All You ‘Fraidy Cats May Have Overbought Defensive Stocks

Jack Hough had an interesting observation in this week’s Wall Street Journal: jittery investors have driven up the price of defensive stocks. He cited as an example evergreen stock General Mills (GIS) and Caterpillar (CAT), a more cyclical stock.

GIS PE Ratio Chart

GIS PE Ratio data by YCharts

General Mills’ price to earnings ratio shows investors are willing to pay a premium for the defensive stock – its earnings trade for 1.6 times those of Caterpillar. That may mean Caterpillar’s selling for a discount, and YCharts Pro considers it undervalued.

Fresh off a labor dispute, it has higher revenue growth.

GIS Revenue Growth Chart

GIS Revenue Growth data by YCharts

It also has higher return on equity.

GIS Return on Equity Chart

GIS Return on Equity data by YCharts

And check out the net income chart.

GIS Net Income TTM Chart

GIS Net Income TTM data by YCharts

Jack thinks defensive investors may have gone too far.

From the editors of YCharts.YCharts Pro Investor Service includes professional stock charts, stock ratings and portfolio strategies.



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