10 Defensive European Stocks

We've screened for some moaty stocks that could be more resilient in a lower growth environment

Susan Dziubinski 3 November, 2021 | 3:44PM Sunniva Kolostyak
Facebook Twitter LinkedIn

Euro symbols

Clogged supply chains and rising inflation have some experts concerned about growth in the fourth quarter and beyond and what that means for stocks. Of course, Morningstar isn’t in the business of predicting where the stock market is headed. Still, equities have been in rally mode for much of 2021, with US markets alone up around 20%. It’s not unreasonable to suggest that playing a little defence right now might be a good idea.

As such, we’re looking for some undervalued defensive stock ideas.

Specifically, we screened for the following.

Stocks in Morningstar’s Defensive Super Sector: This Super Sector includes industries that are relatively immune to economic cycles: healthcare, consumer defensive, and utilities. Companies in these sectors provide goods and services that we need in both good and bad times. If the economy slows, we’ll still fill our prescriptions, seek medical care, practice good hygiene, and enjoy our favorite beverages and snacks.

Stocks with Wide Morningstar Economic Moat Ratings: Stocks that have durable competitive advantages, or economic moats, are by their very natures more reliable than no-moat companies in terms of their businesses. Moaty companies are financially healthy and highly profitable, two qualities that are prized when economic times get tough. And as Morningstar’s chief US markets strategist David Sekera notes, stocks with moats are more likely to have the power to raise prices and pass through higher costs they may be experiencing.

Stocks Trading at 4- and 5-star Levels: Stocks at this rating level are significantly undervalued relative to our fair value estimates, providing a substantial margin of safety.

The 10 companies on our list all have a wide economic moat and come from a wide range of industries, including beverages (Anheuser-Busch Inbev), tobacco (Imperial Brands), healthcare (GlaxoSmithKline). The UK is well represented in this list with five names - my colleague Dan Lefkovitz explains why the UK stock market is still undervalued.

 

 

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn

About Author

Susan Dziubinski  Susan Dziubinski is senior product manager with Morningstar.com.