Is This Another Overbought Defensive Stock (and a Relative Bargain)?
We’ve mentioned that Jack Hough, in the Wall Street Journal, argued that jittery investors have driven up the price of defensive stock to indefensible levels. He compared the defensive stock General Mills (GIS) to the more cyclical Caterpillar (CAT) as an example of that.
Kimberly Clark is a classic defensive stock. The company makes Huggies, Kleenex, and Cottonelle toilet paper, among other staples. Investors know that in the toughest of times, shoppers will still need toilet paper, hence the premium.
Meanwhile CSX, a big railroad company with 21,000 miles of track. The economy has a big impact on how much freight companies transport, making this more of a cyclical buy.
CSX has a higher profit margin.
And its return on equity, while lower, has risen more.
But investors have piled into Kimberly Clark.
YCharts Pro gives CSX strong scores and considers it undervalued, perhaps a bargain overlooked by investors playing defense.