Vanguard’s Health Care (VGHCX) mutual fund is an example of a defensive sector fund. System response and account access times may vary due to a variety of factors, including trading volumes, market conditions, system performance, and other factors. Consumer de fensive stocks are shares in companies in the food and beverage industry, manufacturers, utility,and healthcare companies.
Definition and Examples of Defensive Sector Funds
Unless otherwise noted, the opinions provided are those of the speaker or author and not necessarily those of Fidelity Investments or its affiliates. Banking products and services are provided by Morgan Stanley Private Bank, National Association, Member FDIC. Mr. Ben Becker is a Senior Analytics Product Specialist at FactSet based in Chicago.
- When you invest in defensive sector funds, your main goal is to defend against significant decreases in share prices that might occur during these events.
- That is because the assets that make up your fund are stocks that have historically remained steady in price during market declines.
- Investors who seek to protect their portfolios during a weakening economy or periods of high volatility may increase their exposure to defensive stocks.
- At times, you may work with people who don’t invest in stocks that you love simply because those assets don’t match their needs.
- For instance, gold has historically produced a high return amid economic volatility because many investors see it as a safer alternative to stocks.
Among the hardest-hit segments was packaged foods and meats, a competitive industry due to the presence of lower-priced private-label alternatives. As input costs eased, brand-name food companies stepped up discounts and advertising spending to attempt to gain market share. Investor sentiment also shifted against this segment due to worries about how new weight-loss drugs might impact demand. For instance, biotechnology is an attractive sub-sector of the health sector because of its movement; this is a field with constant innovation. However, if a fund invests in this sub-sector and no others, a decline could result in an outsized decline in the value of your holdings. Choosing defensive stock funds with holdings in a variety of sub-sectors within a given sector can make for less severe losses during a downturn.
General Mills is a leading global packaged food company that produces snacks, cereal, convenient meals, yogurt, dough, baking mixes and ingredients, pet food, and superpremium ice cream. Its largest brands are Nature Valley, Cheerios, Old El Paso, Yoplait, Pillsbury, Betty Crocker, BLUE, and Haagen-Dazs. In fiscal 2022, 77% of its revenue was derived from the United States, although the company also operates in Canada, Europe, Australia, Asia, and Latin America. While most of General Mills’ products are sold through retail stores to consumers, the company also sells products into the food-service channel and the commercial baking industry.
Investors sometimes rush formax forex broker reviews and comments 2021 about formax prime capital into defensive stocks after a downturn in the market even though it’s too late. These failed attempts at market timing using defensive stocks can significantly lower the rate of return for investors. Among the best positioned for 2024 may be household products companies, due to sticky pricing, positive trends on sales volumes, and earnings flexibility. Since its founding in 1806, Colgate-Palmolive has grown to become a leading global consumer product company. It also owns specialty pet food maker Hill’s, which sells its products through veterinarians and specialty pet retailers.
Utilities Select Sector SPDR Fund: A Strong Performer in a Volatile Market
We could also look at the three- or five-year averages to get a longer-term valuation picture. However, looking at cumulative returns, cyclical stocks rebounded quickly and ran away the rest of the year. We did see another dip in October when the second wave of coronavirus cases hit but that was also present in defensive names. Historically, investors have defined cyclical stocks as those that perform well when the economy does well and defensive stocks as those that can weather the storm regardless of market conditions. When you invest in consumer defensive stocks, remember that you’re reaping several currency converter calculator usd/sgd benefits all in one.
Apartment REITs
Shares of major pharmaceutical companies and medical device makers have historically been considered defensive stocks. However, they aren’t as defensive as they once were due to increased competition from new drugs and uncertainty surrounding regulations. Warren Buffett became one of the greatest investors of all time in part by focusing on defensive stocks. Investors who seek to protect their portfolios during a weakening economy or periods of high volatility may increase their exposure to defensive stocks. I believe that companies with attractive valuations and strong pricing power may offer the strongest returns potential for 2024. Companies that can raise prices or hold them steady may be more likely to meet their profit-margin forecasts.
They provide extensive research material, tools to backtest strategies and charting capabilities for better market analysis. Remember, choosing the best broker for your needs is more about choosing the best fit and fees. You don’t need to just go for a name, and you can’t rely on the recommendations of others. Defensive stocks shouldn’t be confused with defense stocks, which are the stocks of companies that manufacture things like weapons, ammunition, and fighter jets. While Health Care Select Sector SPDR Fund currently has a “hold” rating among analysts, top-rated analysts believe these five stocks are better buys.
Keurig Dr Pepper was established in 2018 following a merger between Keurig Green Mountain Coffee and Dr Pepper Snapple. Should the economic recession last longer than experts anticipate, Coca-Cola is well-positioned for potential volatility. That’s because as a premier soft drinks and beverages provider, Coca-Cola benefits from the “cheap thrill” thesis. Essentially, its products offer a cheap, sugary high – a brief respite from the doldrums. Defensive stocks accommodate greed by offering a higher dividend yield than can be made in low-interest-rate environments. It usually takes a significant catastrophe to derail their business model.
What kind of stocks are consumer defensive stocks?
Tyson sells 81% of its products through various U.S. channels, including retailers (47% in fiscal 2021), food service (32%), and other packaged food and industrial companies (10%). In addition, 11% of the company’s revenue comes from exports to Canada, Mexico, Brazil, Europe, China, and Japan. They’re less susceptible to factors that affect the rest of the stock market.
For this reason, defensive sector funds are most effective when you use them as one part of a diversified portfolio of mutual funds. People depend on gas, electricity, water, and other utilities in daily life. They are defensive because consumers still need them during an economic decline. This fact makes the prices of defensive utility stock funds less sensitive to market fluctuations. Vanguard Utilities ETF (VPU) is an example of this kind of defensive sector fund.
GE was formed through the combination of two companies in 1892, including one with historical ties to American inventor Thomas Edison. Today, GE is a global leader in air travel, how to use airport lounges: guide to airport lounges precision health, and in the energy transition. The company is known for its differentiated technology and its massive industrial installed base of equipment sprawled throughout the world.