4 Defensive Ways To Play The Stock Market

Recent waves of volatility in the stock market have been making it harder for investors to settle on the right picks to wait out the storm.

Rising interest rates have been a source of concern over the past year for those involved in the equity market. Specific sectors have also been battered by internal crises, like the banking sector, which has become pestered in recent weeks by a wave of fear and uncertainty.

Current market circumstances call for investments in stocks that have low debt, are growing earnings, and have Buy ratings from analysts. That's according to an analysis by The Street Sheet Newsletter.

Four companies from diverse industries fit this description: Microsoft MSFT, Corteva CTVA, Linde LIN, and Equinix EQIX.

"They have low debt, dividend yields of more than 1%, and a three-year beta of less than one, meaning the stocks are less volatile than the rest of the market," wrote the analysts.

Earnings growth from the group is at least 1%, and the majority of analysts who cover them rate them a buy. 

That's against a backdrop of uncertainty, as the Federal Reserve on Wednesday raised the interest rate by 25 basis points to a range of 4.75% to 5%, and the tech sector undergoes massive layoffs.

The Case For Microsoft: Nearly 70% of Wall Street analysts who cover Microsoft rate it a buy.

Beta is a measure to assess an asset's volatility as compared to the overall market. Companies with a Beta rate below one are considered less volatile than the overall stock market. The tech giant has a three-year beta of 0.9, and its debt-to-equity ratio is 42.6%. To fit the “low debt” bill, the company's debt-to-equity ratio must be below 150%.

The software behemoth pays a dividend with a yield of 1.1% and is poised to grow earnings by 1% this year. This is not necessarily impressive in itself, the analysts wrote. But it's more than commendable given the overall market circumstances.

Microsoft's recent foray into AI with ChatGPT has gotten some on Wall Street giddy about the company's prospects, wrote the Street Sheet analysts. Analysts at Credit Suisse recently wrote that the company can generate more than $40 billion in revenue from integrating ChatGPT into its Office suite and other apps.

Also See: EXCLUSIVE: GameStop Expert Says ‘Apes’ Learned ‘So Much’ About Market, Are Helping Push For SEC Changes

The Case For Corteva: Agricultural chemical and seed company Corteva is another Wall Street favorite, with a three-year beta of 0.8 and expected earnings per share growth of 8% this year. 

CNBC analyst Jim Cramer recommended the stock in December of last year, and others followed suit: over 60% of analysts have a buy rating on the stock.

Corteva's dividend yields 1%, and its debt-to-equity ratio is a low 6.9%. 

The Cases For Equinix And Linde: Wall Street is smitten with real estate investment trust Equinix for good reason, say the analysts at The Street Sheet. 73% of the analysts covering this REIT rate it a buy.

The company has the lowest three-year beta of the four stock picks, coming in at 0.6. Its dividend yields 2% and is projected to have earnings growth of 8.5% this year. It also boasts the highest debt-to-equity ratio of the group, coming in at 143.1%.

Hailing out of Germany is global chemical company Linde. Its debt-to-equity ratio is close to 47%, and its three-year beta is at one. In its most recent fourth-quarter adjusted earnings, $3.16 per share blew past Wall Street's forecast of $2.90 per share.

Read also: Here’s How Much You Would Have Made Owning Linde Stock In The Last 5 Years

In a CNBC interview, Linde CEO Sanjiv Lamba said the company is "hugely resistant" to market fluctuations given its products are used in every industrial application.

Photo by Patrick Weissenberger on Unsplash.