4 Low-Beta Defensive Stocks to Buy as Rate Cut Uncertainty Continues
The minutes of the Federal Reserve's latest meeting, released on Wednesday, suggest that most officials are in no rush to go for an immediate rate cut. A delay in the rate cut could weigh on stocks and turn markets volatile.
Given the uncertainty, it would be ideal to invest in safe-haven defensive stocks from the utility and consumer staples sectors. Four such plays are: Atmos Energy Corporation ATO, Fortis, Inc. FTS, Colgate-Palmolive Company CL and The Coca-Cola Company KO. Each of these stocks carries a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
Also, these stocks are from the low-beta category (beta greater than 0 but less than 1). Hence, the recommended approach is to invest in low-beta stocks with a high dividend yield and a favorable Zacks Rank.
Uncertainty Over Rate Cut Lingers
The minutes of the Fed's latest meeting suggest that only a handful of officials believe that the central bank could go for a rate cut as early as this month. Most Federal Reserve officials have adopted a wait-and-see approach as they worry that Trump's tariffs, which will go into effect on Aug. 1, can build inflationary pressures.
According to the minutes, 'most participants' at last month's Federal Reserve meeting believed that interest rate cuts would likely be suitable later this year, and any inflationary impact from tariffs was expected to be 'temporary or modest.' Although the minutes described the effect of upcoming tariffs as 'considerable uncertainty,' most of the officials believed that there was no urgency in going for rate cuts anytime soon.'
Trump has been calling for immediate rate cuts and the resignation of Federal Reserve Chairman Jerome Powell, as he believes that the economy is losing hundreds of billions of dollars due to the delay.
Investors have also lately been upbeat about a 25-basis-point rate cut in July, as they believe cooling inflation and a shrinking labor market give the Fed enough reasons to resume its interest rate cuts. However, it is unlikely that the Federal Reserve will cut rates in this month's FOMC meeting. This could turn markets volatile again.
4 Low-Beta Defensive Stocks With Growth Potential
Atmos Energy Corporation
Atmos Energy Corporation, along with its subsidiaries, is engaged in the regulated natural gas distribution and storage business. ATO serves nearly 3.3 million customers in more than 1,400 communities across eight states from the Blue Ridge Mountains in the East to the Rocky Mountains in the West. Atmos Energyoperates more than 73,000 miles of transmission and distribution lines as well as 5,700 miles of interstate pipelines.
Atmos Energy has an expected earnings growth rate of 6% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last 60 days. ATO presently carries a Zacks Rank #2. Atmos Energy has a beta of 0.70 and a current dividend yield of 2.27%.
Fortis, Inc
Fortis, Inc. is engaged in the electric and gas utility business. FTS offers regulated utilities, comprising electric and gas, as well as engages in non-regulated hydroelectric operations. Fortis operates primarily in Canada, the United States and the Caribbean.
Fortis has an expected earnings growth rate of 3.8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.8% over the last 60 days. Currently, FTS carries a Zacks Rank #2. Fortis has a beta of 0.48 and a current dividend yield of 3.81%.
Colgate-Palmolive Company
Colgate-Palmolive Company 's business strategy closely defines efforts to increase its leadership in key product categories through innovation in core businesses, tracking the adjacent categories' growth and expansion into new markets and channels. Due to the shift in consumer preference to organic and natural ingredients, CL is expanding its Naturals range, including Naturals toothpaste.
Colgate-Palmolive Company has an expected earnings growth rate of 1.7% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the past 60 days. CL presently has a Zacks Rank #2. Colgate-Palmolive has a beta of 0.37 and a current dividend yield of 2.27%.
The Coca-Cola Company
The Coca-Cola Company 's strong brand equity, marketing, research and innovation help it to garner a market share of more than 40% in the non-alcoholic beverage industry. KO is putting its best foot forward to evolve its business model to become a total beverage company with something for everyone to drink. The Coca-Cola Company has coped with the industry-wide flattening of soda sales over the years by going on a buying spree and making investments in healthier alternatives like coffee, sparkling water and sports drinks.
The Coca-Cola Company has an expected earnings growth rate of 3.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the past 60 days. KO currently carries a Zacks Rank #2. The Coca-Cola Company has a beta of 0.45 and a current dividend yield of 2.94%.
#1 Semiconductor Stock to Buy (Not NVDA)
The incredible demand for data is fueling the market's next digital gold rush. As data centers continue to be built and constantly upgraded, the companies that provide the hardware for these behemoths will become the NVIDIAs of tomorrow.
One under-the-radar chipmaker is uniquely positioned to take advantage of the next growth stage of this market. It specializes in semiconductor products that titans like NVIDIA don't build. It's just beginning to enter the spotlight, which is exactly where you want to be.
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