Defensive Company

While Northrop Grumman may be a good example of a defense company, it does not necessarily meet the criteria for being a defensive company.

Defensive companies have steady business regardless of economic climate, due to their products being considered essential. They get to be "defensive," in that they do well in bad economies or bear markets, at least historically. Think: Drug manufacturers, telecom service providers, healthcare, food retailing, food, and energy.

Investments in defensive companies tend to hold up better during recessionary periods than other stocks, which might be sink or swim with the trend. The economy would have to get awfully bad before Joe Sixpack stopped paying for his drugs, cable, and food.