Andrew Bary

What's the most defensive stock in the market?

Many investors might think it's a traditional defensive name such as telecom leaders AT&T, Verizon Communications, cigarette maker Altria, or Johnson & Johnson. All these stocks have resilient business models and solid, above-market dividends.

It turns out the winner is Cboe Global Markets, the leader in options trading, followed by health insurer Cigna.

Using data generated by our parent, Dow Jones, Barron's looked at the top performers in the S&P 500 during the 10 worst days for the index in the past eight months including Monday, when the index is off 2.6%.

Cboe stock is up 1.9% Monday to $217.06, and is within 2% of its record high. Cboe has risen in all 10 of the biggest down days for the index since last July. The No. 2 stock is Cigna, which has risen on nine of those days.

Six stocks have gained on eight of those dates -- those of American Water Works, a top water utility; Crown Castle, a leading cellphone tower company; health-insurer Centene, Hershey, Altria Group, and Verizon.

Utilities, food, health care, and tobacco are traditionally defensive groups because their earnings are less economically sensitive than those of the overall market and they often have above average dividend yields that can act as a cushion. So far this year, these sectors are in the black while the S&P 500 index is down over 4%.

Why might Cboe be so defensive? Big down days often mean high options volume, both on single stocks and indexes. The Cboe has the leading position in U.S. equity options with a roughly 30% market share so far this year, according to data compiled by KBW analyst Kyle Voigt. In a recent note, he wrote that based on options volume so far this year that the company's first-quarter earnings could top the consensus estimate.

He noted that his earnings estimate was $2.26 a share, versus the consensus of $2.21, and that if year-to-date volume holds through March that the earnings could be around $2.30 a share in the current period. Voigt rates Cboe stock at Market Perform with a $216 target price, about flat with the current market price.

Write to Andrew Bary at andrew.bary@barrons.com

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March 10, 2025 15:08 ET (19:08 GMT)

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