11 Cheap Defensive Stocks to Buy Now: Morningstar

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Last year was tough for the stock market, but was good for defensive stocks because they held firm during the bear market, according to Margaret Guidici, a member of Morningstar’s development program.

Guidici wrote in a recent blog post that Morningstar equity analysts see room for growth in a number of high-quality, defensive names. To identify these, they turned to the Morningstar US Defensive Super Sector Index, which measures performance of stocks in traditionally defensive sectors.

In 2022, the index lost 3.6% for the trailing 12-month period, while the broader market fell 19.4%, as measured by the Morningstar US Market Index. Morningstar analysts cover 156 of the 323 defensive stocks in the index, and 73 of these were undervalued as of Dec. 31, compared with 75 at the end of 2021.

Guidici noted that defensive stocks are normally resistant to economic cycles because consumers need certain products in both good and bad times. Consumer defensive companies manufacture food and beverages, household and personal products, packaging and tobacco. Some provide education and training services.

To find the most appealing defensive names for investors to buy now, analysts culled the Defensive Super Sector Index for stocks that currently carry a Morningstar Rating of 4 or 5 stars, and for those that have earned a Morningstar Economic Moat Rating of wide, meaning they have durable competitive advantages.

See the gallery for the 11 most undervalued stocks in the Morningstar Defensive Super Sector Index as of Jan. 2.