Zacks Investment Ideas Feature Highlights: McDonald’s, Dollar Tree, Perrigo Company and Philip Morris International

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Aug 10, 2011, 09:30 ET

CHICAGO, Aug. 10, 2011 /PRNewswire/ -- Today, Zacks Investment Ideas feature highlights Features: McDonald's (NYSE: MCD), Dollar Tree (Nasdaq: DLTR), Perrigo Company (Nasdaq: PRGO) and Philip Morris International (NYSE: PM).

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4 Stocks for Any Market

There are plenty of reasons to be bearish on the stock market right now. Sovereign debt in Europe and now the United States are serious problems with no easy solutions. Moreover, recent economic data suggests that the economy is slowing down and a double-dip recession could be right around the corner.

While the stock market has gotten crushed over the last two weeks, it may still have a long way to go before reaching the bottom.

Investors worried about the recent market turmoil need not panic, however. There are still opportunities out there.

Get Defensive

While it may be tempting to move your entire portfolio to cash, it's important to realize that not all stocks will get clobbered in a bear market. Blue chip stocks in defensive industries like consumer staples, healthcare, and utilities usually hold up well, for example.

But what about when the market turns around (and it will)? These stodgy companies will get left in the dust.

...But with Plenty of Offense

Defensive stocks and growth stocks do not have to be mutually exclusive. Many companies in traditionally defensive industries will see strong earnings growth no matter what the overall economy is doing. As a result, these non-cyclical stocks should hold up well in any market environment.

Many healthcare companies fit this criteria. Large-cap U.S. consumer staples with significant overseas operations is another example. Value-oriented retailers should also perform well for quite some time.

Some investors may be tempted to shift towards big dividend payers, but this isn't always the best strategy. While solid income is nice in any market, that 5% dividend yield will provide little comfort if the stock itself drops 25%.

4 Stocks for Any Market

Here are 4 defensive stocks with strong growth potential that should perform well in any market environment:

McDonald's (NYSE: MCD)

People still need to eat no matter where the Dow is, and cash-strapped consumers in the U.S. continue to find value at McDonald's. But the world's largest restaurant is also growing rapidly in the world's most populous country: China. The company plans to open a new restaurant there every day over the next three to four years.

Moreover, McDonald's is trying hard to steal customers away from higher priced fast-casual chains. The recent redesign of its stores is a step in the right direction, as it gives it a more "Starbucks" feel. This could help drive additional consumers to the Golden Arches where they'll buy higher-margin products, like McCafe drinks.

If you look at the 5-year chart on MCD, you wouldn't guess that the overall stock market whipsawed during that time. The stock has steadily moved higher as its balanced approach continues to create value for shareholders. The stock also yields a solid 2.9%.

Dollar Tree (Nasdaq: DLTR)

Dollar Tree benefited tremendously from the Great Recession as consumers traded down from higher-priced competitors. Even as the economy improved, consumers never seemed to trade back up to the middle-market retailers. An unemployment north of 9% probably had something to do with that. Even if the stock market turns a corner and soars higher, no one expects unemployment to fall meaningfully for a long time.

Dollar Tree is expected to grow EPS by double-digit rates over the next few years through square footage growth, share buybacks, and expanding operating margins. The company is also expanding its food selection with the continued roll out of frozen and refrigerated merchandise. This is expected to help drive same-store sales higher as well.

Dollar Tree seems well-positioned to grow for quite some time, particularly if another recession is coming.

Perrigo Company (Nasdaq: PRGO)

Perrigo manufactures private label over-the-counter and prescription pharmaceuticals. People don't stop getting sick during recessions and when they're standing in the medicine aisle at the drug store and see generic cough syrup at half the price of the name-brand stuff, many will choose the former.

Over the last 10 years, Perrigo's overall revenue has risen at a 12% annual clip while EPS has jumped an average of 25% per year. Much of that growth has come from overseas. I don't see a bear or a bull market hurting that trend.

Philip Morris International (NYSE: PM)

People around the globe will continue smoking no matter what the U.S. stock market is doing. Philip Morris International and its famous Marlboro brand are becoming increasingly popular overseas, and the company doesn't have to worry as much about regulation since it sells its products entirely outside of the U.S.

In addition to growing demand in the emerging markets, Philip Morris will continue to grow EPS higher simply because it is aggressively buying back shares. Since going public in 2008, management has repurchased approximately 18% of shares outstanding. The company also pays a dividend that yields a stellar 3.7%.

The Bottom Line

Not all stocks get clobbered in a recession, and some of the ones that perform relatively well don't necessarily underperform during a bull market either. Look for companies in defensive industries that also have plenty of growth opportunities no matter the economic climate.

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