We believe defensive (or staples-oriented) retailers are increasingly attractive — especially if the recovery is volatile and economically sensitive stocks stumble. For example, in the panic of March 2009, investors piled into perceived safe havens. Since then, the rubber band has snapped back, and we find investors have been in a mad dash for economically sensitive stocks.
As a result, we have begun to reposition our recommendations by adding some exposure to defensive retailers. On Aug. 16, we upgraded Wal-Mart Stores (WMT) to Buy from Hold — which is now our highest-conviction idea.
– “Investors In Retail Should Think Defensive” (subscription required), Jason Blair, Rochdale Research, September 25
Disclosure: Top Gun is long shares of Walmart (WMT).