Defensive Stock

Finance allah shmoop what is a defensive stock Well pretty

much everyone looks like a genius in a big bull

market right At least everyone who is invested in the

market and not just sitting there holding cash well in

a big bull market Every stock's going up everyone's making

money he invested or getting richer on the best investment

results of that bunch come from the aggressive investors or

offensive groups of stocks the ones that exist on a

hope and a prayer of massive growth They usually pay

no dividend that khun traded hundreds of times trailing earnings

or more and they're expected to more than double earnings

every year for the next five years or more Offensive

that's How owners of them get when those stocks get

crushed in a bad market Yeah well the fed raises

rates Bomb goes off in an oil field The president

loses a high stakes arm wrestling match Something like that

And all of a sudden the bull market is over

the masses air selling selling selling and well that hundred

times a dollar of earnings growth stock promising wifi enabled

fidget spinners trading at one hundred bucks a share atleast

it wass last month Yeah well it crater celestine Half

of that ouch Fifty bucks a share and still expensive

and trading down So what about that tortoise to this

company's hair The big dumb slow moving oil company How

about them It grows revenues It like something totally unexciting

like gdp plus a percent in a good year It

won't double earnings for like thirty years or more but

it has and will pay a six percent dividend more

or less forever And if you think about it while

skittish linoleum our favorite company like that trades at forty

bucks a share and pays two dollars forty cents a

year in davy in a big bad ugly awful market

Well sure it probably goes down a bit Two bucks

to thirty eight a share five bucks to thirty five

maybe even a bit more But while nervous marble has

gone from one hundred to thirty down some seventy percent

while skittish linoleum is gone from forty to thirty five

in these bad two years of bear market itis down

a few percent not too bad And meantime it's paying

its two dollars forty cents a year dividend steady so

you've gotten back four dollars and eighty cents in dividends

so even down from forty to thirty five If you

add back the dividend and you should know you're only

down like twenty cents and we're going to forget about

taxes here Big would compare that to nervous marble So

yeah that's a defensive stock when the trades at low

multiples of earnings and pays a big fat dividend and

generally does well when the tide goes out and shows

everyone else's you know not thing And so well there

Yeah but every now and then it's Awfully nice to 00:02:47.788 --> [endTime] be the tortoise and not the hair