This stock’s defensive appeal faces a valuation test. Here’s where else investors can look
Investors looking for defensive stocks need to be wary. Best-of-breed companies can become pricey relative to other options.
TL;DR
- Coca-Cola exhibits classic defensive stock qualities but faces a premium valuation, limited upside, and significant risks, including a potential $20 billion tax liability.
- PepsiCo and Keurig Dr Pepper are presented as alternatives, offering lower valuations, higher dividend yields, and greater diversification.
- Coca-Cola's bonds are also suggested as a defensive investment due to improved yields, providing an alternative to its stock.
- Historically defensive sectors like healthcare, utilities, and consumer staples are considered, with established leaders often attracting investor interest.
- Coca-Cola's strong track record, market share, and recent positive earnings are noted, but its price-to-earnings and PEG ratios suggest it is expensive compared to the S&P 500 and its historical averages.