As the markets remain near record highs, you may find yourself among those investors that are nervous regarding a possible pull back in the market over the summer months.
If you fall into this category, the worst decision you could make would be to sell all your holdings and exit the market. A better move would be to evaluate your current holdings, and reallocate some money away from riskier stocks into defensive stocks that offer protection in the event of a market-wide pullback.
One thing to keep in mind is that if the overall market does encounter a steep sell off, all stocks will take a hit, even defensive stocks. We are not looking for stocks that are immune to a market sell off, but instead looking for those stocks that have the best chance of outperforming the overall market when things turn south.
One key component to defensive stocks is that they offer goods or services that remain in demand regardless of overall economic conditions such as tobacco, consumer staples, utilities, food, etc. Companies that keep demand in any market environment will always fare better than companies that do not when conditions start to erode.
Each of the five stocks in our group offer a good defensive play in the event of a market sell off, but also offer attractive upside potential should the market continue to move higher, and as such they are great buy candidates for every investor.