolio" has grabbed a lot of attention in the past few weeks as the strong gains of four companies - Facebook, Amazon, NetFlix and Google - masked underlying weakness in the broader market.
stocks, investing, portfolio, defensive
330
2016-03-08
Friday, 08 January 2016 08:03 AM
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