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3 Defensive Stocks for Tough Times
Kenny
April 11, 2025
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THE MONEY IDEA💡
3 Defensive Stocks for Tough Times
Welcome to Money Masters!
In tough economic times, defensive stocks can provide stability, reliable income, and long-term potential. With guidance from Morningstar analysts, we’ve highlighted three companies built to withstand market pressure. Campbell’s Soup, International Flavors & Fragrances, and ExxonMobil offer strong fundamentals and attractive valuations for investors looking to stay grounded in uncertain conditions.
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Let’s dive in.
THE MONEY IDEA💡
3 Defensive Stocks for Tough Times
Industry: Packaged Foods
Current Status: 36% undervalued with a ~4% dividend yield; medium uncertainty rating and wide moat status.
Brand Power & Moat Strength – Campbell’s benefits from entrenched retail shelf space, iconic product lines, and strong brand recognition, giving it pricing power and customer loyalty.
Defensive Sector Advantage – As a consumer staples company, Campbell’s offers earnings stability during economic downturns or inflationary cycles—exactly what investors seek in uncertain times.
Margin Recovery Potential – Recent cost-saving initiatives and smarter pricing strategies are projected to expand operating margins from 14.6% in 2024 to 17% by 2029.
Stable Domestic Supply Chain – Campbell’s sources most ingredients domestically, shielding it from the near-term risks of global tariff shocks and supply disruptions.
Compelling Valuation – With a 5-star rating from Morningstar and trading well below fair value, CPB offers a solid mix of income, safety, and potential upside.
Bottom Line: Campbell’s is a reliable pick for investors looking for shelter in defensive sectors, backed by strong brands, improving efficiency, and a healthy dividend.
Industry: Specialty Chemicals / Ingredients
Current Status: ~40% undervalued with a 2.2% dividend yield; high uncertainty rating but wide moat.
Moat Through Intangibles – IFF holds a wide economic moat supported by proprietary formulas, customer stickiness, and high switching costs in food, beverage, and health sectors.
Defensive Revenue Profile – Roughly 70% of sales come from stable industries like food, beverages, pharmaceuticals, and biosciences—softening economic volatility exposure.
Path to Margin Normalization – Operating margins, which fell to 5% in 2023, are projected to recover to 10% in 2024 and 12% by 2028—still below pre-COVID levels, suggesting recovery room.
Global Revenue Buffer – While it imports raw materials, IFF generates ~70% of revenue outside the U.S., limiting direct exposure to U.S.-specific tariffs.
Valuation Rebound Setup – With a near 40% discount to fair value and signs of operational stabilization, IFF could be poised for strong medium-term performance.
Bottom Line: IFF combines deep undervaluation with long-term moat strength and a customer base that thrives in all seasons—making it a compelling recovery play in a challenged sector.
Industry: Integrated Oil & Gas
Current Status: 23% undervalued with a ~4% dividend yield; high uncertainty rating and narrow moat.
Balance Sheet Excellence – Exxon carries a top-tier AA credit rating and generates strong free cash flow, giving it the firepower for dividends, buybacks, and reinvestment.
Dividend Dependability – Its consistent dividend payments and nearly 4% yield provide income stability, even through oil price cycles.
Low Expectations, Big Potential – The company trades at under 12x forward earnings, and Morningstar forecasts modest revenue, making the current price attractive even under conservative assumptions.
Inflation-Resistant Business – As oil prices often rise alongside inflation, Exxon’s upstream and refining businesses may serve as a natural hedge in today’s macro environment.
Value Rotation Candidate – With strong fundamentals and a low valuation, Exxon stands to benefit from continued investor rotation into value sectors.
Bottom Line: ExxonMobil is a sturdy, income-generating pick offering exposure to energy with built-in inflation protection and long-term strategic advantages.
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