Rising Coronavirus Cases Spark Lockdown Fears: 5 Defensive Picks

After months of a slump, stocks are struggling to make a comeback as states ease lockdowns and reopen in phases. But the rise in new case is creating hurdles with several states rolling back plans.

On Jul 16, the Dow, the S&P 500 and the Nasdaq declined 0.5%, 0.3% and 0.7%, respectively, leaving investors reassessing their position amid the persistent rise in new cases and initial jobless claims. In fact, companies that were benefiting from the reopening of the economy saw a steep decline on the day.

Rise in New Cases Instill Lockdown Fears

So far, the United Stated has registered nearly 3,695,469 coronavirus cases, witnessing a record single-day rise of 73,388 new cases on Jul 16. Cases in Florida, Texas and California keep rising by more than 9,000 per day, while the country has registered more than 65,000 new cases per day since last week.

Miami, which is currently the epicenter of the life-threatening infection, has been seeing a drastic rise in new cases. And Florida’s rolling seven-day average for deaths has increased to 92 per day, triple of 31 posted in June.

During the past week, several states that were undergoing reopening programs have to rollback plans on the spurt in new case. In fact, governors of multiple states have imposed social-distancing norms and put restriction on outdoor gatherings.

New York’s Governor Andrew Cuomo has issued a quarantine list on travelers from 22 states who will have to quarantine themselves for 14 days upon entering New York. Earlier, California’s Governor Gavin Newsom had ordered statewide closure of bars and restricted indoor operations of restaurants, wineries, movie theaters and zoos.

Initial Jobless Claims Remain a Concern

Another factor that has been constantly dampening investor sentiments is the unemployment rate. With businesses still not fully operational and rise in new cases forcing many to shut down again, jobless claims keep piling each week.

The Labor Department reported on Jul 16 that a total of 1.3 million Americans filed for unemployment benefits for the week ending Jul 11, much above the consensus estimate of 12.2 million. And nearly 17.3 million Americans are claiming the ongoing unemployment benefits, as of Jul 4.

5 Defensive Stocks to Buy

Given the current economic condition and looming coronavirus fears, investors can invest in defensive stocks that can return well even during phases of market volatility.

Defensive stocks provide stable returns regardless of market gyrations, leaving demand for these constant. Hence, investing in defensive stocks like utilities, healthcare and consumer staples can prove beneficial in the current scenario. Requirement for essential items like food, medicines, water and electricity remains unchanged, even as the virus forces people to stay indoors.

Here are our top five defensive stock picks –

Co-Diagnostics, Inc. CODX is a molecular diagnostics company that intends to manufacture and sell reagents used for diagnostic tests. The company’s expected earnings growth rate for the current quarter is more than 100% compared with the Zacks Medical Services industry’s estimated earnings growth of 57.8%.

The Zacks Consensus Estimate for its current-year earnings has climbed more than 100% over the past 60 days. Co-Diagnostics sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

QIAGEN N.V. QGEN provides sample to insight solutions that transform biological materials into molecular insights. The company’s expected earnings growth rate for the current year is 28.7% compared with the Zacks Medical - Biomedical and Genetics industry’s estimated earnings growth of 10.8%. The Zacks Consensus Estimate for its current-year earnings has climbed 5.8% over the past 60 days. QIAGEN sports a Zacks Rank #1.

The Boston Beer Company, Inc. SAM produces and sells alcohol beverages. The company’s expected earnings growth rate for the current year is 9.1% against the Zacks Beverages - Alcohol industry’s estimated earnings decline of 7.5%. The Zacks Consensus Estimate for its current-year earnings has climbed 18.3% over the past 60 days. Boston Beer sports a Zacks Rank #1.

Ollie's Bargain Outlet Holdings, Inc. OLLI offers food products, housewares, books and stationery, bed and bath products, health and beauty products and more. The company’s expected earnings growth rate for the current year is 17.9% compared with the Zacks Consumer Products - Staples industry’s estimated earnings decline of 5.1%.The Zacks Consensus Estimate for its current-year earnings has climbed 22.2% over the past 60 days. Ollie's sports a Zacks Rank #1.

NextEra Energy, Inc. NEE generates, transmits, distributes, and sells electric power to retail and wholesale customers. The company’s expected earnings growth rate for the current year is 8.7% against the Zacks Utility - Electric Power industry’s expected earnings decline of 0.4%. The Zacks Consensus Estimate for its current-year earnings has climbed 0.4% over the past 60 days. NextEra Energy carries a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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