Growth stocks have been hit hard by a combination of rising rates and forecasts of an impending recession. But rather than pivoting towards an entirely defensive portfolio, Citi says investors might do better with a portfolio of stocks ranked high for value, growth and defensiveness simultaneously. “Instead of giving up on any desired growth or value exposure entirely, investors can seek a combination of these factors with the more defensive factors of quality and low risk,” analysts at Wall Street bank said in a note to clients on Nov. 28. Citi named US-listed IT giant Accenture, trucking company Old Dominion and UK’s online car portal Auto Trader as “low risk, quality and growth” stocks. London Stock Exchange, France’s luxury brand Hermes and Japan’s bicycle parts maker Shimano also made its list. The Citi analysts said they screened the MSCI World index of 1,500 stocks for companies in the top quantiles for growth, low risk and quality simultaneously. In defining “quality,” the bank considered metrics such as earnings certainty, rising profit margins and debt level, among others. While five of their picks had negative returns this year, the London Stock Exchange stood out for beating the FTSE 100 handsomely. The stock is up roughly 20% so far in 2022, and was trading around £83.36 ($101.40) on Thursday afternoon, compared to its benchmark index which is up less than 1% over the same period. According to FactSet data, analysts also expect the stock to rise by more than 10% over the next 12 months. Citi’s note, however, cautioned that overlapping the three metrics risks building a concentrated portfolio owing to the low number of stocks that meet all three measures. “There are also several months where there is no overlap at all for value and in the past year the overlap of growth and defensive stocks has dropped from 25 to around 5,” the analysts added.
