Are these blue chip ASX stocks losing their defensive advantages?

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Some investors place their portfolios in the consumer staples, utilities, and healthcare sectors in an actual or perceived bear market.

The underlying idea is that companies in these sectors should continue their strong operations even if the rest of the economy is struggling. It’s because they sell products that people can’t live without.

It would therefore be logical to assume that these defensive sectors would outperform the others in today’s volatile environment. But you would come to the wrong conclusion.

In fact, the S&P/ASX 200 Utilities Index (ASX:XUJ) was one of the worst performing sectors over the past month, posting a loss of 9.77%.

To complicate matters further, the S&P/ASX 200 Core Consumer Index (ASX:XSJ) also performed poorly, down 8.38% over the same period.

So, have blue chip defensive stocks started to fade? Let’s investigate by covering the highlights of these companies.

Woolworths Group Ltd (ASX: WOW)

Woolworths shares are down 10.23% over the past month. My colleague Fool Cathryn noted that the iconic Australian supermarket chain was challenged by supply chain and operational disruptions in FY22, which came amid a decline in its earnings before interest and tax (EBIT) reported for that year.

However, according to analysts at Goldman Sachs, Woollies could be turning things around. The investment bank just gave Woollies a Buy rating and raised its price target to $44.10.

Analysts said in a brokerage note yesterday:

Despite the weaker revenue environment, we believe WOW’s COVID cost reduction, Cartology’s strong growth as well as careful execution will result in an increased EBIT margin.

Coles Group Ltd (ASX: COL)

Coles shares have underperformed the Woollies over the past month, falling 13.68% at the time of writing. The supermarket received mixed coverage from analysts during this period, earning both an upgrade and a downgrade in its share price.

On September 6, a Citi broker said Coles would benefit from food inflation as prices rise. The bank has a price target of $20.10 for shares of the supermarket, which is expected to reach that level over the next 12 months.

The broker said:

Food inflation will significantly benefit supermarkets while operating costs are expected to remain below overall inflation, which will benefit margins.

Tough news arrived Sept. 14 in the form of a brokerage rating from Goldman Sachs, lowering 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 a new TP of A$15.60/sh, implying a 9.5% share price decline due to a delay in digital transformation, resulting in losses market share and entering a high investment cycle for digital and supply chain, putting pressure on margins in fiscal year 23/24.

Origin Energy Ltd (ASX: ORG)

Moving on to utilities, Origin’s stock price is currently down 3.48% over the past month. There was a lot 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 high debt.

Origin has also come under pressure to reduce its emissions. HESTA, a $68 billion Australian pension fund, has placed Origin and others on watch, saying that if they fail to address climate risks, they could be eliminated from the fund’s portfolio.

But the challenges for Origin began before the start of last month, with the company announcing a loss of $1.4 billion for fiscal year 22 on August 18.

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