Awhile back, amid the subprime default fall-out, more-somber outlook for the U.S. economy and hence, the markets, yours truly suggested that investors increase the number of defensive stocks in their portfolios. In doing so I drew on a lesson offered by my late Uncle Nick, a lifelong New York Giants fan and season ticket holder. The wisdom: In tough times, think established companies. Something, as my Uncle Nick would say, "As strong as the New York Giants' defensive front four." And I added that in case one hadn't noticed lately, the defensive front four of the Giants, also the favorite football team of yours truly, is still pretty good.
(My late Uncle Nick, of course, based his advise on the Giants' longstanding tradition of building a strong defense first, because, according to many revered football head coaches, Vince Lombardi and Bill Parcells among them, defense wins championships.)
Defense wins in Super Bowls
Well, as most are aware, the Giants defeated the New England Patriots, 17-14, in Super Bowl XLII, in one of the biggest upsets in pro football history, if not sports history. Going into the game the Patriots were undefeated at 18-0 and were 12-point favorites - - a tough environment for the Giants, to say the least.
And yet, the Giants won. They held the high-powered, menacing Patriot offense to just 14 points. How did they do it? With a stifling, relentless defense. In other words, the Giants overcame tough times, by thinking defense.
Likewise, investors should do the same: in today's tough times, think defense. The subprime mortgage and related asset default threat looks just as menacing as the Patriots' offense, if not more so. But, like the Giants, investors can overcome these formidable economic odds, buy thinking defense.
Defense wins on Wall Street
Here are 5 defensive plays worth a consideration:
Procter & Gamble (NYSE: PG), Sell / Stop Loss: $47.
-A diversified consumer products giant, extraordinaire (pun intended).
Cola-Cola (NYSE: KO). Sell / Stop Loss: $43.
-Because no one ever went broke, holding Coke.
AT&T (NYSE: T). Sell / Stop Loss: $27.
-Ma Bell is almost as big and as strong as she was before her forced break-up by the U.S. Government decades ago.
Tupperware (NYSE: TUP). Sell / Stop Loss: $22.
-A wonderful defensive play, given that millions more Americans will be eating at home and saving more leftovers, rather than dining out, in the decade ahead.
Woodward Governor (Nasdaq: WGOV). Sell / Stop Loss: $32.
-Solid international demand for energy control systems, industrial / aircraft engines, and power equipment buttresses Woodward against a U.S. economic downturn.
Underscoring, in tough times, investors, like the Giants, think defense: because defense wins in Super Bowls and on Wall Street.
Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit. Lazzaro is also a lifelong New York Giants fan and an even bigger fan of his late Uncle Nick.
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Reader Comments (Page 1 of 1)
2-04-2008 @ 3:56PM
sara said...
these football analogies today on blogging stocks are not working for me, how about something a little more original?
2-05-2008 @ 6:16AM
Michael Schneider said...
This pits you up against Jim Cramer who yesterday was telling people to buy homebuilders and financials. I tend to agree with you though-- I have stayed away from those areas pretty much as the problems will likely continue. Yesterday there was added news that the subprime mess is spreading to cash investments of companies like Bristol Myers which have had to take charges because of holding subprime securities. That means even tech and defensive stocks could be hit by the subprime slime--- but not as much as the financials. Today on Bloomberg, an analyst was saying it could also hit pension funds and university endowments. Every time financials rally, there are a bevy of commentators who pop up to say "I told you so" and at some point I hope that view will be right for awhile but there is great risk in some of those housing, finance and related areas. A list that includes many defensive stocks which have been discussed in Barrelomoney's free e-mailing called the Barrel View is at http://www.Barrelomoney.com. A caveat is that there is greater market risk right now and some of the defensive names have moved up quite a bit-- so part of a good defense could involve waiting for a better opportunity-- we will see what happens this week.