During the decline, there’s been a lot of portfolio management advice about “going defensive” through purchases of stocks that have held up well in the past during economic weakness or recessions. This is a common piece of “wisdom” that you can hear coming from really successful fund managers and investors. Good for them. You will not hear that from me because I don’t do it. If in my normal course of analysis whether we are in a boom or bust period of the cycle a stock looks like it is likely to head higher - I would be inclined to consider buying it. REGARDLESS OF ITS INDUSTRY. REGARDLESS OF HOW THE INDUSTRY HAS DONE DURING PAST PERIODS OF ECONOMIC WEAKNESS.

I really don’t like the idea that you should let the assessment of the economy by economists (or anyone else for that matter) tell you what sectors you should buy. Please remember how pathetic economists are at predicting the onset, severity or duration of a recession. It scares the hell out of me to think that investors buy stocks for themselves this way. It makes me feel even worse that professionals would do this for others.

I look at each stock on its own merits. Obviously, if demand is picking up for a company considered to be defensive and this “going defensive” strategy is the source of that demand, I am affected by it. As for looking at specific stocks because they are considered “defensive”, I just think that is dangerous.

Big Pharma used to be considered great “defensive stocks.” I look at MRK and most of the other names in this space and I wonder how someone would have felt buying them as recently as December when the economy already appeared to be slowing. What about other traditional defensive sectors / industries like utilities, food, beverages, tobacco, oil, etc. I know the market’s been tough lately(at least since December) on fears of the economy slowing (among other things), but pull up a bunch of stocks considered to be defensive and analyze how well they did as a group relative to the index. With a few exceptions, I see very few that did better than companies that are not defensive.

Defenders of the defensive strategy will probably tell me that it’s too early to judge. That’s an interesting point - the whole timing thing. So when do you get in? Typically for an investment like this to work out, you need to buy before everyone else does it. When was/is that? I remember hearing this advice back then or if it wasn’t at the end of December, then when is it? Is it now? Is it next month? Since few (none) of us can say for certain when a slowdown begins or ends until it’s obvious that it happened a few quarters ago, when exactly do you go defensive?

To me, this whole concept is problematic. Yet, I realize that experts in the industry and the media are fascinated by it. They are treated as if it’s so easy… so brilliant… so foolproof. Unfortunately, it’s none of those things. If you find a great stock that you think is undervalued and your technical analysis is encouraging and it happens to be considered defensive - good for you. If you find all those things and it isn’t “defensive” - good for you.