As a Trump presidency may hold some unexpected surprises for investors, it might be time into rotate into classic defensive stocks. With this in mind, our Foolish contributors think Johnson & Johnson (NYSE:JNJ), Clorox Co. (NYSE:CLX), and Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B) may all be worth a deeper diver right now. Here's why.
Want safety? Turn to your medicine cabinet
George Budwell (Johnson & Johnson): No matter what happens with the broader economy, people aren't going to stop getting sick. That means that well-diversified healthcare companies such as Johnson & Johnson should continue to post strong earnings moving forward.
Digging deeper, J&J has posted 32 consecutive years of earnings increases after accounting for special items, along with 54 consecutive years of dividend increases. These impressive long-tailed trends have been powered by a highly diversified business that's spread fairly evenly across three units: consumer, pharmaceutical, and medical devices. J&J also has a monstrous global footprint, with 250 companies operating worldwide. Roughly half of its sales come from outside the United States.
Another important metric is that J&J's high-growth pharma unit is composed of over 100 approved drugs and 11 blockbuster-level products, giving it the ability to weather the loss exclusivity for key products such as Remicade. After all, the company's pharma pipeline has been the most productive within its peer group at generating new products over the past five years running.
If its vast product portfolios and strong clinical pipeline weren't enough, J&J also offers the cleanest balance sheet in the entire healthcare sector, evidenced by its triple-A credit rating by both Standard & Poor's and Moody's credit rating agencies.
All told, J&J is a natural fit for risk-averse investors because of its financial strength and industry-leading levels of innovation.
There's safety in making stuff people always need
Jason Hall (Clorox Co.): While Clorox hasn't exactly been a world-beating investment -- it's down 12% since the start of the year and almost 20% from its peak in July -- it's exactly the kind of stock that offers safety for investors looking to ride out the market's short-term volatility.
The biggest reason, frankly, is the kinds of products that Clorox makes and sells around the world. Beyond its eponymous bleach, Clorox makes some of the most recognized consumer products out there, including Pine Sol, Brita water filters, Glad bags, and more. And these are the sorts of items that people need and buy in essentially every economic environment -- and in some cases even buy more of. For instance, restaurants will suffer during a recession, but Clorox might actually sell more of its Hidden Valley Ranch dressing, since people will eat at home more often.
And Mr. Market tends to recognize this. After all, when the market crashed from its peak in late 2007 to the bottom in 2009, the S&P 500 lost nearly 60% of its value. Clorox shares fell only about 25% during that period -- what is widely considered the worst market since the Great Recession. That's about as safe as it gets for a stock.
Clorox is also reasonably valued today, at least as compared with the market, selling at a trailing price-to-earnings ratio of 22.6, about the same as the S&P 500 average. Put it all together, and Clorox offers a nice combination of financial strength and safety from economic weakness, while also paying a nice dividend that yields about 2.8% right now, and is likely to be increased regularly -- if modestly -- in the future.
A company built to last
Tim Green (Berkshire Hathaway): The world is an uncertain place following the election, and it's hard to predict which companies and industries will be affected. But as Warren Buffett said during the company's 2016 annual meeting, Berkshire Hathaway will be just fine.
With Berkshire already sporting a market capitalization of nearly $400 billion, achieving the same pace of growth in the future that the company managed in the past will be exceedingly difficult, if not impossible. But the company, consisting of dozens of businesses spanning industries such as insurance, manufacturing, retail, and energy, as well as a stock portfolio worth tens of billions of dollars, should continue to grow as cash generated from those businesses are reinvested.
Buffett won't be around forever, and that creates some uncertainty around whether the company can continue to thrive without the Oracle of Omaha at the helm. But as Buffett once said, "I try to buy stock in businesses that are so wonderful that an idiot can run them, because sooner or later, one will." While Berkshire's succession plan will put people Buffett trusts in charge, Berkshire is built to last, regardless of who's running it.