Time to Get Defensive

In summary, things are not all that bad in the economy. The real question, in my mind, is just how damaging the currently weak housing market will be to the rest of the economy. Put simply, sector dislocations often take time to fully play out.

For my part, I am a bottoms-up investor, so I will continue to hold stocks like Apple (AAPL Quote), Boeing (BA Quote), St. Paul Travelers (STA Quote) and American International Group (AIG Quote). While everything is economically sensitive to some degree, these stocks are currently enjoying earnings growth that will hold up even with a weaker economy. These growth stories continue to be underappreciated by investors, in my view.

But I do have a generous portion of defensive holdings. For example, I own Procter & Gamble (PG Quote), Johnson & Johnson (JNJ Quote), Pfizer (PFE Quote) and GlaxoSmithKline (GSK Quote). I group these stocks together because they are weak-dollar beneficiaries, but stocks such as Duke Energy (DUK Quote) and Dean Foods (DF Quote) also offer appealing defensive growth opportunities

Other defensive holdings that are currently priced attractively because of investor fear are UnitedHealth Group (UNH Quote) and Caremark Rx (CMX Quote).