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5 Defensive Stocks to Counter Coronavirus Scare

China’s Health Commission confirmed 17,205 coronaviruscases and the nationwide death-toll stands at 361, per reports as of Feb 2. The second largest economic leader in the world already declared a state of emergency, quarantined major cities including Wuhan, which is the epicenter of the epidemic. Besides, it withstood the economic downturn in China from the shock of the rampant Novel Coronavirus (2019-nCoV).

The infection is believed to have transmitted from animals into humans, and has now spread to more than 24 countries across the globe. Several countries imposed unprecedented travel ban on passengers moving in and out of China. Further, news of the first foreign death from this virus in the Philippines on Jan 2, also intensified the health scare.

The number of people afflicted by the coronavirus already crossed the victims of SARS and forced the World Health Organization to dub the crisis a global emergency.

China’s Viral Outbreak Stalls Global Growth

Per a research conducted by Warwick McKibbin, a professor of economics at Australian National University, the coronavirus eruption could impact the global economy “three to four times larger than the $40-BILLION fatal blow from SARS.”

Globalization and the availability of cheap as well as efficient work force prompted several companies to open factories in China. Thus, even if an entity is of a foreign origin, its presence in China makes vulnerable to the coronavirus onslaught. From retail stores to companies expecting hefty sales this Chinese lunar new year, all have been sadly shut down.

Companies Bearing the Brunt of Coronavirus

More than thousands travel worldwide on the Chinese lunar new year. But the rush in the airports following this health emergency upset the vacation plans at large as several airlines, namely American Airlines Group Inc., Delta Air Lines, Inc., et al canceled flights to China. In fact, entertainment and tourism providers are the worst hit, which is evidenced by the closedown of The Walt Disney’s theme parks at Shanghai and Hong Kong as a result of this coronavirus fear!

Car manufacturers in China like General Motors and Toyota have to delay their productions as government has extended the lunar new year holiday to avoid the spread of the coronavirus. This apart, the footfall at the malls seems nearly negligible and pose a threat to the sales of major players like Under Armour and Nike. Until now, Starbucks shuttered more than 2,000 outlets in China along with curtailing the menus as the beverage giant runs out of raw stock.

China is widely known as the major buyer of semiconductor chips in the world as the country purchases more than $470 billion of the product. However, the virus restricts transport of goods. Apple with nearly 10,000 direct employees in China has a supply chain of a million of workers fashioning its products. Due to the quarantine order issued by the Chinese government, the staff is allowed an extended holiday. This, in turn, induces a delay in production, sparking uncertainties around the reopening of the plants.

5 Defensive Stocks to Buy 

The virus is wreaking havoc not only across the health care space but also disrupting trade routes and companies’ outlooks. Overall, this virus is creating similar tension as that of the U.S.-China trade war, compelling companies to find alternatives to their Chinese suppliers and shifting production sites to the United States and Mexico.

This chaos emanating from the 2019-nCoV is practically spiraling out of control at the moment and if this cannot constrained in time, companies will have to incur heavy losses. With the current instability caused by the coronavirus, investing in defensive stocks that include consumer staples and healthcare looks beneficial.

Defensive stocks have stable returns regardless of the volatile market conditions asdemand for these products or services is constant irrespective of market gyrations. However, these stocks do not promise high returns when the economy is expanding compared to technology and other sectors.

Below, we selected five defensive stocks that flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Calavo Growers, Inc. CVGW markets and distributesperishable foods to retail grocery and foodservice customers. The company’s expected earnings growth rate for the current year is 14.9% compared with the Zacks Agriculture - Operations industry’s projected earnings growth of 5.3%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 6.8% upward over the past 60 days.

Darling Ingredients Inc. DAR develops, produces and sells natural ingredients from edible and inedible bio-nutrients. The company’s expected earnings growth rate for the current year is 40.5% compared with the Zacks Food - Miscellaneous industry’s projected earnings growth of 2.8%. The Zacks Consensus Estimate for the company’s current-year earnings has moved 98.4% north over the past 60 days.

The Simply Good Foods Company SMPL develops, markets and sells branded nutritional foods and snack products including nutrition bars, ready-to-drink shakes, snacks and confectionery products. The company’s expected earnings growth rate for the current year is 64.3% compared with the Zacks Food - Confectionery industry’s projected earnings growth of 27.7%. The Zacks Consensus Estimate for the company’s current-year earnings has been raised 26% over the past 60 days.

KalVista Pharmaceuticals, Inc. KALV, a clinical stage pharmaceutical company discovers, develops and commercializes small molecule protease inhibitors. The company’s expected earnings growth rate for the current year is 18.1% compared with the Zacks Medical - Drugs industry’s projected earnings growth of 10.2%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 10.9% upward over the past 60 days.

CareDx, Inc CDNA develops and provides a diagnostic surveillance testing solution for heart and kidney transplant recipients. The company’s expected earnings growth rate for the current year is 64.3% compared with the Zacks Medical Services industry’s projected earnings growth of 27.7%. The Zacks Consensus Estimate for the company’s 2020 earnings has been revised 14.3% upward over the past 60 days.

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Calavo Growers, Inc. (CVGW): Free Stock Analysis Report
 
KalVista Pharmaceuticals, Inc. (KALV): Free Stock Analysis Report
 
Darling Ingredients Inc. (DAR): Free Stock Analysis Report
 
CareDx, Inc. (CDNA): Free Stock Analysis Report
 
The Simply Good Foods Company (SMPL): Free Stock Analysis Report
 
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