Are You A Defensive Investor?

Which side of the investing game are you on?

During tough economic times, investment advisors may recommend defensive stocks. These companies offer products or services which will continue to sell even when consumers cut their spending.

Photo courtesy of Schluesselbein2007, courtesy of flickr

Some industries with defensive stocks include:

Fast food companies – In a contracting economy, consumers often cut back on the fine dining experience and flock to fast-food restaurants for a cheaper, quicker alternative.

The quality may not be as high, but the savings can make a big difference for those operating on a tight budget.

Drug companies – Even in the worst of times, people still need their medicine. Drug companies can count on certain streams of revenue regardless of economic conditions.

Discount retailers – Consumers heighten their search for sales and discounts during recessions, so discount retailers and outlet stores usually see increased traffic and revenue.

Consumer staples (i.e. food, beverages, tobacco, household goods) and utility companies are also defensive industries, because their products are necessities.

This week, I will profile defensive stocks and their performance during the recession. Here’s my list:

Colgate-Palmolive (Ticker: CL)
Reynolds American (Ticker: RAI)
Molson Coors Brewing Company (Ticker: TAP)
Kraft Foods (Ticker: KFT)
Campbell’s Soup (Ticker: CPB)
McDonald’s Corp. (Ticker: MCD)
The Coca-Cola Company (Ticker: KO)
Procter & Gamble Co. (Ticker: PG)
Pepsico, Inc. (Ticker: PEP)
Merck & Co. Inc. (Ticker: MRK)

I have to throw in a disclaimer here: This week’s posts are NOT recommendations to buy or sell any of the above stocks. The posts are meant to examine how the stocks have held up during the recession.

Tomorrow, we’ll begin the defensive stock rundown with Colgate and Reynolds.