Tired bull market ready for defensive stocks

Defensive companies are those that sell products whose demand remains stable or even increases during an economic downturn.

For example, people will still buy bread, beer and laundry soap — so-called consumer staples — during tough times or periods of rising interest rates.

Conversely, demand for steel, autos and diesel engines typically drops during these periods.

 

Historically, consumer-staples companies such as Anheuser-Busch Cos., Clorox Co. and Coca-Cola Co. are among the favored defensive plays during uncertain economic times.

 

Legendary investor Warren Buffett certainly has found comfort recently in shares of Anheuser-Busch. His investment company, Berkshire Hathaway Inc., has disclosed that it holds 44.7 million shares, or about 6 percent of the outstanding stock, in the world's biggest brewer. In fact, Berkshire is now the largest shareholder in Anheuser-Busch.

"People are still going to drink beer when the market gets dicey. They may even drink more," said Eric Bjorgen, senior research analyst at the Leuthold Group, a Minneapolis money management firm.