“Offense wins games, defense wins championships,” the ages-old football mantra goes. While football fans debate whether or not that hypothesis is true, it’s easier to prove when applied to investment strategies.
In good times, offensive stocks offer flashy earnings growth (and huge potential rewards at higher risk). Defensive stocks deliver stable income and protection when growth sectors like technology combust or when the economy goes south.
In today’s volatile market, conservative investors — particularly those nearing retirement — would do well to play a little defense. But that doesn’t mean your only play is sticking with stodgy 2% yields on 10-year T-bills. Defensive stocks focused on necessities like utilities and other consumer staples pay better yields than Treasuries, beating cyclical stocks like airlines and automakers in tough times.
Here are four defensive plays to consider for the coming bear market:
Procter & Gamble
Procter & Gamble (NYSE:PG) is the ultimate defensive stock because people always will need bathroom tissue, razors, laundry detergent, shampoo and diapers. That’s why the company now boasts 24 billion-dollar brands, including Tide, Crest, Charmin, Pampers, Gillette and Duracell. In addition to by cross-selling products in the U.S, P&G is targeting international growth. Sales in emerging markets like China, Brazil and India grew 5% last year to a whopping $82.6 billion.
At $64.80, PG is trading about 12% over its 52-week low of $57.56 in August. With a market cap of $178.06 billion, the company has a price/earnings-to-growth ratio of 1.69, indicating that the stock is slightly overvalued. P&G pays a dividend yield of 3.3% and has reliably paid its dividend for more than 50 years.