It is always a good time to invest defensively in stocks such as Wal-Mart (NYSE: WMT), Coca-Cola (NYSE: KO), and Mondelez International (NASDAQ: MDLZ). Each is a low beta stock that sells consumer goods on a global basis. Not only do companies such as these do well in boom times, they provide a buffer when downturns inevitably come.
The bull market has been very good for all of these stocks.
Mondelez International is up more than 30% for 2013. Over the same period, Wal-Mart has jumped by over 20% for the same period. Since the first of the year, Coca-Cola has increased by nearly 14%.
In terms of preparing for a downturn, each is a low beta stock with a high dividend.
The beta for Coca-Cola is 0.48 and the dividend yield is 2.79%. For the Standard & Poor’s 500 Index, the beta is 1 and the average dividend is about 1.9%. Wal-Mart has a dividend of 2.41% and a beta of 0.41. The beta for Mondelez is 0.55 and the dividend yield is 1.56%.
The consumer franchise of each of the firms will provide downside protection. No matter what the economic conditions, Wal-Mart, Coca-Cola and Mondelez International will stay in business. That has been proven by decades of bear markets, recessions, wars, and other other adverse economic events. Legendary investor Warren Buffett wrote about staying invested in the stock market in The New York Times, back in the nadir of The Great Recession in October 2008.
The Standard & Poor’s 500 Index is up about 30% for 2013.
It has been a great year for the stock market. But it cannot go on forever. But, as it is impossible to time the stock market, investors should always own equities. Low beta companies with high dividends such as Wal-Mart, Coca-Cola, and Mondelez International offer the gains of a bull market with protection against a bear cycle.