Asked by: Weiwei Rosskopf
personal finance mutual funds

What is a defensive industry?

Last Updated: 18th June, 2020

21
A term used to describe a business whose economic prospects are independent from the business cycle. Drug makers, utilities, and food producers are examples of defensive industries.

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Similarly one may ask, what is a defensive sector?

When the economy is getting weaker, many investors begin to pad their portfolios with defensive sector funds. Because these funds can perform better than the broader market during recession or a bear market, they are referred to as "defensive." Examples of defensive sectors include healthcare and consumer staples.

One may also ask, are industrials defensive? Companies in the utility industry, for example, are defensive because consumer demand does not decline as much during downturns. Consumers need electricity, water, heating, and air conditioning, whether the economy is in a recession or not. The other primary defensive industries are consumer staples and healthcare.

Secondly, what is an example of a defensive stock?

Water, gas, and electric utilities are an example of defensive stocks because people need them during all phases of the business cycle. Utility companies also are thought of as benefiting from slower economic environments because interest rates tend to be lower and their competition to borrow funds is much less.

Why is healthcare a defensive sector?

Defensive plays, such as health care, are considered safer bets in a shrinking economic environment where demand for their goods and services are less affected. Health care, alongside other defensive sectors such as utilities and REITs, typically offer a dividend and consistent growth.

Related Question Answers

Han Milanov

Professional

Is energy a defensive sector?

All constituent securities from Consumer Staples, Energy, Healthcare and Utilities are included in the MSCI Defensive Sectors Indexes.

Felisindo Pagonabarraga

Professional

What are some good defensive stocks?

A Bit Of Luck Helps, Too
Company Name Exchange:Ticker Composite Rating
Lamb Weston Holdings (LW) 33
AutoZone (AZO) 94
Starbucks (SBUX) 93
Pinnacle West Capital (PNW) 87

Amr Jungbluth

Professional

What are good defensive stocks?

Defensive consumer stocks are those that deal with staples.

Nonetheless, if you want a few stocks in your portfolio that pay a dividend and can weather most storms, here are a few options.
  1. Kraft Heinz Company. Kraft Heinz (KHC) has been beating analyst expectations for earnings.
  2. Johnson & Johnson.
  3. Sysco Corporation.

Jurgita Rabiezanka

Explainer

What are the 11 stock sectors?

The 11 stock market sectors:
  • Materials.
  • Industrials.
  • Financials.
  • Energy.
  • Consumer discretionary.
  • Information technology.
  • Communication services.
  • Real estate.

Weiming Pierrat

Explainer

Are banks cyclical?

For a long time the banking sector was considered to be a cyclical sector that used to move with the crests and troughs of economic growth. However, over the last few years, private banks have largely de-risked their business models.

Jozsef Nuger

Explainer

Are utilities good investments?

Retirees, conservative investors and other income-generators gravitate towards utilities. Growth investors tend to eschew these stocks because utility companies often have limited growth prospects. The recession-resistant nature of utilities makes utility stocks a good defensive stock.

Felina Danielmeier

Pundit

What is a defensive portfolio?

A defensive investment strategy entails regular portfolio rebalancing to maintain one's intended asset allocation; buying high-quality, short-maturity bonds and blue-chip stocks; diversifying across both sectors and countries; placing stop loss orders; and holding cash and cash equivalents in down markets.

Weiqiang Jeinsen

Pundit

What are defensive stocks in a recession?

The "defensive stocks" category consists of companies in the food, home supplies, healthcare, utilities, and real estate segments. Such stocks also tend to pay dividends to their shareholders, guaranteeing a small yet stable form of income.

Yasiel Chercoles

Pundit

What is Blue Chip Stock?

A blue-chip stock is a huge company with an excellent reputation. A blue-chip stock typically has a market capitalization in the billions, is generally the market leader or among the top three companies in its sector, and is more often than not a household name.

Odila Morras

Pundit

Are telecoms defensive stocks?

The three telecom stocks - Verizon Communications Inc (VZ. N), AT&T Inc (T.N) and CenturyLink Inc (CTL. But many active investors may still ignore telecom stocks, which are typically viewed as defensive investments because of slower, though relatively predictable, growth rates and high dividends.

Ngagne Cartagena

Pundit

Is McDonald's a defensive stock?

McDonald's stock (ticker: MCD) has risen more than 22% this year, just edging ahead of the S&P 500. The defensive nature of the shares helped shelter them during market turmoil, and last week, the stock gained following an in-line second-quarter earnings report that showed strong same-store sales performance.

Nepomuceno Kircheiss

Teacher

What defines a penny stock?

A penny stock refers to a small company's stock that typically trades for less than $5 per share. Although some penny stocks trade on large exchanges such as the New York Stock Exchange (NYSE), most penny stocks trade via over the counter (OTC) transactions.

Espiridion Migliaccio

Teacher

Is real estate defensive or cyclical?

The Cyclical super sector has four sectors: Basic Materials, Consumer Cyclical, Financial Services, and Real Estate. The Defensive super sector has three sectors: Consumer Defensive, Healthcare, and Utilities.

Manoela Pagani

Teacher

Are industrials a cyclical sector?

Examples of cyclical industries are manufacturing, the steel industry, travel, and construction—sectors that produce things we can live without when money is tight. These are exactly the types of industries people avoid when the economy turns sour. Investors may find opportunities in cyclical stocks hard to predict.

Concetta Hempelmann

Teacher

Is pharmaceutical industry cyclical?

Pharmaceuticals are generally growth stocks and chemical companies tend to be highly cyclical. Pharmaceuticals have a much clearer and longer flow of earnings, and the chemical sector moves in line with the world economy and is much more volatile."

Christy Deters

Reviewer

What sectors are considered value?

The retail, bank, energy and industrial sectors are typically considered to be value plays, while cyclical sectors like technology are viewed as growth groups.

Craciun Cargol

Reviewer

Is technology a cyclical sector?

When growth is increasing, cyclicals' profits and stock prices tend to rise, and vice versa. Classic cyclical sectors include semiconductors and most technology stocks, transports, energy and materials. Some consumer-related sectors like automotive, gaming, and restaurants are also considered cyclical.

Deniss Matheisen

Reviewer

Are REITs defensive?

U.S. REITs have outperformed the S&P 500 by more than 7% annually in late-cycle periods since 1991 and have offered meaningful downside protection in recessions, underscoring the potential value of defensive, lease-based revenues and high dividend yields in an environment of heightened uncertainty (see chart below).

Aneudy Pita

Reviewer

What are the most volatile sectors?

Financial. Banks, brokerage firms, financial services, insurance companies, credit card issuers, financial planners, securities exchanges, and commodity exchanges form the bulk of this sector.