Home Investing BATS and Imperial Brands are technically sound in a bear market?

BATS and Imperial Brands are technically sound in a bear market?


Motiur Rahman

Jun 23, 2022

BATS and Imperial Brands have double-digit returns this year.

Both companies are defensive names in an overheating economy.

Investors should buy either stock on a retracement.

British American Tobacco PLC (LON:BATS) has returned 23.99% to investors year-to-date. Imperial Brands PLC (LON:IMB) has 10.34% returns in the same period. The strengths of the two companies illustrate their defensive features in good and bad times.

BATS and Imperial Brands offer consumer goods in the tobacco category. As markets tumble, investors want to own tobacco names that are considered recession-proof. Besides, tobacco names are considered dividend names. BATS carries an annual dividend yield of 6.27%. Imperial Brands have a comparable dividend yield of 8.83%.

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A further snapshot of the two stocks shows that they faced bearish pressure last year. Perhaps, this was due to investors holding positions in risky assets for massive returns. Investors’ concerns around tighter regulations for cigarette names also contributed. Declines in smoking rates also hit companies such as British American Tobacco in 2021. These companies are now exploring non-combustible products to diversify. Nonetheless, with the overheating economy, investors are now exploiting tobacco names’ defensive features.

BATS and Imperial Brands are emerging from the lows of last year

Source – TradingView

Technically, BATS and Imperial Brands exhibit similar technical features. Both stocks are emerging from the ruins of 2021 and are moving higher. As defensive stocks become popular, BATS and Imperial Brands will gain. The developing bullish momentum already confirms this. We believe investors should snap the stocks to gain as bullish moves emerge. However, investors should seek to buy lower as the RSI points to overbought conditions.

Concluding thoughts

BATS and Imperial Brands are gaining as investors exploit their defensive characteristics Both stocks are escaping the oversold bottom. Investors should buy a retracement on either of the stocks.

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