Market uncertainty lingers, but Wall Street analysts say there are several ways to play defense and not entirely abandon equities. Analysts named a wide range of stocks this week that they claim every investor must own in times of uncertainty. CNBC Pro combed through Wall Street research to find buy-rated companies that Wall Street argues have defensive characteristics.
They include: Aecom , Microsoft, General Dynamics, Netflix and AutoZone. Microsoft HSBC doesn't think customers can stop relying on Microsoft and that's positive for the owner of Xbox, LinkedIn and Windows software, the firm says. "Due to its products and services' critical positioning within enterprises, we think it is difficult for customers to materially reduce spending with Microsoft," analyst Stephen Bersey wrote.
HSBC says Microsoft is well positioned by the long-term contracts it maintains with many vendors. But it's the AI outlook that has HSBC most excited, according to Bersey. "And we see AI as a non-negotiable investment within most large enterprises," he wrote.
Meanwhile, the stock is up about 11% this year with plenty of more room to run. "The company has a strong and sustainable competitive advantage and is very hard to displace in most of its end markets," Bersey went on. Aecom Bank of America analyst Michael Feniger says the construction management company is "steady in a stormy sea.
" Aecom recently reported a mixed fiscal third quarter earnings report, but Feniger believes the stock is a must-own in a bumpy macroeconomic environment. Profit margins are on the upswing, he says, and while growth has moderated there's still plenty of room for improvement. "This is encouraging given some mixed trends that infrastructure momentum is slowing," Feniger added.
Bank of America notes that Aecom is too attractive to ignore at current prices and investors should buy any share price pullback. "Industrials are under pressure this earnings season, yet nuances in ACM's business model stand out to us," the firm said. Shares are up more than 7% this month.
AutoZone Buy shares of this best-in-class stock, Citigroup says. The do-it-yourself auto parts retailer is firing on all cylinders and poised to withstand a bumpy macro environment, analyst Steven Zaccone wrote. "The combination of industry-leading DIY sales and increasing market share in the faster-growing commercial pro category should drive top-line growth above the industry average," he said.
Citi says companies like AutoZone likely got a boost from the summer heatwave as consumers took home projects into their own hands. "AZO shares have outperformed the S & P 500 and the retail sector YTD, but we still like the defensive positioning in an uncertain consumer spending environment for the 2H24," he went on to say. Shares of the company are up more than 24% this year.
AutoZone is scheduled to next report earnings in September. Aecom- Bank of America, buy "Steady in a stormy sea ..
. While ACM's growth rate has likely peaked, we think confidence there remains [in its] visibility to grow: pipeline of large $25mn+ pursuits is ~70% higher YoY driven by infrastructure, water & sustainability. This is encouraging given some mixed trends that infrastructure momentum is slowing.
...
.Industrials are under pressure this earnings season, yet nuances in ACM's business model stand out to us." AutoZone- Citi, buy "AZO shares have outperformed the S & P 500 and the retail sector YTD, but we still like the defensive positioning in an uncertain consumer spending environment for the 2H24 .
.. The combination of industry-leading DIY sales and increasing market share in the faster-growing commercial pro category should drive top-line growth above the industry average.
" General Dynamics- Morgan Stanley, overweight "Defense may prove defensive in the current market environment as geopolitical tensions remain elevated ...
. We see GD with a premier balance sheet and strong prospects for capital return upside. A refreshed line-up of new Gulfstream aircraft coupled with strong demand for GD's defense products .
.. together present strong earnings growth potential.
" Microsoft- HSBC, buy "Due to its products and services' critical positioning within enterprises, we think it is difficult for customers to materially reduce spending with Microsoft ...
And we see AI as a non-negotiable investment within most large enterprises ...
The company has a strong and sustainable competitive advantage and is very hard to displace in most of its end markets." Netflix- JPMorgan, overweight rating "Across Internet earnings the past few weeks, higher capex spending & the softening consumer have been two major themes ..
. we believe NFLX has relatively less exposure on each of these fronts compared to Internet mega-caps. .
.. .
But net/net, we like how NFLX is positioned as it targets 500M+ global [connected TV] households, & we believe the company controls its destiny more than most in our coverage universe." Read more about this call here..
