Recession is still likely: 2 defensive stocks you should buy
- Kevin Simpson explains why he's bullish on Nucor Corporation stock.
- He also likes Schlumberger NV to play the strong demand for energy.
- "NUE" is down 20% from its YTD high; "SLB" up 60% from its YTD low.
There’s still a very real possibility that the Federal Reserve won’t change its path even though the inflation data for October came in better than expected (detailed here). And that reiterates the importance of sticking with the defensive stocks for now.
Here’s a defensive stock that’s worth buying
To that end, one that Kevin Simpson – the Founder of Capital Wealth Planning likes is Nucor Corporation (NYSE: NUE) that’s currently down more than 20% versus its year-to-date high. Explaining why on CNBC’s “Closing Bell: Overtime”, he said:
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Nucor is an old-school American steel company and if you believe in the infrastructure play, what better than an old-school steel company? They’ve been increasing their dividends by 8.0% over the past three years, really good cash on cash.
At less than five times, Simpson is a fan of this stock from the valuation perspective. Last month, the Charlotte-headquartered company reported its financial results for the third quarter that topped Street estimates.
Kevin Simpson also likes an energy stock
Another one that Simpson recommends investing in to keep defensive ahead of a possible recession is Schlumberger NV (NYSE: SLB).
Shares oilfield services company are already up nearly 60% since late September but he’s convinced the strong demand for energy will help the stock move further up from here.
Schlumberger again is incredible cash on cash. They suffered when shale was a bit out of favour, but it seems like energy now is a license to print money. They’ve increased their dividend by 100% this year.
Simpson also recommends buying Schlumberger stock as it’s committed to spend half of its free cash flow on stock buybacks and special dividends.