Defensive Dividend Portfolio Buy Zones (Part III: Consumer Staples)

Includes: KO, MO, PG, PM, WMT
by: Parsimony Investment Research

We recently wrote a series of articles highlighting our Defensive Dividend Portfolio picks for 2012. We focused on the following low beta, defensive sectors:

  1. Utilities
  2. Healthcare
  3. Consumer Staples
  4. MLPs
  5. Mortgages REITs

As discussed in the previous articles, the global economy will continued to be weighed down by a debt problem that took over two decades to create. The leverage that has built up in the system will not unwind for years to come and it will continue to provide significant uncertainty and market volatility.

As central banks drive down short-term rates to deal with high debt levels and low growth rates, investors have been flocking to dividend stocks in search of yield. That said, any pullback in the market should be an opportunity to add to your low-beta dividend stock positions.

This next series of articles highlights our "buy zones" for the 2012 Defensive Dividend Portfolio.

Current "Buy Zones" (Part III: Consumer Staples)

Due to the current market rally (which we believe will be short-lived), investors should consider waiting for a pullback in these stocks to enter a new position or to add to an existing position.

Most of the stocks below are currently in a positive uptrend. As such, investors should be looking for near-term areas of support as potential entry points.

(Click charts to expand)

Altria (MO) has been trading in an upward range the past few months, and we believe that this trend will continue for the stock as investors continue to seek good risk-adjusted yield in a low interest rate environment. That said, the stock should get downward support around the 50-day moving average ($28.47), and we think that investors should consider buying MO on any further dips. As of today, MO is hovering around the high end of our "Buy Zone."

Buy Zone: $27.25-$28.25

Coca-Cola (NYSE:KO) has been trading in a range that past few months and is currently hovering around the 50-day moving average ($67.67). We believe that KO will likely test the low end of the recent range if the general market dips as expected and we would be a buyer at that level.

Buy Zone: $64.00-$65.00
Philip Morris (NYSE:PM) treated investors very well in 2011 and we think that 2012 could be just as good for the stock. While PM is currently hovering around the 50-day moving average ($75.53), the long term is still very strong. We believe that the stock will get further downside support around the 200-day moving average ($69.02) and we would be a buyer at that level.

Buy Zone: $69.00-$71.00

Procter & Gamble (NYSE:PG) has also been trading in a range the past few months. The stock is currently getting support at the 200-day moving average ($63.14), but we think it will test the low end of the range on a general market pullback.

Buy Zone: $60.00-$61.00

Wal-Mart (NYSE:WMT) has been on fire since late September, rising 24%. The 50-day moving average crossed over the 200-day moving in late October and the stock really hasn't looked back. That said, the stock is technically overbought right now and a healthly pullback is likely. However, we think the strong long-term trend will continue in 2012, and we would be a buyer on any meaningful dip.

Buy Zone: $55.00-$57.00

Disclosure: I am long MO, PM.