The defensive stocks that offer an illusion of comfort

'Herd-like' focus on the short-term

A herd-like focus on shorter-term newsflow often serves to harm investors' longer-term returns. Relative valuations now exceed the extreme levels last observed post-Lehman's crisis. This appears to be in part a response to rising price volatility.

These expensive defensive stocks offer an illusion of comfort due to a perception of shorter term earnings certainty. We avoid overpaying for comfort at all costs. We observed a shift in risk preferences after the Bank of Japan announced its negative interest rate policy (NIRP) in late January. Banks and insurance companies have been dumped by the market on an overly simplified rationale, irrespective of attractive valuations and supportive trend fundamentals. Our contrarian approach is to exploit significant price opportunities by doing the detailed work required to understand the lo...