Morningstar Advisor - April/May 2013 - (Page 30)
Sector Rap
A Defensive Ride
By Philip Guziec
Consumer defensive stocks, though fairly valued, still offer
opportunities for investors concerned about safety.
In the face of commodity cost pressures and
weak economies worldwide, consumer
defensive companies continue to press on
through the ups and downs of the
business cycle. Investors, searching for yield
and safety, have rotated into the sector,
pushing up values. Still, Morningstar’s
equity analysts think that the long-term
fundamentals of the sector are strong and that
opportunities exist for patient investors.
To learn more about consumer defensive
stocks, I sat down with R.J. Hottovy, Thomas
Mullarkey, Erin Lash, and Ken Perkins, who
30 Morningstar Advisor April/May 2013
Morningstar equity analysts who cover the
sector. Our discussion took place Feb. 25.
Philip Guziec: The consumer defensive sector
is supposed to hold some value through
an entire business cycle. How well did these
stocks hold up through the our latest cycle?
R.J. Hottovy: Through 2008 and 2009, consumer
defensive stocks outperformed the broader
market. What we saw was a lot of rotation into
high-quality names. Consumer defensive
is one of the more-concentrated categories in
terms of economic moats. Roughly two thirds
of the 100 consumer defensive companies that
we cover have either a wide or narrow
Morningstar Economic Moat Rating. That
makes them attractive in times of difficulties.
These are the brands that people buy,
regardless of the economic backdrop. And
while shoppers may trade down to private-label
and lower-priced items, these products
are still produced by consumer defensive firms.
Now, as we started to see a bit more recovery,
the bounce back among the consumer
Table of Contents for the Digital Edition of Morningstar Advisor - April/May 2013
Morningstar Advisor - April/May 2013
Contents
Contributors
Letter From the Editor
The Pursuit of Happiness and Financial Advice
What Strategies Do You Use to Control Risk?
Driven to Succeed for Clients and Family
How to Assess a Portfolio’s Bond Risk
Luck, Skill, and Investing
Investments á la Carte
Investment Briefs
Investing’s No- Brainers Have Costs
A Defensive Ride
Risk On/On Risk
The Risk of Being Overconfident
Year of Living Dangerously
The Risk-Parity Approach
A Guide to Mutual Funds Running Risk-Parity Strategies
What Moats Tell Us About Risk
Risk’s Wake-Up Call
Seeing Is Believing
Why Investors Lag the Returns of Their Funds
Liquidity Signals
Pump Them Up
Golden Oldies Keep on Truckin’
Our Favorite Mutual Funds
50 Most-Popular Equity ETFs
Undervalued Stocks With Wide Moats
Our Social Blind Spot
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