The mood on the markets is becoming increasingly uncertain with the resumption of hostilities between the United States and Iran. How to find defensive values adapted to this environment? 10 values combine several key qualities to resist crises.
Investor confidence on Wall Street deteriorated this week as tensions between the United States and Iran further escalated. After declaring the end of the ceasefire following the NATO summit in Turkey, President Donald Trump announced new military strikes. Iran’s Revolutionary Guard responded by targeting U.S. facilities in Bahrain and Kuwait, sending a surge of nearly 5 percent.
Times like these typically push investors toward defensive stocks. The challenge, however, is to identify companies best positioned to weather increased uncertainty rather than just indiscriminately buying traditional defensive sectors.
4 criteria to identify real safe havens
Not all defensive actions provide the same level of protection. In a market shaped by geopolitical uncertainty, rising bond yields and pressure on growth stocks, a handful of key metrics can help distinguish truly resilient companies from those that only appear defensive.
THE InvestingPro Health Score is a useful starting point. Rated on a scale of 1 to 4, it combines measures of liquidity, profitability, solvency and growth to identify companies with strong financial fundamentals. Companies with higher scores are generally better equipped to deal with economic uncertainty.
THE Fair value InvestingProwhich combines several widely used valuation models, highlights stocks trading below their estimated intrinsic value. Buying quality businesses at a discount provides a greater margin of safety if market volatility persists.
THE Piotroski scorewhich ranges from 0 to 9, assesses the financial strength of a company using nine criteria covering profitability, debt, liquidity and operational efficiency. A score above 6 is generally considered a sign of strong underlying fundamentals.
Finally, dividends remain an important consideration in times of market volatility….
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