Defensive Stock

Categories: Stocks, Investing, Econ

See: Defensive Investment Strategy.

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Finance: What is Defensive Stock?1 Views

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Finance allah shmoop what is a defensive stock Well pretty

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much everyone looks like a genius in a big bull

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market right At least everyone who is invested in the

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market and not just sitting there holding cash well in

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a big bull market Every stock's going up everyone's making

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money he invested or getting richer on the best investment

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results of that bunch come from the aggressive investors or

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offensive groups of stocks the ones that exist on a

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hope and a prayer of massive growth They usually pay

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no dividend that khun traded hundreds of times trailing earnings

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or more and they're expected to more than double earnings

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every year for the next five years or more Offensive

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that's How owners of them get when those stocks get

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crushed in a bad market Yeah well the fed raises

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rates Bomb goes off in an oil field The president

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loses a high stakes arm wrestling match Something like that

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And all of a sudden the bull market is over

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the masses air selling selling selling and well that hundred

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times a dollar of earnings growth stock promising wifi enabled

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fidget spinners trading at one hundred bucks a share atleast

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it wass last month Yeah well it crater celestine Half

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of that ouch Fifty bucks a share and still expensive

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and trading down So what about that tortoise to this

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company's hair The big dumb slow moving oil company How

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about them It grows revenues It like something totally unexciting

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like gdp plus a percent in a good year It

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won't double earnings for like thirty years or more but

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it has and will pay a six percent dividend more

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or less forever And if you think about it while

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skittish linoleum our favorite company like that trades at forty

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bucks a share and pays two dollars forty cents a

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year in davy in a big bad ugly awful market

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Well sure it probably goes down a bit Two bucks

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to thirty eight a share five bucks to thirty five

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maybe even a bit more But while nervous marble has

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gone from one hundred to thirty down some seventy percent

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while skittish linoleum is gone from forty to thirty five

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in these bad two years of bear market itis down

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a few percent not too bad And meantime it's paying

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its two dollars forty cents a year dividend steady so

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you've gotten back four dollars and eighty cents in dividends

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so even down from forty to thirty five If you

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add back the dividend and you should know you're only

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down like twenty cents and we're going to forget about

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taxes here Big would compare that to nervous marble So

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yeah that's a defensive stock when the trades at low

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multiples of earnings and pays a big fat dividend and

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generally does well when the tide goes out and shows

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everyone else's you know not thing And so well there

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Yeah but every now and then it's Awfully nice to 00:02:47.788 --> [endTime] be the tortoise and not the hair

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