The Zacks Analyst Blog Highlights: Johnson & Johnson, Altria Group, AT&T, Kimberly Clark and Campbell Soup

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Sep 07, 2011, 09:30 ET

CHICAGO, Sept. 7, 2011 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Johnson & Johnson (NYSE: JNJ), Altria Group (NYSE: MO), AT&T (NYSE: T), Kimberly Clark (NYSE: KMB) and Campbell Soup (NYSE: CPB).

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Here are highlights from Tuesday's Analyst Blog:

Defensive Stocks Pay Off

When the going gets tough, the tough often get defensive without even blinking. This was the argument I made in late June after Ben Bernanke spoke about the economic slowdown and seemed more concerned than he had been all year.

I want to revisit the half-dozen defensive stocks I looked at then and see how they have performed during this market volatility and economic uncertainty -- and if they are still worthy of investment cash. First, here's how characterized the landscape on June 23 in "Bernanke Worried = Rotate Defensive"...

The way to play the "more than transitory" soft patch in the second half is by getting a little defensive. If you think running into a few dividend-paying defensive stocks in consumer staples or healthcare or even telecom is a move for the frightened, think again.

Are institutional investors going to run to cash? Of course not. Cash is trash for their mandates and benchmarks. They will rotate into non-cyclical names that add income and stability to their portfolios. A minimum 3% dividend yield with appreciation potential from a solid business, while the 10-year Treasury sits below 3%, isn't a bad way to get defensive.

Riding Out the Storm

Below are some names I suggested investors and traders could think about adding to portfolios or rotating money to, as they considered selling some of their high-beta, higher-growth names and putting that money to work in these areas.

Many had run higher as the defensive rotation began in April. But as I said in June, "If the slowdown gets entrenched in investors' minds, whether or not the data justifies it, they will only attract more institutional money flow."

And that's exactly what happened with most of these names as the market corrected in August. Let's take a look at the six stocks and their performance since June 23:

Johnson & Johnson (NYSE: JNJ): Down only 1.5% from $65 to $64. Correction lows took it to $59, but recent relief rally saw its strength take it above $66. Dividend of $2.28 is yield of 3.5%. The stock has dropped to a Zacks #3 Rank (hold).

Altria Group (NYSE: MO): About flat since June 23 trading around $26.70. Correction lows saw a dip below $23.50 and the August rally took it back above $27. Dividend of $1.52 is yield of 5.69%. Down to a Zacks #3 Rank (hold).

AT&T (NYSE: T): This telecom giant has not fared as well, down 8.25% from $30.25 to $27.75 as investors absorb the impacts of a possible merger with T-mobile. Though the recent rally took it nearly back to $30, this week the stock is threatening its August lows below $27.50.

This test will obviously and quickly become either a double-bottom for the name or news lows. Still, AT&T remains one of the highest yielders of blue chip names with a dividend of $1.72 (over a 6% yield). It maintains a Zacks #3 Rank (hold).

Kimberly Clark (NYSE: KMB): Here's the brightest of defensive names on this list. Trading $66 in late June, Monday's bounce took it higher on the day to $68.25. Dividend of $2.80 is yield around 4.1%. Still a Zacks #3 Rank (hold).

Campbell Soup (NYSE: CPB): And here's another underperformer, down 6% roughly from $33 to $31. I originally included Campbell's because I wanted to have a food stock with popular brands in North America and Europe. Dividend of $1.16 is yield of 3.7%. CPB has slipped to a Zacks #4 Rank (sell) after analysts lowered earnings estimates in the past two months.

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