Defensive stocks are known to be non-cyclical in nature, whose performance is relatively resilient to the economic cycle. Such stocks are often seen as attractive investments during a recession and people are generally quick in pointing out whether a stock is defensiveness or not. My view is that there are 2 aspects of defensiveness for a stock – operating and capital – which have to be considered.

What is Operating Defensiveness?

A stock is operating defensive if its product or service sales are unaffected by the larger economic cycle. I believe that this is the conventional wisdom of what constitutes a ‘defensive’ stock as well.  Some local names which are known to be defensive include Comfortdelgro, Vicom, Dairy Farm, Sheng Siong. Property REITs are also often known to be defensive. However, we will see why this is not necessarily true.

Introducing Capital Defensiveness

Capital defensiveness refers to the resilience of ...