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5 Defensive Stocks to Guard Against Economic Slow Down

Zacks Equity Research

The final estimate for second-quarter GDP has slowed down to 2%. The economy is being restricted from expanding by the prevailing trade war between the United States and China. Given this economic slowdown, investors should look for safer investments like defensive stocks.

Behind the Downward Revision in U.S. GDP

As per the Bureau of Economic Analysis, U.S. GDP growth estimate for the second quarter is finally 2%. The report highlights downward revision of personal consumption expenditures and non-residential fixed investments. On the other hand, the report stated that there has been a rise in government spending and exports.

Consumer outlays did increase during spring mostly due to a record low unemployment rate and rise in income. Nonetheless, the government still trimmed its consumer spending estimate. Consumer spending was revised to an increase of 4.6% from 4.7% as they restrain themselves from spending on takeout and other prepared foods.

Business spending and investments remain disappointing. Even after the Federal Reserve’s monetary easing policies, businesses are bearing the brunt of the U.S.-China trade war, which is weighing on the ongoing expansion of the U.S. economy that has lasted for more than 10 years after the 2009 recession.

Government spending grew 4.8% from the previously reported 4.5%. Construction of roads and building throughout different states was a major part of government spending.

Why Play Defensive?

The second-quarter final GDP revision report clearly shows sluggishness in the economy. In such a scenario, investors can opt for defensive stocks.

Defensive stocks have stable earnings regardless of any market gyrations. There is constant demand for these products in any business cycle as they are necessary items. In other words, when the economy is slowing down and consumers are spending less, these products are unaffected as people with need them for survival.

Consumer staples, health care and utilities’ stocks fall under this category.

5 Top Picks

We have selected five such defensive stocks that also carry a Zacks Rank #1 (Strong Buy) and 2 (Buy).

Hanger, Inc (HNGR) is a publicly traded company that delivers orthotic and prosthetic patient care and rehabilitation services. Hanger’s expected earnings growth rate for the current year is 11.5%, above the industry’s projected rally of 0.9%. The Zacks Consensus Estimate for current-year earnings has improved 3.6% over the past 60 days.

Hanger sports a Zack Rank #1 and has outperformed the Outpatient and Home Healthcareindustry over the past one-year period (+1.3% vs -22.8%). You can see the complete list of today’s Zacks #1 Rank stocks here.

Chemed Corporation (CHE) is a publicly traded fresh chicken retail line. Chemed Corp’s expected earnings growth rate for the current year is 15.3%, ahead the industry’s projected rally of 0.9%. The Zacks Consensus Estimate for current-year earnings has improved 4.8% over the past 60 days.

Chemed Corp carries a Zacks Rank #1 and has outperformed the Outpatient and Home Healthcare industry over the past one-year period (+30.7% vs -22.8%).

American States Water Company (AWR) is a publicly traded diversified energy company that owns oil-production assets in the Appalachian basin. American States Water Company’s expected earnings growth rate for the current year is 22.7%, above the industry’s projected rally of 0.5%. The Zacks Consensus Estimate for current-year earnings has improved 6% over the past 60 days.

American States Water Company carries a Zacks Rank #2 and has outperformed the Utility - Water Supplyindustry over the past one-year period (+48.3% vs +41%).

Pilgrim's Pride Corporation (PPC) is a publicly traded fresh chicken retail line. Pilgrim Pride’s expected earnings growth rate for the current year is 53.9%, higher than the industry’s projected rally of 20.7%. The Zacks Consensus Estimate for current-year earnings has improved 7.7% over the past 60 days.

Pilgrim’s Pride carries a Zacks Rank #1 and has outperformed the Food – Meat Productsindustry over the past one-year period (+75.6% vs + 30.8%).

Purple Innovation, Inc. (PRPL) is a publicly traded designer and manufacture of mattresses, pillows and cushions. Purple Innovation’s expected earnings growth rate for the next year is 64.8%, ahead of the industry’s projected rally of 22.9%. The Zacks Consensus Estimate for current-year earnings has improved 563.16% over the past 60 days.

Purple Innovation carries a Zacks Rank #1 and has outperformed the Consumer Products - Staplesindustry over the past one-year period (+33.6% vs -13.8%).

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PURPLE INNOVATION, INC. (PRPL) : Free Stock Analysis Report
 
Pilgrim's Pride Corporation (PPC) : Free Stock Analysis Report
 
Hanger Inc. (HNGR) : Free Stock Analysis Report
 
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American States Water Company (AWR) : Free Stock Analysis Report
 
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