Two ultimate defensive stocks to ride out anymore volatility in this already tumultuous year

CNBC

21 hours ago

We are adding two classic defensive plays to our All-Weather Stock List , both tied to industries that can weather any type of economic hiccups: water and tobacco. We launched the All-Weather List in February with the idea that 2025 would be a more volatile year than typical and that's turned out to be the case. Our strategy of hiding out in stocks that can thrive in any kind of economy continues to work even as the S & P 500 has mostly recovered from the April lows reached in the wake of aggressive tariffs from the Trump administration (that were subsequently walked back). Here's a look at the current members and how they are doing: Six of the nine picks are in the green or flat since we added them to the list, with Netflix as the best of the pack, up 14%. None are down more than 5%. While the stock market seems to be assuming most of the stiffest tariffs get walked back and the economy skates through mostly unscathed, there are troubling signs brewing. Most recently, JPMorgan CEO Jamie Dimon warned that key economic readings could start to deteriorate at any moment. So we found two more names for the list to weather any possible economic storm. Reminder, the goal of the All-Weather list is to use our CNBC Pro resources — top analyst research, stock screening tools of the Pros — to identify stocks that can thrive in any type of market. New addition: American Water Works American Water Works (AWK) first caught my eye because it appears on a list generated by Trivariate Research that contained the top performers in the S & P 500 during the tariff correction from Feb. 18 to April 8. AWK gained more than 10% in that stretch, notes the firm run by Adam Parker, formerly the top stock strategist at Morgan Stanley. Parker was sending out defensive ideas as a hedge even though he said many of his clients believe stocks will continue to grind higher. AWK YTD mountain American Water Works (AWK), YTD AWK likely garnered interest during the correction because its revenue is immune to tariffs, being 100% domestic. Not to mention, it also has revenue that would remain stable even if we fell into a recession. The water utility sports a dividend yield of 2.3% so investors get regular income along with a protective put against another tariff flare-up in the market. Traders scrambled to this stock in April and would do so again. New addition: Altria Altria (MO) made a list from UBS equity strategists who were looking for "companies that exhibit safe haven characteristics via high operational quality and low volatility while paying a material dividend." Altria pays a nearly 7% dividend and has a beta of just 0.5%. So this thing pays you a 60% higher yield than a 10-year Treasury and barely budges when the stock market freaks out. The defensive stock also appeared in one of Trivariate's defensive baskets. Parker's firm identified Altria as a stock that works in market downturns, but which also has good price momentum and a cheap valuation relative to its history. MO 5Y mountain Altria, 5 years Altria's stock also has been on a roll the past few years, with some investors likely attracted to some growth from the smokeless tobacco trend. Altria makes the On! nicotine pouches. The shares were up 30% last year and are up 15% this year through Wednesday (excluding the high dividend), lifting the stock to a six-year high. That makes me a bit uneasy, but the 7% dividend should allow you to sleep at night.