Some investors park their portfolios in the consumer staples, utilities, and healthcare sectors amid an actual or perceived bear market.
The thinking behind that is that companies in these sectors are expected to continue solid operations even as the rest of the economy struggles. This is because they sell products that people cannot live without.
So it would be logical to assume that these defensive sectors would outperform others in today's volatile climate. But you'd reach the wrong conclusion.
In fact, the S&P/ASX 200 Utilities Index (ASX: XUJ) has been one of the worst-performing sectors over the past month, posting a 9.77% loss.
Confusing matters further, the S&P/ASX 200 Consumer Staples Index (ASX: XSJ) is also performing poorly, down 8.38% over the same period.
So, have blue-chip defensive shares begun to lose their shimmer? Let's investigate by covering the highlights of these companies.
Woolworths Group Ltd (ASX: WOW)
Shares in Woolworths are down 10.23% for the past month. My Fool colleague Cathryn noted that the iconic Australian supermarket chain was challenged by supply chain and operations disruptions in FY22, which came amid a drop in its reported earnings before interest and tax (EBIT) for that financial year.
However, according to analysts at Goldman Sachs, Woollies could be in the process of turning the ship around. The investment bank just gave Woollies a buy rating and upgraded its price target to $44.10.
The analysts said in a broker note yesterday:
Despite the softer topline environment, we believe that WOW's reducing COVID costs, strong Cartology growth as well as careful execution will result in EBIT margin expansion.
Coles Group Ltd (ASX: COL)
Coles shares have performed worse than Woollies over the past month, tracking 13.68% lower at the time of writing. The supermarket has received mixed coverage from analysts during this time, gaining both an upgrade and a downgrade for its share price.
On 6 September, a Citi broker said Coles would benefit from food inflation as prices rose. The bank has a $20.10 price target for the supermarket's shares, expected to reach this level within the next 12 months.
The broker said:
Food inflation will benefit supermarkets significantly while operating costs should remain less than top-line inflation, benefiting margins.
Challenging news came on 14 September in the form of a broker note from Goldman Sachs, downgrading its rating on Coles shares to a sell and reducing its price target to $15.60.
Goldman explained its position with the following:
Downgrade COL from neutral to sell with new TP of A$15.60/sh, implying 9.5% share price downside due to laggard in digital transformation resulting in market share losses and entrance into high investment cycle for digital and supply chain pressuring margins over FY23/24.
Origin Energy Ltd (ASX: ORG)
Moving across to utilities, the Origin share price is currently down 3.48% over the past month. There has been plenty of bad news for the energy producer, including analysis that it could be a 'zombie company' with an interest coverage ratio of less than one and carrying significant debt.
Origin has also been pressured to cut down on its emissions. HESTA, a $68 billion Australian superannuation fund, has placed Origin and others on watch, saying if they failed to address climate risks, they could be dumped from the fund's portfolio.
But the challenges for Origin started before the past month began, with the company reporting a $1.4 billion loss for FY22 on 18 August.
